What Is Payroll? How It Differs From Salary
Payroll literally means the list of employees and the amounts they are paid. In HR, it refers to the full pay cycle: collecting working hours, leave and overtime, calculating earnings, deducting tax and Social Security contributions, then transferring money to employees' bank accounts and issuing payslips. Salary is the fixed amount an employee receives each month, as agreed with the employer. Simply put, salary is one figure inside that process.
Many companies start out in Excel. As headcount grows and each employee has different earnings and deductions, the risk of calculation errors rises. That is why many switch to payroll software that pulls in working hours, leave and deductions automatically and keeps past records for checking.
What Does Payroll Cover?
One cycle has 5 parts.
- Time data: clock-in and clock-out times, leave, holidays and overtime hours.
- Earnings: salary, daily wages, overtime pay, attendance allowances, commissions and bonuses.
- Deductions: withholding tax, Social Security contributions, provident fund contributions and any other agreed deductions.
- Payment: preparing the salary transfer file for the bank and issuing payslips to employees.
- Filing: filing form P.N.D.1 with the Revenue Department and form Sor.Por.Sor. 1-10 with the Social Security Office.
See every step in detail in Monthly Payroll Processing Steps.
How Is Payroll Different From Salary?
Both terms relate to paying employees, but they work at different levels. The table below sums up the differences.
| Aspect | Payroll | Salary |
|---|---|---|
| Meaning | The full pay cycle, or the pay register of the whole company | The monthly pay of each employee |
| Scope | All types of earnings, deductions, tax, Social Security, transfers and filings | Only the agreed base pay |
| Changes each month? | Yes, with working hours, leave, overtime and deductions | Fixed until the next salary adjustment |
| Handled by | HR, accounting, or an outsourced service provider | Agreed between employer and employee |
| Related documents | Payslips, bank transfer files, P.N.D.1, Sor.Por.Sor. 1-10 | Employment contract, salary certificate |
Payroll (the pay cycle)
The term does not mean income alone. It covers the whole process of paying employees, from salary data, tax and Social Security to every earning and deduction item. Once the calculation is done, the last step is payment, which most companies make by sending a salary transfer file to the bank so every employee is paid at the same time.
Salary (monthly pay)
Salary is the pay that the employer and employee agree will be paid monthly in a fixed amount. It differs from daily wages, which are paid by the number of days actually worked. Salary is therefore just one item in the pay cycle, because the amount an employee actually receives each month is salary plus other earnings, minus tax, Social Security and other deductions.
Summary: Which Way Should You Run Payroll?
There are 3 ways to do it: in-house with Excel, with dedicated software, or through an outside provider (Payroll Outsourcing). With only a few employees and simple deductions, Excel still works. Once overtime, shifts and leave have to be factored in every month, software helps reduce calculation errors and pay salaries on time.
The HumanSoft program is one option that helps you prepare pay records, calculate pay and pay staff efficiently, preventing errors and helping you pay employees on time. Contact us using the details below, or try it free for 30 days.
Frequently Asked Questions About Payroll
Q: What does payroll mean?
A: Literally, it is the list of employees and the amounts each one must be paid in a pay period. In HR, it means the whole process of paying employees. In Thailand, people often shorten it to "pay-ro".
Q: What is the difference between HR Payroll and payroll?
A: Payroll is the work of paying employees, while HR Payroll or Payroll Officer is the job title of the person responsible for it. Read about the duties and skills of this role in What Is HR Payroll and What Does It Do?
Q: Which forms must be filed with government agencies every month?
A: Tax withheld from employee salaries is filed on form P.N.D.1 with the Revenue Department, and Social Security contributions are filed on form Sor.Por.Sor. 1-10 with the Social Security Office. Both forms must be filed for every month in which salaries are paid.
Q: Do small businesses need payroll software?
A: No. The law does not require software, and a company with only a few employees can manage in Excel. Once overtime, shifts and leave must be calculated every month, using payroll software cuts repeated data entry and reduces calculation errors.
Q: What is payroll outsourcing?
A: It means hiring an external provider to handle it for you, such as calculating salaries, preparing bank transfer files and preparing documents to file with government agencies. The scope depends on each provider. It suits companies without a dedicated payroll staff member.
Q: How long does it take to run payroll each month?
A: It depends on headcount and the method used. In Excel, most of the time goes into gathering working hours, leave and overtime from several sources and re-entering them. With software connected to the time attendance system, that data is pulled in automatically. See all the steps in the monthly processing guide.
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