What is Payroll Reconciliation & How to Apply It

Running payroll is one of the most important—and often most complex—parts of managing a business. Payroll reconciliation helps ensure your team is paid correctly and your business stays compliant with the ATO (Australian Taxation Office). Without it, you risk overpaying or underpaying employees, missing super or PAYG obligations, or facing costly compliance issues.

By regularly checking and confirming payroll accuracy, you can protect your business from errors and maintain employee trust. In this guide, we’ll explore what payroll reconciliation is and how to complete it effectively—whether manually or using QuickBooks Payroll.

Key Takeaways

• Payroll reconciliation ensures employee pay, deductions and taxes are accurate.
• It supports ATO compliance through Single Touch Payroll (STP).
• Regular reconciliations prevent costly errors, maintain staff satisfaction, and keep your financial reports accurate.
• Automating with QuickBooks Payroll saves time and reduces manual mistakes.
• Regularly reviewing super and pay deductions helps your business stay compliant.

What is payroll reconciliation? 

Payroll reconciliation is the process of comparing your payroll register against actual employee payments to confirm all figures match. In simple terms, it’s a double-check to make sure your payroll data is correct before finalising pay runs.

This important part of the payroll process should be completed before every pay period and at the end of each financial year when submitting your finalisation declaration through Single Touch Payroll (STP). Regular reconciliations help to ensure you’re paying your employees correctly, meeting tax and super obligations, and maintaining up-to-date financial records.

Why payroll reconciliation is important

Payroll is often one of the largest business expenses. Plus, a landmark HR study showed that nearly half of employees say they’d consider leaving a job after just one or two payroll errors. 

Reconciling payroll ensures every dollar is accounted for, employees are paid on time, and that all tax, PAYG and super contributions are accurate. It sets you up for better financial control and employee retention.

Best practices for payroll reconciliation

How to run a payroll reconciliation

Research from SCORE found that over half of small business owners spend more than three hours on payroll each month—but payroll reconciliation doesn’t have to be time-consuming.

Here’s how to streamline the process in six easy steps:

Step 1: Check the payroll register

Your payroll register is your starting point. It contains key employee details and pay information for the current period, including:

• Name, date of birth and tax file number
• Hours worked and pay rate
• PAYG withholding and other pay deductions
• Gross and net pay
• Overtime, bonuses and allowances

Confirm all data is current, especially if you’ve added new staff or adjusted rates. Then double-check that gross pay equals hours worked multiplied by the pay rate, and move onto the next step.

Step 2: Check and confirm timesheets

Next, review each employee’s timesheet and verify the hours match your payroll register. You should also confirm that leave and entitlements are accurately recorded, including:

• Annual leave and public holidays
• Paid and unpaid leave
• Overtime and shift penalties
• Sick or carer’s leave

Using digital time-tracking tools in QuickBooks Payroll makes this step much faster.

Step 3: Review pay rates and salaries

Confirm that all pay rates reflect the latest agreements, awards, and raises. Check:

• Current hourly rates or salaries
• Overtime rates
• Commission or allowances

Outdated pay rates are a leading cause of payroll errors. Keep them up to date to avoid underpayment issues and ensure compliance with Fair Work guidelines.

Step 4: Confirm any pay deductions

Review all deductions to make sure they’re accurate and up-to-date. Common deductions include:

• PAYG tax and PAYG contributions
• Voluntary or employee-requested super contributions
• Union fees, professional memberships, or wage garnishments

Confirm each deduction separately, not as a lump sum. You can check amounts using the ATO’s tax withheld calculator.

Step 5: Record payroll in the general ledger

Once your payroll data is verified, record it in your general ledger (also known as your books). Include:

• Wages and salaries (debit)
• Deductions, super, and PAYG (credit)
• Employer liabilities

Using QuickBooks Payroll or QuickBooks Online Advanced helps mid-sized businesses automate ledger entries and reduce human error.

Step 6: Submit payroll

Finally, issue pay slips and transfer employee pay on payday. Don’t forget to submit:

• PAYG withholdings through the ATO
• Employer super through your clearing house
• STP reports via your payroll software

Learn how to set up payroll correctly from the start.

Payroll reconciliation examples

Here are a few common payroll reconciliation scenarios:

Example 1: Overpayment

An employee should receive $1,200 but is paid $1,350 due to a rate error. You should adjust the next pay cycle and issue a pay slip correction to document the change.

Example 2: Timesheet error

An employee logs 40 hours instead of 38. The error would be caught during reconciliation and corrected before payroll submission, preventing overpayment.

Example 3: Accurate reconciliation

All payroll data aligns with the register, deductions and hours worked—proving the system’s accuracy and strengthening your employee’s trust in the business.

How to reconcile in QuickBooks

Doing a payroll reconciliation with Intuit QuickBooks is simple:

• Open your Payroll Centre and select the pay period
• Review timesheets and payroll registers
• Compare gross, net and deduction totals
• Confirm STP reporting and PAYG figures
• Make any adjustments and finalise payroll

Learn more in the payroll glossary to understand key terms.

Get payroll reconciliation right with QuickBooks

Payroll reconciliation doesn’t have to be stressful. Automating the process with QuickBooks Payroll gives you real-time visibility, fewer errors, and more time to focus on your business. Our business tools automatically manage STP submissions, track super, and sync data with your general ledger—making payroll compliance easy and efficient.

Whether you’re a small or mid-sized business, Intuit QuickBooks will help you run accurate, compliant payroll every time.

Try QuickBooks today and simplify your next payroll reconciliation.