In honor of National Payroll Week, we put together a brief timeline of the history of payroll. Continue reading to see how payroll was developed and how it’s changed to become the system we utilize today.
14th Century: Payroll Introduced as Bookkeeping
The development of payroll started in the 14th and 15th centuries when businesses realized they needed both bookkeeping and accounting to create a successful business. Bookkeeping was originally used to track sales and purchases, but eventually was adopted to track all business finances, such as payroll. As tax laws increased and became mandatory, employers began paying tax on behalf of their employees via accounting and bookkeeping, as well.
Early 20th Century: Payroll as a Business Practice
Many business owners began to utilize a true payroll system in the beginning of the 20th century. Because of the lack of proper technology, automated payroll systems were not available. Instead, most business owners outsourced payroll management until automated systems became available in the late part of the century.
Late 20th Century: Payroll Automation
The 1980’s brought payroll automation for a variety of reasons.
First, the necessity for payroll automation became evident due to human error. For example, outsourced payroll resources would unknowingly return employee payroll and benefits errors to businesses.
Second, the introduction of the first computer science degree at Purdue University led to new, revolutionized computer systems and payroll management processes. Accuracy and timeliness were the most valued benefits of these new systems.
In 1982, the American Payroll Association was founded. The goal of this organization was to provide education, support and representation for payroll providers at the federal, state and local levels.
The last big change in payroll was the introduction of Social Security payroll deductions in 1992, which called for an automated, electronic system to manage money behind the scenes for employers.
Present: Personalized Payroll
Today, there are about 2,000 payroll companies in the U.S., serving nearly one-third of all businesses.
These payroll companies provide a variety of services for employers, such as payroll processing, HR support, employee benefits administration and workplace solutions.