Payroll: It’s one of an organization’s greatest expenses and there are many ways that employers can make their payroll processes more efficient and accurate. Achieving efficiency in your payroll practices requires the integration of compensation, technology, legal, and accounting considerations. Here are some tips, touching on all of these areas, to enhance your organization’s current payroll process:
Streamline payroll administration with technology.
Payroll systems are used by the majority of organizations, as per ERC’s most recent survey results on payroll practices. Choosing the right technology is really crucial and pay off in significant efficiencies. Verify that the payroll system can handle all of your payroll needs. The more automated your payroll system is, the better. Ideally, payroll, human resources, and accounting information/databases should all be linked.
Adopt a self-service model.
Adopting a model of employee and managerial self-service helps streamline administration of payroll. However, self-service is largely influenced by the technology your organization has chosen as well as the degree to which managers and employees can support the payroll system by recording attendance hours, signing off on paid time off, verifying expenses etc.
Keep policies simple.
The more complex your attendance, paid time off, commission, expense reimbursement, and other workplace policies are – the more complex your payroll process will be. Keep policies simple and concise, clearly stating the position of your organization. Having different policies for segments of your workplace, lengthy procedures, and strict, intricate guidelines will add administrative complexity to payroll.
Outsourcing payroll is a common practice among employers. Processing payroll accurately and timely has its hassles and liabilities associated with it and outsourcing may be the best solution, especially for smaller organizations with fewer resources to devote to payroll administration.
Use direct deposit.
Use direct deposit versus manual checks. In fact, it’s estimated that employers could save $100 per employee per year by using direct deposit (Lambert, 2005). For employees that don’t have bank accounts or don’t wish to use direct deposit – there are other new, more efficient ways of paying them – such as offering pay cards.
Provide electronic stubs.
Delivery of paper pay stubs is time-consuming and expensive. In addition, while the majority of employers continue to provide paper pay stubs, using electronic stubs is a way employers can streamline the manual delivery of paper stubs.
Ensure proper classification.
Not having employees classified correctly can certainly cause havoc in any payroll system. Proper classification of employees as exempt and non-exempt, according to FLSA guidelines, supports an efficient payroll process and decreases consequences of misclassification which could include back wages owed to the misclassified employee.
Use competitive pay rates.
Payroll is one of your organization’s largest expenses so it’s important to ensure that pay rates are in line with those provided by other organizations with which they compete for talent. This is best done by comparing pay rates to those of the market. Make sure you are paying employees enough to competitively attract and retain key talent. Utilize salary surveys to determine these rates.
Prepare for the new year.
At the end of the year, be sure your organization is prepared with any new information impacting payroll practices which include income tax withholding changes, new benefit charts or deduction amounts, new forms (W-4s, W-2s, address change, direct deposit, and others). These forms are typically released during the last weeks of November or early December by the IRS.
Establish a payroll calendar.
Outline a calendar of when payroll will be run which also coordinates the many facets of the payroll cycle and helps coordinate payroll with other departments. For example, you may want to outline what input is needed for processing and when it will be completed, due dates for all tax deposits, quarter and year end activities, and processing activities (which processes need to be accomplished to run and complete the payroll cycle, dates for check roll-out, and distribution of reports)
Stay up to date on payroll news.
Here is an informative website to visit for continually updated information on all your payroll needs: www.americanpayroll.org.
For additional resources related to this topic, please refer to the following:
- HR Help Desk – For sample policies, timesheets, direct-deposit forms, federal/state income tax documents, and other information about payroll, please contact firstname.lastname@example.org.
- Cost Savings – For information on ERC’s Preferred Partner, Paychex, which provides payroll, human resource, and time and attendance solutions, please click here.
- HR Consulting – To help you ensure that all of your organization’s positions are classified correctly, according to FLSA guidelines, consider having ERC conduct an FLSA audit for your organization. Contact email@example.com for more information.
- Surveys – Benchmark payroll practices as well as employee compensation with ERC’s many survey resources, including our compensation surveys and recent Payroll Practices Survey.
- Lambert, Vicki. (2005). Payroll: a guide to running an efficient department. Institute of Management & Administration: John Wiley & Sons.