A payroll report summarizes a company’s payroll information, including gross wages, variable compensation, tax withholdings, and benefits. Businesses use this information to help budget for payroll, find inaccuracies in payments, and remain compliant with federal and state payroll regulations.
Although several types of payroll reports exist, you really only need to worry about a few if you use payroll software to help you manage your payroll.
4 Critical Payroll Reports
You can run numerous payroll reports that detail everything from employee information to tax withholding. However, if you have payroll software—I’ll get into this more below—you can let your software handle most of them.
Here are the most important payroll reports you’ll still need to run and keep a record of to ensure that you’re paying employees correctly and overseeing and maintaining your payroll budget.
Overall Payroll Report
For most businesses, labor is their biggest expense. Keeping an eye on it isn’t just a good idea; it’s a must.
Use our guide to create a payroll budget. After creating your budget, you’ll need to maintain it, and the best way to do that is to run overall payroll reports regularly.
An overall payroll report gives you information on your actual payroll spending throughout the year, including the following:
- Salaries and wages: This is the actual gross pay spent for the time your employees work. Hourly workers get paid hourly wages, while salaried earners make a set amount each year divided by the number of pay periods your company pays. This also includes overtime and shift differentials, which are based on time worked.
- Benefits: If you pay employee benefits, like vacation, health insurance plans, or retirement contributions, these should all be included in your payroll budget and report.
- Variable compensation: Variable compensation is any type of pay that fluctuates, like commissions, bonuses, and incentives.
This payroll report is invaluable for overall budgeting, as it helps you see trends in current spending and make predictions for how much your business can expect to spend on payroll in the future.
Although your report should show the total spend on all of these types of pay, it should also list the total spend for each separately, allowing you to pinpoint where the majority of your payroll spending is going and identify where you might have too much spending.
For example, if the variable compensation spend is higher one month than others, it could simply be because you gave out annual bonuses that month. But it’s also possible that bonuses were inputted incorrectly.
Or, salaries and wages might be lower than you projected, which could point to one or more employees not being reimbursed properly for overtime.
Overtime Payroll Report
Overtime pay can get complicated in businesses with a lot of hourly employees subject to overtime pay laws.
According to the Fair Labor Standards Act, non-exempt employees are entitled to one and a half times their regular pay for any time worked beyond 40 hours in a week. Additionally, some states, like Alaska and Colorado, mandate employers to pay overtime when an employee works more than a specified number of hours in a day.
Therefore, keeping track of overtime is a non-negotiable, and the best way to do that is with an overtime payroll report.
An overtime payroll report can let you see where your overtime spending is happening, like certain months where more overtime occurs or specific employees consistently working several overtime hours per week.
Regular visibility in the area of overtime through payroll reporting can help you get overtime pay under control, essentially helping you stick to your payroll budget.
Retirement Contributions Payroll Report
Employers offering a retirement plan to their employees must keep track of employer contributions, or the amount an employer contributes to each employee’s retirement funds. If you offer a retirement plan, your contributions must become part of your payroll budget, as they’re a continued expense you need to account for.
A retirement contributions payroll report becomes an important part of your budget, too. This report shows your overall contributions for all employees and can also break down your spending by employee. You’ll also see how much your employees have contributed to their retirement plans for a specific period, which can be helpful if any discrepancies arise.
Also, if you have a plan that falls under the regulations of the Employee Retirement Income Security Act of 1974 (ERISA) — like 401(k) plans, for example — you’ll need to report information about your company retirement plan each year to the IRS with Form 5500.
Running a quarterly retirement contributions report lets you check that your totals look correct and all participants are included, keeping you on track for annual reporting.
Compensation Benchmarking Report
Compensation benchmarking compares your current salaries with market rates, helping to ensure fair pay at your company. It’s a good idea to do this once a year if you’re a medium to large company, as salaries tend to shift annually with cost of living, inflation, etc. If you’re a small business with just a few employees, you might be able to stretch this to every two or three years.
Run a compensation benchmarking report when you’re ready to benchmark salaries. This report shows the market benchmarks for roles similar to those in your company and compares your current employees’ salaries to those benchmarks. From there, you can determine which positions might be due for a raise to hit your compensation goal of being at or above market level.
What About Payroll Reports for State and Federal Tax Filings?
You certainly can run payroll reports for state and federal tax filings, which provide the information needed to file and pay your taxes. For instance, payroll tax reports can show the total taxable FUTA wages or the amount of state withholding tax that should be withheld for each employee for that period.
But if you set up your business with payroll software from the start, you don’t have to worry about these reports. The best payroll tools keep track of your taxes, submit many state forms for you, and send you alerts when anything extra is needed. If there’s an occasional tax report you need to file, you can simply run it when needed rather than running tax reports consistently.
How Often Should You Review Your Payroll Reports?
Most business owners should run and review payroll reports monthly. Doing it this frequently turns it into a second-nature task that you do right along with your monthly close process.
When you align your payroll reports with your monthly financials, you can quickly correct mistakes to avoid bigger problems later on. Compare your monthly projections to your actual spending and take note of any discrepancies. Then, dig into anything that looks off to catch the problem before it escalates.
It’s much easier to take a few extra minutes each month to run necessary reports and quickly review their data than to correct financial hiccups months after the fact.
