Pay administration is a broad term that has to do with any and all regulations, laws, and procedures connected with the management of a payroll system. The term may refer to the internal processes and standards used by a business or other institution to manage the process of issuing wages and salaries to employees and properly award benefits such as vacation or personal time. Pay administration also involves making sure that any taxes due are calculated accurately, withheld from the net pay of the employee, and forwarded to the appropriate tax agency. Other forms of withholding, such as contributions to retirement plans or some type of court-ordered withholding, will also fall under the process of this type of administration.
With pay administration, the business or other type of entity will implement specific policies and procedures for tracking the work hours of employees, calculating gross pay, and also making sure each employee account is correctly updated in terms of the accrual and use of vacation and personal days, tax deductions, and any other type of withholding that may be necessary. These policies and procedures must be in harmony with all employment and tax laws that apply in the jurisdiction where the employee is located. Failure to do can result in serious consequences for the employee as well as for the company itself, in terms of the imposition of fines and other penalties.
Along with compliance with governmental regulations and policies, employers may also implement other practices that are designed to manage the payroll and benefits with a greater degree of accuracy. This often means developing an internal system that makes ample use of the checks and balances found in generally accepted accounting principles, as well as using methods that may be somewhat unique to the industry or culture in which the business operates. This means that while the pay plans and many of the tools used in pay administration will be the same from one employer to the next, some of the particulars in how the processes are managed may vary.
Typically, trained professionals will engage in the process of payroll administration. Most will have some type of training and experience with accounting, be aware of governmental requirements, and also be capable of managing payroll accounts efficiently. An administrator is normally accountable for how well the pay administration policies and procedures are carried out, and will have the authority to make changes in those policies when and as governmental regulations related to payroll functions are put into effect.