Payroll processing: easy done in 6 steps

Payroll processing in 6 steps

Payroll processing is a vital part of any business as long as it’s not a sole proprietorship. Therefore it’s important to keep in mind how to conduct payroll processing and that’s what we’ll talk about in this article. We also will touch upon common issues faced by accountants during the processing.

Payroll processing steps

The procedure involves a series of tasks you must complete accurately and on time. You must ensure that you pay employees correctly and promptly. Here are some steps for properly processing payroll:

  1. Gather employee information. You will need to have up-to-date information for all employees. This includes their names, job titles, pay rates, and any deductions or benefits.
  2. Calculate hours worked. You will need to keep track of the number of hours each employee works. Aslo include overtime if applicable. You can do this manually or through the use of time-tracking software.
  3. Calculate pay. Using the information gathered above, you will need to calculate the total payment due to each employee. This will include their regular pay, any overtime pay, and any other applicable pay such as bonuses or commissions.
  4. Deduct taxes and other deductions. State and local taxes, as well as any other required deductions such as insurance premiums, must be withheld from employee pay.
  5. Issue direct deposit. One of the specifics of payroll in Lithuania is you must transfer salaries to your employees exclusively through deposit. This measure has been in effect since 2022.
  6. Record and report payroll data. It is important to keep accurate records of payroll data, including the amount of pay issued to each employee and any taxes or deductions withheld. You must also report this data to the appropriate government agencies. In case of Lithuania it’s State Tax Inspectorate (Valstybinė mokesčių inspekcija).

By following these steps, you can ensure that the procedure is accurate and efficient. And most importantly – that you pay your employees on time. Or you could let our dedicated team take care of the payroll processing for you

Common issues

As vital as payroll processing is, it can also be a complex and time-consuming process. Therefore some potential issues might arise. Here are some of the most common problems that businesses encounter during payroll processing:

  1. Incorrect calculations: One of the most common issues during payroll processing is the calculation of wages and benefits. This can be due to a variety of factors, including mistakes in data entry, incorrect tax calculations, or changes in employee status or pay rates. To avoid this issue, it’s important to have a thorough system in place to ensure that all calculations are accurate and up-to-date. Our software, for instance, is easy to use and is a great option if you are searching for a reliable and powerful database tool. 
  2. Late payments: Another common issue is the late payment of wages or benefits to employees. This can be caused by a variety of factors, including a delay in processing payroll, a lack of sufficient funds to cover wages or a problem with the payroll system itself. To avoid this issue, it’s important to ensure that payroll is processed on time and that there are sufficient funds available to cover all wages and benefits.
  3. Missing or incorrect tax withholding: Payroll processing also involves calculating and withholding taxes for employees. If you don’t go through this process correctly, it can lead to problems with tax authorities and potentially costly penalties. To avoid this issue, it’s important to ensure that you’ve calculated all tax withholding accurately and withheld appropriate amounts from employee deposits. As a company working on the payroll for more than 20 years, we know how to calculate taxes like the back of our hand. So if you choose to outsource this to us, you will have nothing to worry about. 
  4. Miscommunication with employees: Another common issue during payroll processing is miscommunication with employees about their wages and benefits. This can be due to a lack of clear communication about pay rates, overtime, and other issues. To avoid this issue, it’s important to have clear and open communication with employees about their pay and benefits and to make sure that any changes or updates are spelled out clearly.
  5. Data security breaches: In today’s digital age, one of the biggest concerns during payroll processing is the security of employee data. If payroll systems are not secure, it can lead to data breaches and potential identity theft for employees. To avoid this issue, it’s important to have secure systems in place to protect employee data, as well as regular training and updates for employees on data security best practices.


All of these issues might possess great risks if you overlook them. Here is what our team offers to avoid all the problems in the first place: 

  • State-of-the-art software for ensuring correct calculations;
  • Employee self-service system for solving communication problems 
  • Standardized document forms, internal procedures, and instructions for employees, employers, and payroll accountants;
  • Databases with an option to keep track of ALL the accounting records.

If you are interested in a reliable payroll services provider in Lithuania or the sophisticated software, please, contact us!