Payroll software is the process of processing paychecks (salaries and bonuses), complying with labour laws, and maintaining appropriate documentation.
Businesses must learn to manage payroll software efficiently, as it directly impacts their financial health. The IRS assessed $31.4 billion in civil penalties for non-compliance to employment tax requirements in 2020.
These tips are part of the Payroll Library. We discuss them in greater detail and offer guidance to make payroll as easy and painless as possible for small business owners. You can check it out here:
These 15 tips will help you manage your payroll
1. Make a Payroll Calendar
Employees can use payroll calendars to understand when they will get paid and when their timecards are due. This calendar also assists payroll staff in planning and executing their payroll tasks.
These are some guidelines for creating your payroll calendar.
- Use a regular calendar to help you analyze dates that may require extra time to process payroll.
- To emphasize certain information, use coloured fonts.
- Provide a calendar to supervisors and managers so they can give it to employees.
An effective payroll software calendar should include all pay periods throughout the year. This will simplify payment processing and reduce employee confusion regarding when and how long their paychecks will be covered. Save the template to your hard drive once you have created it. You can then update it as needed.
2. Allow HR staff to attend Payroll Training
Although processing payroll forms part of a professional’s human resource (HR), their expertise is more focused on employee records and recruitment.
Consider arranging employee payroll training sessions to improve your company’s payroll management. While the roles of HR and payroll are distinct, they both have crucial functions that contribute to a company’s success.
Payroll training is a great benefit for your HR staff.
- Collaboration improves: Many payroll software problems are related to human resources. Therefore, working together would allow the payroll and human resource departments to share their knowledge to find more innovative solutions.
- Reducing manual/double work. Consolidating reports can help reduce paperwork for your staff. It can also simplify the process.
- A more cohesive team is possible: Your HR staff will be more aware of the payroll process and more responsive to your time spent on it.
- Avoids conflict: Payroll training can help you avoid misunderstandings between payroll workers and HR personnel and clarify payroll policies for all employees.
A deeper understanding by your HR team of payroll policies can help ease some of the pressure on employees when communicating with payroll staff. This will improve working relationships and increase the general mood in the office.
3. Keep up-to-date on Federal and State Tax Procedures
Employers must be aware of changes in federal and state reporting requirements and tax obligations. There are many reasons for changes, such as business relocations, employee relocations, or hiring remote employees. It is the employer’s responsibility when this happens to collect and update all necessary information to calculate payroll and taxes.
Employers should submit a W-2 Form to their employer and have it filed with the Social Security Administration before mid-April each year. This helps the payroll department to keep track of changes in federal and state deadlines. It also allows them to calculate hours, wages, tax holdings, benefits, and other information. Penalties can be imposed for failing to pay an employee- and employer-withheld taxes accurately.
4. Standardize Turnover Processes
Payroll staff turnover can be very painful because every company has its payroll processing system. This can make it difficult for new hires to learn the details. You can minimize the negative consequences of losing employees to other companies or moving them to new roles. Also, it is possible to fill in for those on leave temporarily.
These are some suggestions to smoothen your internal and externe turnover processes.
- Promote internally: Consider Promoting internally First to reduce the learning curve for new hires.
- Create a buddy program: Each payroll team member should train another in their task.
- Maintain a standard process/role document: Include an outline and schedule in your payroll software documentation to make managing roles easier when you promote payroll staff.
- Update your Payroll Templates: Always update your page templates and save them on a drive that is accessible to all members of your payroll team.
Standardizing your payroll process will increase the productivity of your payroll staff. This will also reduce your chance of making payroll mistakes, making your payroll department more reliable.
5. Automate your Payroll Process
Processing payroll can be time-consuming and costly. It is easy to make mistakes that could lead to severe penalties if done manually. This is particularly true for growing businesses with a steady increase in employees.
Payroll processing can be difficult when there needs to be more payroll staff or HR. Automating payroll processing is the best way to automate time-consuming tasks.
6. Avoid borrowing from the Payroll Tax Funds
If your company is in a cash crunch, it might be tempting to borrow from your payroll tax funds. Borrowing from your tax funds is a grave mistake and should be avoided at all costs.
Business decisions can be easily overlooked when processing your payroll tax payment. It is possible to run out of money and not be able to repay the IRS.
Consider opening a separate bank account for both your contributed and collected taxes. This will ensure that you refrain from using payroll taxes to pay for business expenses. A cash reserve can be created for your business. You can also access your emergency funds to help you when you are short of cash.
7. You can distribute the payroll duties among your HR staff
Reallocating payroll processing duties to one or more payroll processors may be an option if they are not processing payroll on time. Document the change in duties and update your payroll policies to communicate clearly.
It is also a good idea for your staff to review new policies and processes regularly. Separating payroll tasks will relieve stress from individual payroll staff and help you meet deadlines, handle the volume, increase accuracy, prevent fraud, and keep your payroll staff safe.
Multiple people should perform the following tasks in relation to payroll:
- Verifying and processing payroll changes and making changes
- Approving monthly payroll journal entries and reviewing and approving them
- Distributing paychecks
8. Payroll transparency is important
Employee misinterpretations of the payroll system can often lead to problems. Pay policies that are not easily accessible or poorly presented to employees are the most common cause of this problem. A transparent payroll policy can fix many payroll problems, such as misclassifications of employees.
Transparent payroll policies should contain information about:
- How payroll works
- How employees are classified
- How are salaries determined?
- Reporting by employees
- Payroll mistakes can be corrected by companies using company procedures
- The levels of vocational earnings
- Calculation of promotions and wages
The policy should be written and displayed prominently in the workplace. Each employee should also have a copy. Your employee manual should be updated accordingly.
9. Document your Payroll Process
It is important to document your payroll process to manage payroll. This helps you to analyze and audit your payroll system. It highlights each step and helps you identify weak points. To ensure that each member of your payroll staff understands their roles, create the most effective payroll process for your business.
For payroll departments, maintain a standard payroll processing guide. It should contain all steps of payroll processing and reporting and check-handling procedures. It is also useful to have manual instructions for processing payroll manually in an emergency.
You will need to document the printing steps and file tax reports and payroll registers. Also, you should list the names of those receiving the paychecks.
10. Employer Scheduling and Time Tracking Software
Payroll processing is a complex task that requires accuracy. This can be achieved by properly monitoring employee attendance. Even the smallest error can cause problems that could lead to severe civil penalties or poor feedback for your business.
Scheduling and Time Tracking Software can help you save time, increase efficiency, improve productivity, and ensure accuracy in your payroll reports.
11. Audit your Payroll Process
There are often complaints about the payroll process. Frequent complaints about payroll computations are an indication that regular audits are needed. Companies that still use manual timecard systems are at high risk of discrepancies.
Data entry errors can also affect automated systems, such as incorrectly recording a new employee’s tax status (married or single) and entering outdated pay rates.
To ensure an audit is effective, here are some steps you can follow:
- Verify and reconcile all accounting, payroll, and cash documentation to ensure that dollar values are consistent across all records.
- Test plugins to ensure your payroll software integrates with your time- and attendance system.
- Install biometric sign-in hardware and check-in software to track employee login times.
Employees who have difficulty or raise concerns about payroll policies should be notified so that you can review them (and your documentation) to ensure clarity and accuracy. Employees must understand their roles in the payroll process to complete tasks such as timesheet submission and timecard usage correctly and on time.
12. Hiring qualified payroll staff
The ability to manage the demands of their job is essential for payroll staff. Otherwise, they could make errors and incur costly compliance penalties, leading to job dissatisfaction.
Businesses must ensure that they have the right payroll staff to handle the payroll tasks required by their company. This applies to people with impressive credentials who can learn quickly and adapt to the work environment.
While no “industry standards” qualifications can be used to hire payroll personnel, you can still look for relevant payroll accreditations that prove their math skills. Experience, adaptability, integrity, and honesty are all important qualities. Hiring qualified payroll personnel will ensure that all payroll obligations are taken care of. It is important to be able to identify the right candidates.
13. Complete onboarding paperwork in a timely manner
You must complete all employment forms you are legally required to complete for new hires. These forms will give you information about new hires to help you classify and pay employees properly. You may have different laws depending on where you live or your county. For all deadlines and paperwork, check the websites of your state and county.
These are the most popular types of employment forms that employers should complete:
- W-4 (or HTML9 for contractors).
- I-9 Form for Employment Eligibility Verification
- Direct deposit Form
You will also need to provide documentation explaining the terms and conditions of your employee benefits to each new hire. In some cases, you may request they sign.
When new employees join your company, they must complete onboarding documents. They are essential to ensure that you properly manage payroll. To avoid future errors, it’s best to make an onboarding schedule.
14. Get feedback from employees about the Payroll Processes
Refrain from assuming your employees are familiar with the payroll procedures of your company. Encourage employees to ask questions and make it a habit to do so.
Communication is key to identifying areas of confusion, such as incorrect timesheet submissions or problems with timecard use. After changes have been made, it is a good idea to invite staff members to suggest improvements.
Begin by having an all-staff meeting on payroll issues. Because everyone is directly involved in the process, employees will want to be there. Ask employees to share their payroll experiences and suggest improvements. The creative ideas you get may surprise you. To determine employee satisfaction with current procedures, consider surveying the company.
15. You can outsource your payroll tasks
Businesses must be able to pay their employees on time and accurately to avoid any problems with staffing. For a growing company, this can be overwhelming as tasks such as payroll take longer to complete.
You can manage payroll internally. Instead, you can use one of the many outsourcing options. You can still participate in the process, even though you won’t have to calculate taxes or pay your paychecks. Payroll software will allow you to manage the system and process each payroll. However, the software will do all the calculations and file and remit taxes for you so that you don’t have any worries.
You can use a professional organization (PEO) for a more hands-off approach. PEOs act as the employer of record in tax and payroll matters. You may still be responsible for the payrolls depending on your chosen provider. However, PEOs can take over most of your company’s HR functions and payrolls.
Bottom line
Delivering accurate paychecks to employees is a direct representation of your brand. It also indicates your ability to retain high levels of employees.
You should make sure you are learning how to manage your payroll. You can ensure that you stay on top of your payroll tasks by creating a payroll strategy that supports your culture.
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