Two small business owners looking through their YTD payroll.

What is Year-to-Date Payroll?

Year-to-date payroll is all about analyzing past financial reports that can point business owners in the right direction when they are making  critical decisions. Although YTD payroll is one of the simpler concepts when it comes to handling payroll, its importance can not be underestimated, as it’s a contributing factor to a business's overall cash-outflow.

What is YTD Payroll?

Year-to-date payroll is the total amount the organization has spent on payroll since the beginning of the fiscal calendar until the current payroll period. That would include all your employee’s gross income, and the total income an employee makes before deductions and taxes. Although freelancers and contractors are not paid the same way as regular employees, the costs you incur by hiring them are still counted in the YTD payroll. 

This would also include the payments made towards hiring and utilizing the services of self-employed contractors or freelancers. YTD payroll does not include money earned during the fiscal year but the payments that were actually paid out during the fiscal year. 

Example of YTD payroll

Let’s consider that your organization’s fiscal year begins on January 1st. A 12-month year-to-date payroll would involve gross payroll statements from January 1 until December 31. You can look at your YTD statements from previous years and compare them to the current year’s statement. In doing so, you will be able to easily spot any upward or downward trends that may be occurring – therefore providing you with additional insights into your own company. 

Why is YTD Payroll Important to Your Company?

If you have a clear vision of your YTD payroll, you can determine what business expenses are feasible and which might exceed your overall budget for the year. Let’s say you’re thinking of purchasing new machinery or expanding your location. These kinds of business expenses are quite large and will heavily impact your accounts. 

If you have a clear vision of your YTD payroll, you can determine what business expenses are feasible and which might exceed your overall budget for the year. 

Let’s say you’re considering purchasing new machinery; however, you aren’t sure if you will have enough funding. By looking at your YTD payroll, you can gain clear insights into how much money you spent on the previous year’s payroll expenses and can now estimate how much you will need to save to cover the upcoming year’s payroll expenses. This will allow you to make a judgment call on whether you have the leeway to add additional cash toward the new machinery. Of course, YTD payroll will not be the only report you will need to look at when making large financial projections; however, it is important to keep this in mind.

Also, your YTD payroll helps you get a clear picture of your company’s tax liabilities. As a business owner, it helps to stay on top of your quarterly and annual tax liabilities so that you are able to allocate funds for business expenses.

Even in terms of hiring additional resources, knowing your YTD payroll lets you know if your organization will meet its projected revenue, which helps you make those decisions easier.

YTD Payroll and Pay Stubs

Your YTD payroll is directly related to the pay stubs you give your employees each pay period. Your employee’s pay stub will normally have a YTD section that displays how much your employee earned from the start of the fiscal year up to the most current pay period. The YTD section of the pay stub will also show the total tax deductions taken from the employee’s wage from the beginning of the fiscal year up to the current period. 

Hiring or budget cuts based on YTD payroll

 A YTD payroll will give business owners a better understanding of how hiring new employees or making budget cuts will affect their business. They are able to see how much money was spent on the payroll in the previous year and compare it to how much money they made throughout that same year. This will allow them to make informed decisions on if they can afford to spend more money on staff in the future or not. 

Your YTD payroll will also give you deeper insights into whether you have the funding to give staff members additional raises or bonuses. 

YTD and tax liability

As a business owner, there are many tax implications when it comes to paying your employees. Payroll remittances can include EI, CPP, and other federal and provincial taxes. This is where utilizing YTD payroll will help. Seeing exactly what you paid out to your employees and what you owe the CRA  at the end of the year will help you keep your finances organized and contribute to the overall financial health of your business. 

How do you generate accurate pay stubs with YTD?

Another benefit of the year-to-date payroll is being able to create very accurate paystubs. You can calculate the YTD with several aspects, including an employee’s gross earnings, net earnings, the deductions made and even the hours they’ve worked for. If you’re wondering how you can use YTD when it comes to your employees’ pay stubs, here are a few ways to do so.

Year-to-date Gross

You can calculate their gross earnings for the year before the required deductions.

Year-to-date Net Earning

You can also calculate their earnings after deducting benefits and taxes.

Year-to-date Deductions

This is the total amount of deductions made for an employee towards CRA dues and company benefits if any.

Year-to-date Hours

Another thing shown on the pay stubs, if an employee or contractor earns hourly, is the total number of hours they’ve worked for the whole year.

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YTD Payroll for an Employee vs. Your Business

For both employees and business owners, a YTD payroll calculation is of immense value. For an employer, it is an indicator to ensure that all employees are being compensated fairly and helps you track their growth if they’ve been with your company for a while. The YTD payroll also helps you check if you can expand your team in terms of having the budgets for hiring. An employee can check how much they’ve earned prior to taxes and how much they owe in taxes. It also gives them details on their benefits, overtime pay, holiday pay etc. This helps them plan their financial goals for the next month or year. 

How to Calculate YTD Payroll

Let’s break down how to calculate the YTD payroll for your organization. All you need to do is gather each employee’s pay stub for the entire fiscal period, make a note of the year-to-date gross income, and add them all up.

For instance, your company's fiscal period is from January to December. And let’s say you had 3 employees working for you between that time frame –  Tom, Sandra and Dave. 

Sandra earned a year-to-date gross income of $50,000, Tom, on the other hand, earned a YTD gross income of $55,000, and Dave earned himself about $54,000. Let’s not forget Dave did really well at the end of last year and earned himself a commission of $3,000. If you add these earnings, your company’s year-to-date payroll is $162,000. 

Calculating YTD payroll without pay stubs

There are instances where an employer does not have to issue pay stubs to your employees or contractors. So, the next natural question would be, can you calculate your YTD payroll without pay stubs? 

Yes, you most definitely can. All you’ll have to do is simply multiply each employee’s gross income for the given pay period by the number of cheques they receive.

For example, your two new employees, John and Jane, have earned themselves 12 pay periods. For each of those pay periods, John earns $3,000 in gross wages, and Jane earns $2,000. John’s year-to-date payroll amounts to $36,000, and Jane’s is $24,000. Your total year-to-date payroll is the addition of the two, which is $60,000.

Whether you’ve got paystubs or not, having a clear picture of your year-to-date payroll helps you stay steady on your journey to grow your business. While making sure your employees are paid is crucial, calculating your YTD is an important part of running payroll and it starts with staying on top of your finances. QuickBooks Advanced can help you organize your taxes, expenses, and payroll all in one place! Sign up today.

YTD Payroll FAQs

Is YTD the same as gross pay?

The answer varies depending on who’s asking the question. For an employee, yes. It is the same. But for an employer, YTD is the sum of all their employees’ gross earnings.

Is YTD required on paystub?

In Canada, it is required to have your employee YTD information on their pay stub from the beginning of the year to the current pay period.

What is a YTD example?

Let’s say your fiscal year starts on 1st June. A 3-month YTD would mean calculating the gross payroll from June 1 to August 30.

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