Streamline Payroll for 2025: Steps to Smoother Processing, Compliance, and Security

In 2025, managing payroll is about more than just cutting checks—it's a strategic operation that requires precision, compliance, and foresight. Yet, many businesses face challenges like tax miscalculations, inconsistent pay schedules, or overlooked compliance requirements, all of which can lead to costly penalties or employee dissatisfaction.

At Deel, we understand how daunting payroll can be, especially when managing global regulations and multi-currency payments. That’s why our latest guide walks you through eight critical steps to streamline payroll processes, from setting up schedules to delivering secure and timely payments.

By embracing these best practices and tools, your organization can achieve seamless payroll management, minimize risks, and maintain employee trust.

How to do payroll in eight steps

Payroll processing is the procedure of paying employees at the end of a payroll period. This process involves multiple steps to ensure you calculate pay accurately and withhold the correct amounts for tax, benefit contributions, and other deductions before you deposit the funds.

Here’s a look at the standard process of running payroll:

Step one: Gather all the relevant business and employee information

Before you can process payroll, you need to gather all the necessary data. The data will differ slightly depending on the country where your company is based.

For example, if you’re based in the US, some of the information you'll need includes:

• Employer identification number (EIN): The IRS assigns businesses unique, nine-digit identification numbers. It functions as a business’s social security number, and distributing payroll is impossible without it.
• Local tax ID: Some states require a separate local state tax ID to pay state-specific taxes. The local state government issues this ID.
• Employee’s Identification Number (EIN)
• Social Security Number (SSN)

The employer can collect the emloyee information by requesting that each new employee complete a W-4 form, also known as an Employee’s Withholding Certificate, at the start of employment.

Step two: Choose a payroll schedule

When it comes to payroll frequency, there are several options. The most common pay schedules include the following:

• Monthly
• Semimonthly
• Biweekly
• Weekly

Choose a schedule that works best for your business and is compliant with local pay frequency requirements. Before making a decision, you must be mindful of your cash flow and other important payroll expenses, such as annual tax filings, utilities, and rent.

Step three: Choose your payment method

Another important decision you have to make is how you will distribute salaries. The method must be compliant with your worker's local regulations. Direct deposits are the most popular and convenient method as employers can control cash flow better than paper checks, and employees can access their earnings easily from their bank accounts.

A more modern payment method is via payroll applications. Employers can send funds directly into an employee’s digital wallet, cutting salary payment processing times and providing employees with flexible withdrawal methods.

Learn more: Supported Payment Methods and Currencies for Client Account Funding – Deel

Step four: Calculate each employee’s gross pay

How you calculate an employee’s gross pay depends on whether they are salaried employees or receive an hourly wage.

To pay hourly employees, you must track the total number of hours worked and calculate their pay for every pay period, as their earnings may vary. You will need to check timesheets for their standard and overtime hours and multiply this by the pay rate.

Be cautious of overtime laws. Exempt employees are not entitled to overtime pay, while non-exempt employees must receive overtime pay at a higher rate than regular hours.

You must also factor in additional bonuses, commissions, profit shares, merit pay, and incentives when calculating remuneration.

Learn more about the different types of employee compensation.

Step five: Subtract payroll tax deductions and withholdings

Next, it’s time to subtract payroll deductions and file them with the local authorities. Employees will require different deductions depending on their pay frequency, withholding allowances, and benefit entitlements.

In the US, The most common deductions are as follows:

• Federal income tax (FICA): The FICA tax rate is 15.3% of the employee’s pay
• Social Security tax: 12.4% for Social Security
• Medicare taxes: 2.9% for Medicare health insurance
• State and local taxes: Some states and municipalities have additional payroll taxes for short-term disability, paid family medical leave, or other programs. Employers should check with their local authorities for specific requirements.
• Voluntary deductions: Voluntary deductions are amounts which an employee has elected to have subtracted from gross pay, such as retirement plan contributions, life, and dental insurance
• Wage garnishments: The state, IRS, or even private organizations can garnish employees’ wages to collect any unpaid debt, such as:
• Spousal or child support
• Federal or state tax levy
• Creditor garnishment
• Student loans

How do I file taxes?

Depending on the country you’re operating in, you must file taxes online on or before each payday with the local tax authority.

You can only make business tax deposits in the US using the Electronic Federal Tax Payment System (EFTPS). If you choose to pay via credit card, you might have to pay some fees, while direct deposit doesn’t charge any extra cost.

Do I need to deduct Federal Unemployment Tax?

No. In the US, Federal Unemployment Tax (FUTA) is an employer tax that only applies to employers and isn’t a payroll deduction. However, employers are obligated to pay this tax if they pay more than $1,500 during one quarter to employees. There is also a State Unemployment Tax (SUTA) for employers with at least one employee for 20 weeks during the calendar year.

See: State Unemployment Insurance (SUI) Rates by State (2024)

Is employee compensation tax deductible for the business?

Yes. The compensation you pay your employees and your portion of the income tax are deductible expenses for the business. You can claim this deductible on your annual tax return.

Do I need to make deductions for independent contractors?

No. You have fewer obligations if you hire independent contractors (also known as 1099 employees in the US) instead of full-time employees.

Read more on how to pay independent contractors.

Step six: Fund payments to your employees and distribute pay stubs

After you have calculated gross pay and made all of the deductions, what is left is the employee’s net pay. The net pay is the amount you will distribute to the employee via the agreed payment method. You will need to distribute electronic payslips to each employee for their records.

Step seven: Keep meticulous payroll records

Retaining digital payroll records is required for tax purposes and is sensible in case of any payment disputes that need backing up with evidence.

The term ‘payroll records’ refers to any form or documentation collected or produced for processing payroll. These records include things like:

• Collective bargaining agreements
• Wage rate increase forms
• Timekeeping logs and timecards
• Tax withholding forms

See also: A Guide to Running US Payroll

What’s the best way to run payroll?

Depending on the size of your human resources team, their capacity, and the location of your workforce, you can handle payroll in the following ways:

Manually in-house

Small business owners with few employees or a dedicated payroll manager or team with plenty of experience and know-how can process their own payroll in-house.

Check out 12 Payroll Best Practices to Implement in 2025 to stay in the know.

Automated in-house

Automating payroll removes some of the stress of manually executing every aspect of payroll. Payroll automation uses software to run payroll calculations and distribute payments automatically. That means less work (and math) for you since the payroll software calculates wages based on every employee’s hours and applicable tax rates.

Some programs will even disburse the payment through direct deposit or another digital method at the end of the pay cycle. Automation makes in-house payroll significantly easier while saving time and increasing overall accuracy.

See also: How Automation and AI in Payroll Can Elevate Your Productivity and Compliance

Outsourced to a local payroll provider

If you don’t have the capacity for an in-house payroll team, then you might want to consider payroll outsourcing. Payroll outsourcing means bringing in a third-party provider to handle your payroll.

Hiring a third party to take care of your company’s payroll ensures all payments are accurate and timely and that all your payroll paperwork is in place.

Check out The Complete Guide to Payroll Outsourcing to learn more.

Outsourced to a global payroll provider

If you have a global workforce and want to outsource your payroll, you’ll need to work with a payroll service provider specializing in international payroll processing. With global payroll, you must comply with new labor laws, provide global benefits, calculate wage conversions, factor in exchange rates, and send payments to various countries. And don’t forget about possible bank fees.

Outsourcing your global payroll saves you time and ensures you stay compliant with payroll regulations no matter where your employees live.

See Deel Global Payroll in action below:

How to streamline your payroll process

Streamlining payroll is essential for payroll managers to ensure accurate, timely payments while reducing administrative burdens. A well-optimized payroll process also minimizes errors, enhances compliance, and boosts employee satisfaction. Follow these actionable steps to improve your payroll operations:

1. Automate payroll processing

Automation is the foundation of efficient payroll management. Invest in reliable payroll software that handles repetitive tasks like tax calculations, direct deposits, and benefits deductions.

Integration is key—connect your payroll system with accounting and HR tools to enable real-time updates and avoid duplication of efforts. Use software that automatically updates tax rates and generates compliance reports to reduce risks and save time.

• Set up automated recurring tasks such as salary payments and benefits deductions
• Enable seamless integration with accounting and HR systems for synchronized updates
• Use built-in compliance features to ensure tax filings are accurate and up to date

Deel Compliance Hub enables you to stay up-to-date with regulatory changes, avoid compliance issues, and manage risk.

2. Centralize data management

Centralizing payroll-related data reduces errors and makes the process more efficient. Use a workforce management system to consolidate employee information, timesheets, and tax forms into one platform. This is especially important for global teams, where payroll processes need to accommodate multiple currencies and local labor laws.

Standardized templates for timesheets and payroll documentation also simplify processing. With a single source of truth, payroll managers can quickly access accurate information when needed.

Deel features over 80 integrations and an open API to integrate all of your tools into our global payroll platform. And with Payroll Connect, you can easily combine your payroll data from Deel and third-party providers into one standard G2N report.

3. Implement self-service tools for employees

Empowering employees with access to their payroll information reduces the administrative workload on payroll staff. A self-service portal allows employees to view pay stubs, update their personal information, and download tax documents without contacting payroll managers.

• Enable employees to update contact information, direct deposit details, and tax forms independently
• Provide training or guides to help employees navigate the self-service portal
• Use the portal to improve transparency and reduce manual intervention

4. Conduct regular audits

Auditing payroll regularly helps identify and resolve discrepancies before they become significant issues. Cross-check payroll reports against timesheets, bank statements, and accounting data to ensure accuracy.

Overtime and performance bonuses should also be reviewed to confirm they are calculated correctly. By tracking key performance indicators (KPIs) like processing time, error rates, and late payments, payroll managers can continuously improve their processes.

See also: Why and How to Document Your Payroll Processes: An Expert Guide

5. Plan ahead for holidays and year-end deadlines

Holidays and year-end deadlines can disrupt payroll schedules if not managed proactively. Adjust your payroll timeline to account for public holidays and bank closures to ensure employees are paid on time. For year-end tasks, allocate sufficient time for form preparation, and notify employees about any changes to their payroll schedules.

By combining automation, centralization, compliance, and proactive planning, payroll managers can build a more efficient and reliable payroll process that supports both employee satisfaction and organizational success.

Run hassle-free payroll with Deel

Paying your workforce shouldn’t be stressful. With Deel Global Payroll, you can set up payroll with just a few clicks, automatically calculate taxes, and distribute employee paychecks without lifting a finger. Our multiple currency options and various withdrawal methods make it even easier for your team to get paid on time every time.

Our in-house local payroll managers provide on-time, accurate payroll and manage all compliance on your behalf, from deductions to declarations to the government.

Just choose your entities for payroll, handle amendments, and submit changes by the cut-off date. Our in-house PRMs will manage calculations within five business days.

Then, you have three days to review your custom payroll package. After that, payments are processed either by you or through Deel’s Treasury service, within four business days to then pay all the salaries.

Sound like something your business could use? Reach out and book a demo to see Deel in action.