What is payroll reconciliation?
Payroll reconciliation is the check that what a payroll run calculated agrees with what was approved, paid and recorded: employee data and pay changes against the HR system, net pay against bank payments, tax and deductions against the amounts sent to the authorities, and payroll costs and liabilities against the general ledger.
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- When
- Before and after each pay run
- US year-end check
- Forms 941 against W-2 and W-3
- Category
- Payroll
How payroll reconciliation works
It happens at three points. Before each pay run, payroll teams compare the draft with the previous period and explain the changes: starters, leavers, pay rises, overtime and one-off payments. After payment, they match net pay to the bank and payroll liabilities to the ledger. At quarter and year end they agree payroll records with filings: in the US, the four quarterly Forms 941 with the annual W-2 and W-3 totals; in the UK, the Full Payment Submissions sent to HM Revenue and Customs on or before each payday under Real Time Information. Payroll platforms such as Gusto, Rippling, Deel and PayFit produce the payroll reports and ledger journals the reconciliation uses.
Common questions
Why is payroll reconciliation important?+
Payroll errors affect people's pay and tax filings directly, and corrections are slow. Reconciling each run catches wrong rates, missed starters or leavers, duplicate payments and unposted liabilities before they build up.
How often should payroll be reconciled?+
Every pay run, before approval and after payment, with a fuller reconciliation of liability accounts at each month-end and of annual filings at year end.
What are payroll liability accounts?+
Ledger accounts for amounts deducted or owed but not yet paid: income tax and social security withheld, employer contributions, and pension and benefit deductions. Each should clear to zero when the payment is made.
Software used for payroll reconciliation
GustoPayroll, benefits and HR built for small businesses.Profile →
RipplingPayroll, benefits and IT unified on one employee record.Profile →
DeelGlobal payroll, contractors and employer of record hiring.Profile →
PayFitAutomated European payroll, leave and compliance.Profile →
RemoteEmployer of record and international payroll management.Profile →
PersonioEuropean HR platform with payroll and employee administration.Profile →Part of Accountio’s accounting technology coverage · Glossary
