Payroll Closing SOP

Purpose

This procedure defines how to close a payroll cutoff safely, so that every pay run is complete, accurate, approved, and compliant with Philippine statutory requirements before payment is released. Use it as the standard checklist each cutoff.

Intended roles

• Payroll Officer prepares and validates the run.
• HR Officer confirms employee, salary, and benefit data.
• Payroll Approver or Manager performs final sign-off and authorizes release.

Segregate these duties where possible: the person who prepares the run should not be the sole approver.

Standard procedure

1. Freeze source data. Confirm attendance for the cutoff is finalized and locked, approved leaves are posted, and no further edits are expected. Investigate any pending attendance before proceeding.
2. Confirm compensation records. Verify salary history is approved and current, and that earning and deduction templates, commissions, and payroll adjustments for the period are complete.
3. Create and configure the run. In Compensation > Payrolls, create the run for the correct period and account, then set its options (tax table, pay rates, contributions). Checkpoint: the Payroll Officer confirms the setup before initializing.
4. Initialize and process. Initialize the run to Ongoing, then use the Run Wizard to generate payslips.
5. Validate every payslip. Review earnings, deductions, contributions, tax, and net pay per employee. Use the Investigate view for any exception. Correct source data and recompute where needed.
6. First approval — payroll review. The Payroll Officer marks each validated payslip Approved. Checkpoint: no payslip is left in Pending.
7. Second approval — management sign-off. The Payroll Approver or Manager reviews the run totals and authorizes closing. Checkpoint: the run is completed only after this sign-off.
8. Complete the run. Finalize the payroll so its status becomes Completed.
9. Distribute and pay. Preview, email payslips to employees, and generate the bank export for disbursement.
10. Post and archive. Ensure the payroll is posted to Finance and retain the run, payslips, and export as records for the period.

Controls and compliance reminders

• SSS, PhilHealth, and Pag-IBIG: confirm employee and employer contributions were computed on the correct monthly basis using the current agency schedules, including SSS WISP where applicable. Contributions are based on monthly totals, not pro-rated.
• BIR withholding tax: confirm the correct tax table applied and that withholding is captured for later Form 1601-C filing.
• De minimis benefits: confirm tax-exempt benefits stayed within the BIR annual ceiling of ₱90,000; any excess must be treated as taxable.
• Year-end readiness: retained payroll data supports Form 2316, annualization, and the Alphalist. Do not delete completed runs.
• Audit trail: every status change is recorded. Do not bypass approvals or override statuses without authorization.

Escalation

• Data or rate discrepancies that cannot be resolved from source records: escalate to HR before approving.
• Contribution or tax table errors: escalate to your ERPat administrator to update the tables, then recompute.
• Approval or access blockers: escalate to the Payroll Manager. For system errors, contact the ERPat Team.