Year to Date (YTD)

As a business owner with a workforce, big or small, a large proportion of your business expenses will be employee wages. When managing your payroll, there is a key figure you should be keeping track of: Year-to-Date or commonly referred to as YTD. 

It stands for “year-to-date” and it helps business owners work out their payroll budgets and helps employees figure out their personal budgets. Keep reading to learn more about YTD payroll and how it impacts your business and your employees. 

In business accounting, Year-to-date (YTD) payroll is the total amount your company has spent on the earnings of every employee since the beginning of the fiscal or calendar year, up to the current payroll date. This includes money spent on independent contractors and freelancers. Even though they aren’t technically employees, payments to independent contractors need to be carefully tracked to monitor your complete payroll spending throughout the year.

For your employees, YTD on their pay stub represents their earnings from the start of the calendar year to the pay date on the stub. This may be their gross income (i.e., before taxes and deductions) and/or net income (i.e., their take-home pay after taxes and deductions). This figure may also include sales commissions and bonuses earned the previous year but not paid out until this year.

YTD figures are important as they provide a cumulative record of your employee payroll expenses that can be compared to your annual budget for payroll costs, informing you of whether you’re on track to meet or even exceed fiscal goals.

Year-to-date figures also show you how much of your total budget goes towards paying your employees and independent contractors, so you can make informed decisions on whether you can afford to give pay rises and make new hires or need to make budget cuts. 

Additionally, by tracking YTD figures, it’s easy to stay compliant with tax contributions as the data ensures the correct amounts are being paid throughout the year. Knowing your tax liabilities also helps you to manage budgets and cash flow. Plus, discrepancies and errors can be caught early, for accurate payroll processing year-round.

For employees, YTD figures on their pay stubs give them an accurate view of their:

• Gross pay before deductions
• Tax deductions
• Insurance contributions
• Pension contributions by both the employee and employer
• Other deductions, like student loan repayments
• Benefits and additional payments, such as statutory sick pay, commission, bonuses, and tips.

This enables them to better understand their overall salary and make personal budget decisions. Therefore, as a business owner, you should make it a habit to provide a pay stub, either digitally or physically, every time you pay an employee.

To calculate your businesses YTD figures, you compile each employee’s pay stub and calculate the YTD gross incomes for your entire workforce, including overtime pay, commissions, and bonuses. If you want to work out your workforces’s YTD net pay, you can also add up taxes, deductions, and pension contributions, and subtract this figure from the YTD gross income figure. 

YTD Calculation Example 1

 
A business has three employees: Steve, Imogen, and George. George and Imogen both earn £35,000 a year and Steve takes home £24,000. Adding up the three salaries gives your total YTD payroll, which totals £94,000. 

In addition to their salaries, each employee also earned sales commissions. Imogen earned £7,000, George earned £6,400, and Steve earned £2,600. These commissions must also be added to your YTD payroll figure which is now £110,000.

YTD Calculation Example 2

 
A business has two employees: Grace and Alex. Each has been paid for 12 pay periods. Grace earned £2,900 gross wages per pay period and Alex earned £1,700 per pay period. Multiply the gross pay by the number of pay periods to get the YTD for each employee. 

The YTD for Grace is £34,800 and the YTD for Alex is £20,400. Adding the two totals together  gives the payroll YTD, which in this example is £55,200.

YTD Calculation with Payroll Software

 
Modern payroll software makes calculating YTD easy by automatically calculating and updating figures for each pay period. Plus, payroll software often automatically submits YTD data to the relevant tax and insurance agencies, helping ensure your business is tax compliant.

YTD payroll is a crucial component of payroll and employment compliance. To ensure that you are processing YTD payroll correctly it may be worth considering outsourcing payroll to a payroll company or Professional Employer Organization (PEO). To find out more, get in touch with our payroll experts.