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The Rise of the Machines: Payroll in the Early 1900s

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What event made payroll more recognizable to us in 2010 than anything in 20th century history? Go ahead and take a guess.

The shift from cash to checks? Not quite. Machines that calculated payroll, instead of clerks or secretaries crunching the numbers by hand? Close. But these suggestions are really the results — or maybe even the offspring —  or offspring of the answer.

The 16th Amendment changed payroll forever.  Its enactment in 1913 made the federal income tax and Form 1040 a permanent fixture of our paychecks. Although the original progressive income tax didn't affect most Americans until it was altered following World War II, the groundwork for modern payroll was established. (As you may have read yesterday, the Union established an income tax on earnings over $800 a year annually during and shortly after the Civil War.)

Perhaps the second most impactful event was the the establishment of the Social Security Administration in 1935 and, subsequently, collecting Social Security payroll taxes in 1937. Employers were not only deducting and paying taxes on behalf of their employees, they were also matching their "retirement funds."

This spurt of legislation culminated in more work for paymasters and payroll departments —and a new business need for easier ways to calculate and manage payroll. Where there's an unaddressed business need, an entrepreneur is born.

As the World Wars necessitated labor savings, payroll machines took center stage in many offices. The Payteller and the Meilicke Calculator were marketed as "permanently computed payrolls" that, in reality, provided tax tables and other wage calculation tables. To alleviate year-end reporting work necessitated by war-related tax laws, a Burroughs No. 146 Employee Wage and Tax Return machine recorded all employee wages and streamlined preparation for January reports. A Burroughs machine "started as low as $125"— over $1,800 in today's dollars.

Tax tables and reporting systems weren't the only hot items in payroll machines. As flappers danced at speakeasies, post-WWI bookkeepers crunched numbers on a Monroe Calculating Machine. And as payrolls grew in size and the Great Depression grew in severity, the armored car became a must for some larger companies. By 1931, over 550 armored cars generated $3.9 million in revenue.

And as payroll machines reflected the age of machinery, by the 1950s, most large businesses owned a host of payroll machines for the bookkeeping and payroll departments. Unfortunately for small and medium-sized businesses, many payroll amenities were financially out of reach.

But as the machine age declined and the information and communications age galvanized, small businesses could start relieving their payroll headaches in the second half of the 20th century.