What a payroll administrator does, and how to become one

What a payroll administrator does day to day

Payroll runs in a cycle, weekly or monthly. Every run has the same steps, and each one has to be right, because the result is someone's pay.

Collect what has changed since the last run: hours, overtime, bonuses, holiday, sickness, starters and leavers.
Work out gross pay for each employee.
Take off the deductions: income tax through PAYE, National Insurance, pension contributions, student loan repayments and any others.
Check the net pay, then send the payslips and the payments.
Work out what the employer owes to HMRC and to the pension provider, and send the payroll reports.
Answer employees' questions about their payslips.
Keep the payroll records, and give the accounts team the figures for the payroll journals.

Payroll software does the tax sums. The administrator's work is to give it the right data and to notice a result that looks wrong.

The job is found in three places: the finance or human resources team of an employer, an accountancy firm, and a payroll bureau, which is a firm that runs payrolls for other businesses.

The skills the job uses

The path Payslips, tax codes and payroll practises the sums, one module at a time. A module is one part of a path.

Reading a payslip: Every line of it, and how gross pay becomes net pay. The module Read your payslip.
Gross pay: Salaries, hourly pay, overtime, bonuses, commission, piecework and holiday pay. The module Gross pay.
Deductions: How income tax through PAYE, National Insurance, pension contributions and student loans come off pay. The module Deductions from pay.
A whole pay run: Gross to net for a team, what the employer pays on top, paying HMRC and the reports. The module Running a payroll.
Payroll in the books: The journals that record the wages, and the wages control account they pass through. The module Payroll in the ledgers, in the path Journals, errors and control accounts.
Spreadsheets: Checking a total and comparing one run with the last. The module Cells and formulas, in the path Spreadsheets for the office.
Discretion: Payroll holds what everyone in the firm is paid. The module Principles and ethics, in the path Final accounts, has a room on confidentiality.

The rates and limits used in payroll change. Nobody in the job works them from memory, and no page here states one. GOV.UK has the current figures and the guidance for employers.

How payroll reaches the books

An administrator who understands the bookkeeping can agree the payroll to the ledgers, which is a month-end check in its own right.

One pay run is owed to three parties. The employees are owed their net pay. HMRC is owed the tax and National Insurance. The pension provider is owed the contributions.

The cost to the business is more than the gross pay, because the employer pays its own National Insurance and pension contributions on top.

The journals move each amount through a wages control account. When every amount has been posted and paid, that account comes back to nil. If it does not, something is missing or wrong.

The usual routes in

Each employer decides what it asks for. These are the usual ways in, in no order.

Start in an accounts, human resources or administration job that includes some payroll, and take on more of it.
Apply for a junior post, such as payroll assistant or payroll clerk. Some adverts train a beginner.
Study for a qualification first, or alongside the job. There are payroll qualifications as well as bookkeeping ones. AAT and ICB are two bodies that award bookkeeping qualifications in the UK. Each body's own website has what is current.
Take an apprenticeship, where an employer offers one. It combines a paid job with study.

No route promises a job, and this page does not say how long any of them takes.

What employers ask to see

Read current job adverts for your area. They say what employers want now.

Experience of a pay run from start to finish, and the number of employees on it.
The payroll software the employer uses. An advert names it when it matters.
A working knowledge of PAYE, National Insurance, pensions and pay during sickness or leave.
A qualification, or study towards one. Some adverts accept experience in its place.
Spreadsheets, accuracy and discretion.

This page gives no pay figures. Pay depends on the area, the employer and your experience, and any figure here would soon be out of date. Current job adverts show it.

How to practise the skills on Ledger Drill

Start with a payslip, because it is the end of every pay run. Then work back: gross pay, each deduction, a whole team, and the journals.

Each room is a few lines of reading, then questions you work out and type, and every answer is marked at once. A question gives any rate it needs as an example for that question only.

Ledger Drill does not award a qualification, and it is not affiliated with any awarding body. It teaches no payroll software, and it is practice, not tax advice.

Practise it

Module, 5 rooms, all freeRead your payslip

Module, 5 rooms, PremiumGross pay

Module, 5 rooms, PremiumDeductions from pay

Module, 5 rooms, PremiumRunning a payroll

Module, 5 rooms, PremiumPayroll in the ledgers

Module, 5 rooms, all freeCells and formulas

Module, 5 rooms, PremiumPrinciples and ethics

Practise it nowHow to read your payslip

Words used here

Gross pay: Gross pay is everything an employee earned in a pay period, before anything is taken off.
Net pay: Net pay is gross pay less deductions: the amount that is paid into the employee's bank.
Journal: The journal is the book of prime entry for anything that fits in neither a day book nor the cash book.
Control account: A control account holds one total in the general ledger, such as the amount owed by all the credit customers together.

Questions

Do I need to be good at maths to work in payroll?

The sums are adding, taking away, multiplying and percentages, and payroll software does the tax sums. What matters more is care: checking the data that goes in and noticing a result that looks wrong.

Do I need to know the tax rates by heart?

No. They change, and payroll software holds the current ones. You need to understand how each deduction works, and GOV.UK has the current figures.

Can I practise payroll on Ledger Drill?

Yes. The path Payslips, tax codes and payroll goes from reading a payslip to a pay run for a team, and every answer is marked at once. It is practice, not tax advice, and it teaches no payroll software.

How much does a payroll administrator earn?

This page gives no figures, because pay depends on the area, the employer and your experience, and figures go out of date. Current job adverts for your area are the best guide.