What is the History of Payroll?

When we think about payroll and payroll systems, most people think of it as a relatively modern development, particularly as most payroll processes in the majority of businesses are reliant on computer systems today.

Early Payroll

Businesses have always needed to pay their employees for working for them. As such, the history of payroll stretches back to the 14th and 15th centuries, when bookkeeping and accounting were both born and they began to become essential business practices.

While bookkeeping was originally used solely for tracking sales and purchases, educated merchants of the time didn’t take long to work out that they could track all business finances, including payroll. Through the years, as tax laws developed further and things like income tax became mandatory, some businesses would start managing these deductions, paying the tax on behalf of their employees, all through their bookkeeping, and accounting practices.

Those businesses that didn’t want to, or couldn’t, manage things like deductions effectively instead opted to pay their employees ‘cash in hand,’ placing the responsibility on them to manage their own tax affairs.

Payroll Development

In recent years, payroll software has developed into a business essential. The great thing about many examples of payroll software is that it can be used for many business practices, such as monitoring attendance and even task completion with some platforms.

Regulation of the tax system now means that employers are much more accountable for ensuring employers pay tax, which is why systems such as PAYE are in place in the United Kingdom. Businesses that don’t ensure taxes are paid through payroll are liable to penalties and prosecution in many countries around the world.

Making Life Easier

In addition to ensuring that tax obligations are met, modern payroll systems make it easy for businesses to manage this aspect of their finances, as everything is saved and archived for accessing whenever necessary.

Many businesses today choose to outsource payroll to accountants or specialist payroll firms to ensure that no errors are made and that all their obligations are fulfilled.