What is a Payroll Cycle?

A payroll cycle is the length of time between payrolls. Thus, if an entity pays its employees every Friday, this is a one-week payroll cycle, whereas paying them once a month is a monthly payroll cycle. Employers prefer longer payroll cycles, since a reduced aggregate amount of processing labor is required to calculate a smaller number of payrolls per year.

Steps in the Payroll Cycle

There are several steps in a payroll cycle that must be completed in order to pay employees both correctly and on time. This involves collecting time worked information from hourly workers, validating it and loading it into the accounting software. Taxes and benefit deductions must then be subtracted from the calculated gross pay amount to arrive at the net pay for each person. Finally, these payments must be distributed to employees, which may be in the form of cash, checks, or direct deposit payments.