Payroll is one of the most sensitive and high-stakes administrative functions within any organization. Errors affect employee trust, regulatory compliance, and financial accuracy. A payroll checklist ensures that every payroll cycle is processed consistently and correctly. It also reduces the risk of omissions, miscalculations, and non-compliance with employment standards, taxation requirements, benefits administration, and reporting obligations.
This comprehensive payroll checklist covers onboarding, ongoing payroll processing, pre-run checks, post-run reviews, year-end obligations, and record-keeping standards. It is designed for organizations of all sizes and applies broadly across industries.
1. Preliminary Setup and Foundation
Before running payroll, an organization must establish a complete payroll system. This foundation ensures compliance and minimizes operational issues.
1.1 Employer Registration and Compliance Setup
- Obtain all required employer identification numbers.
- Register with federal, provincial, and local tax authorities.
- Register for employment insurance and pension plan programs.
- Set up workers’ compensation accounts.
- Confirm industry classification and applicable rates.
- Review employment standards legislation for each jurisdiction where employees work.
- Document pay frequency requirements per jurisdiction.
- Establish compliance calendars for remittances and statutory deadlines.
1.2 Payroll Software and System Configuration
- Select payroll software or decide on an internal payroll system.
- Configure pay periods and pay schedules.
- Configure direct deposit capabilities.
- Enter organizational information, including legal name, address, and tax identification numbers.
- Set up general ledger mapping for payroll expenses.
- Establish user permissions and access controls.
- Conduct a system test to validate calculations, tax tables, and integrations.
- Set up backups and data retention policies.
1.3 Compensation Structure and Policies
Document all internal payroll-related policies:
- Pay frequency
- Overtime rules
- Vacation accruals
- Statutory holiday pay
- Sick leave policies
- Bonuses and incentives
- Commission structures
- Meal and rest break requirements
- Timekeeping expectations
Ensure written policies align with employment standards.
2. Employee File Requirements and Onboarding Checklist
Accurate payroll starts with complete employee information. Missing or outdated data is one of the most common sources of payroll errors.
2.1 Pre-Employment Documentation
Collect the following before the employee begins work:
- Signed employment agreement
- Completed tax forms
- Direct deposit authorization
- Proof of citizenship or work eligibility
- Emergency contact information
- Job description and classification
- Additional forms required by regulatory bodies
For contractors:
- Valid contract agreement
- Business or tax identification
- Payment terms and invoicing details
- Confirmation of contractor status compliance criteria
2.2 Employee Profile Setup in Payroll System
Enter the following into payroll software:
- Legal name
- Address
- Tax withholding selections
- Social insurance or identification number
- Job title and department
- Start date
- Salary or hourly wage
- Supervisor or manager
- Pay type (salary, hourly, contractor, commission)
- Benefit eligibility and enrollment dates
- Bank account information
- Vacation and sick leave accrual rules
Verify accuracy through a secondary review.
2.3 Document Storage and Record Keeping
Maintain secure records:
- Digital or physical employee file
- Payroll authorization documents
- Signed policy acknowledgments
- Classification documentation for exempt vs non-exempt roles
- Credential copies where applicable
Ensure files comply with privacy legislation regarding storage and access.
3. Time and Attendance Verification
Time and attendance accuracy is essential for proper payroll calculation. Inconsistent data leads to disputes and payroll corrections.
3.1 Collecting Employee Hours
Confirm that time has been properly collected for:
- Regular hours
- Overtime hours
- Double-time hours
- Paid breaks (if applicable)
- Unpaid breaks
- Statutory holidays
- Vacation leave
- Sick leave
- Personal leave
- Unpaid time off
3.2 Reviewing Timecards or Digital Logs
Conduct the following checks:
- Compare logged hours to scheduled hours.
- Validate overtime approval where required.
- Ensure supervisors approved time entries.
- Review any manual edits.
- Audit missing punch-ins or punch-outs.
- Confirm remote or off-site work logs if applicable.
- Review attendance violations or anomalies.
Document any discrepancies and have them approved before adjustments.
3.3 Payroll Cut-Off Dates
Establish and enforce:
- Deadlines for employees to submit hours
- Deadlines for managers to approve time
- Final payroll processing deadlines
Late entries should follow documented escalation procedures.
4. Earnings Verification Checklist
Earnings must be calculated accurately for every employee. This section covers everything that contributes to gross pay.
4.1 Salary Employees
- Confirm the correct salary amount for the pay period.
- Check for prorated pay if start or end dates fall mid-pay-cycle.
- Apply approved unpaid leave deductions (if applicable).
- Apply approved salary adjustments or merit increases.
- Confirm approval for bonuses or stipends.
4.2 Hourly Employees
- Verify hourly rate.
- Confirm correct application of overtime rules.
- Validate shift differentials if applicable.
- Confirm premium pay for statutory holidays.
- Review call-out pay, standby pay, or special duty pay.
4.3 Commission and Bonus Payments
Ensure documentation includes:
- Commission agreements
- Sales reports
- Approval of commissionable revenue
- Bonus eligibility criteria
- Calculation worksheets
Verify:
- Commission tiers
- Threshold calculations
- Deductions from commissions
- Posting period alignment
4.4 Other Earnings Types
Verify calculations for:
- Travel stipends
- Per diem allowances
- Expense reimbursements if processed through payroll
- Retroactive pay adjustments
- Shift premiums
- Hazard pay
- On-call pay
- Profit-sharing allocations
Ensure each type of earning is mapped correctly to benefits, taxes, and the general ledger.
5. Statutory Deductions and Employer Contributions
Statutory deductions are mandatory. Incorrect withholding leads to compliance issues.
5.1 Income Tax Withholding
Verify:
- Correct tax tables loaded in the system
- Employee withholding choices
- Additional tax withholdings if requested
- Tax adjustments for bonuses and lump-sum payments
5.2 Employment Insurance and Pension Contributions
Confirm:
- EI contributions
- Pension plan contributions
- Employer matching calculations
- Maximum annual contribution limits
- Correct classification for employees exempt from certain deductions
5.3 Workers’ Compensation Assessments
Check:
- Employee eligibility
- Industry classification rates
- Correct payroll amounts applied to premiums
5.4 Local/Regional Deductions
Some regions impose additional deductions. Confirm:
- Local tax requirements
- Additional fund contributions
- Union dues
- Garnishments or court-ordered deductions
Maintain documentation for each deduction.
6. Benefits Administration
Benefit deductions must match enrollment records. Errors impact coverage and financial reporting.
6.1 Employee Enrollment Verification
Confirm:
- Benefit eligibility date
- Elections chosen by the employee
- Coverage levels
- Dependent information
- Employer-paid vs employee-paid portions
6.2 Deduction Calculations
Verify:
- Medical, dental, vision premiums
- Disability insurance premiums
- Life insurance premiums
- Employer contribution amounts
- Employee cost-sharing formulas
- Mid-cycle enrollment changes
6.3 Retirement and Savings Plans
Confirm:
- Employee contribution percentages
- Employer matching amounts
- Voluntary contributions
- Compliance with annual limits
Ensure proper mapping to the general ledger.
7. Pre-Payroll Final Review
Before running payroll, complete a structured review.
7.1 Payroll Register Review
Examine:
- Gross pay
- Net pay
- Deductions
- Employer contributions
- Tax withholdings
- YTD totals
7.2 Exception Reporting
Review:
- Excessive overtime
- Missing hours
- Negative earnings
- Unusually large adjustments
- Missing deductions
- Duplicate payments
Investigate and resolve each flagged item.
7.3 Supervisor Approvals
Confirm:
- All time entries approved
- All payroll changes authorized
- All odd transactions reviewed
8. Running Payroll
Once everything is checked, run payroll.
8.1 System Execution
- Process payroll batch
- Confirm no system warnings
- Validate net pay totals
- Review general ledger preview
8.2 Direct Deposit and Pay Cheques
- Finalize direct deposit file
- Upload to bank within required timelines
- Print cheques for employees without direct deposit
- Validate cheque numbers
- Store cheque records securely
8.3 Pay Stub Distribution
Ensure pay stubs include:
- Pay period dates
- Gross earnings
- Net earnings
- Deductions
- Employer contributions
- Vacation balances
- Sick leave balances
- YTD totals
Distribute through secure digital portals or sealed envelopes.
9. Post-Payroll Tasks
After payroll is processed, several administrative tasks must be completed.
9.1 General Ledger Posting
- Export payroll journal entries
- Review account mappings
- Post to accounting software
- Reconcile control accounts
9.2 Payroll Funding and Cash Reconciliation
- Verify total payroll funding amount
- Confirm tax remittance funds reserved
- Confirm benefit and retirement plan contributions scheduled
9.3 Statutory Remittances
Remit:
- Payroll taxes
- EI and pension contributions
- Workers’ compensation premiums
- Local or regional deductions
Confirm remittance deadlines based on payment frequency.
9.4 Benefits Payments
- Pay benefit providers
- Confirm billing accuracy
- Reconcile premium invoices
9.5 Audit Trail Documentation
Store:
- Payroll register
- Deduction reports
- Overtime sheets
- Adjustments
- Approval records
10. Handling Payroll Changes and Adjustments
Not all payroll cycles are perfect. Adjustments are common.
10.1 Retroactive Pay
Ensure:
- Documentation is complete
- Calculations for retroactive periods are accurate
- Taxable status is correct
10.2 Manual Adjustments
Applicable for:
- Missed hours
- Benefit corrections
- Incorrect deductions
- Calculation errors
Document all adjustments with manager approval.
10.3 Off-Cycle Payments
Use when necessary:
- Urgent payroll errors
- Termination pay
- Special bonuses
Follow standard authorization workflows.
11. Terminations and Offboarding
When an employee leaves, follow a structured process.
11.1 Final Pay Calculation
Include:
- Outstanding wages
- Overtime
- Accrued vacation
- Severance if applicable
- Statutory notice requirements
- Deductions owed
- Return of company property (if applicable)
11.2 Benefits Termination
- Notify benefit providers
- Process COBRA or regional equivalents
- End retirement contributions
- Adjust payroll deductions
11.3 Record Updates
- Change employment status
- Update termination date
- Issue required termination documents
12. Year-End Payroll Responsibilities
Year-end requires thorough reconciliation.
12.1 Review Year-to-Date Payroll Records
- Confirm gross-to-net calculations
- Reconcile EI and pension contributions
- Validate taxable benefits
- Match GL accounts to payroll totals
12.2 Issue Year-End Forms
Employees receive:
- Year-end tax slips
- Benefits summary
- Retirement contribution statement
12.3 Employer Year-End Filings
Submit:
- Annual employer tax filings
- Workers’ compensation reports
- Pension and retirement plan reports
- Year-end adjustments to tax agencies
13. Payroll Record Keeping
Payroll records must be retained according to legal requirements.
13.1 Required Records
Keep:
- Employee profiles
- Wages and hours worked
- Deductions
- Tax forms
- Vacation and sick leave balances
- Termination documents
13.2 Retention Periods
- Maintain payroll records for legally mandated durations
- Store files securely
- Limit access to authorized personnel
13.3 Data Privacy
- Encrypt digital records
- Secure physical documents
- Comply with privacy legislation
Conclusion
A payroll checklist is a safeguard against errors, non-compliance, and operational inefficiency. By following a detailed, repeatable process, organizations ensure employees are paid accurately and on time, while maintaining compliance with all regulatory obligations. This checklist serves as a comprehensive operational guide for payroll processing from onboarding to year-end reporting.