When it comes to payroll, having someone on board who is good at the process is invaluable. It takes them less time to do payroll, they make fewer mistakes, and they can spot potential issues months before they blow up.
If you’re still working on making this happen for your team, here are some payroll tips to ensure running payroll is a success every time.
5 Helpful Payroll Tips
1. Use Start Dates for Compensation Cycles
A compensation cycle is the process organizations use to review and adjust employee salaries. Most employers do them annually or semi-annually. Implementing regular compensation cycles makes sure salaries stay competitive with the market. But compensation cycles also reflect each employee’s individual performance and contribution levels.
And that’s why you should use start dates to create personalized compensation cycles for each employee. In other words, you should schedule compensation reviews around each employee’s start date instead of doing them all at once.
There are several benefits to using start dates for compensation cycles, including:
- Customized Reviews: Compensation based on start dates means reviews are more personalized. Your HR team can take the time to recognize each employee’s unique journey and update salaries accordingly.
- Easier for HR: Spreading out reviews throughout the year eases the HR team’s workload, making things less hectic. Imagine trying to do comp reviews for 100, 50, or even 10 employees in one week or month. That’s not fun for anyone.
- Better System: Although it takes some effort to switch, this approach leads to a smoother way of handling compensation. It’s more focused on the individual, and there’s just more breathing room all around.
Not using start dates for compensation cycles can disadvantage employees—particularly new hires who may face longer waits for their deserved raises due to uniform review dates.
And we already noted that a one-size-fits-all approach can overwhelm your HR team. This leads to rushed, less thoughtful performance reviews. Which, in turn, means employees may not get comp adjustments that actually reflect their contributions and growth.
You can learn more in our guide to managing compensation cycles.
2. Automate Payroll Processes
Payroll automation works by turning various parts of the payroll process into a system that operates almost entirely on its own—essentially, with minimal manual input.
And if you’ve spent any time on the HR Advice blog, you know we’re big believers in not using things like Excel to manually do…well, anything.
We’re fierce advocates for using software to automate and simplify processes instead.
It’s no different for payroll. In fact, payroll is one of the most important places to use software that can automate your most complex tasks.
Here’s how payroll automations work:
- Initial setup: Your team configures the system with company-specific information. This includes things like employee data, salary details, and compliance requirements. This information will ensure accurate payroll calculations and processing going forward.
- Data collection: The software system collects necessary data, like employee hours worked. It also collects any data on things like leave balances, shift differentials, and overtime. The system usually gets this data directly from time-tracking software or manual entries.
- Calculations: Using the gathered data, the software automatically calculates the gross pay for each employee. It then calculates deductions, such as taxes (federal, state, and local), social security, medicare, retirement contributions, and any other withholdings (like health insurance or garnishments).
- Tax compliance: The software stays updated with the latest tax rates and regulations to accurately calculate the tax withholdings for each employee. The best payroll software does this for federal, state, and local taxes. The very very best payroll software automatically files and pays all these taxes on time.
- Payment processing: After doing its calculations, the system processes payments to employees, typically via direct deposit. That said, some systems can also handle check printing or even payment through prepaid debit cards.
This isn’t all a good payroll software service does, though. It also keeps detailed records of all payroll activities, making it easier to create reports for accounting purposes, tax filings, and compliance audits.
Plus, many systems will notify employees when their pay has been processed. The software also alerts administrators to any discrepancies or issues that need attention.
Obviously, you’ll still need at least one person to oversee the payroll process, depending on how big your company is. But with automations, it’s a heck of a lot easier than if they had to do all these steps manually every single pay period.
Want more details on how to do this? Read our guide to processing payroll without an HR team.
3. Use Self-Service Portals
If you’re not already using an employee self-service portal, yesterday is the time to start.
No, really.
Employee portals are a game-changer for your employees, yes, but also for your HR team.
For employees, access to a self-service portal is empowering. They can view their payroll information, tax forms, and pay stubs online whenever they want. They don’t have to chase down HR for any of this basic information.
For HR, in turn, using self-service portals drastically cuts down on the number of questions they get about payroll. Instead of spending time fielding these questions—especially at the end of a pay period—HR staff can focus on all the other things waiting on their to-do list.
Self-service portals also help you keep up with payroll compliance because they make it easy for you to keep employee data current. Or, rather, for employees to keep their own data up-to-date. Current employee data is important when it comes to compliance with tax laws, and it also helps you manage the administration of benefits.
All you have to do is encourage your employees to review and update their information every quarter or so.
Or, even better, you can set up an automated reminder system in your payroll software of choice.
Here’s how to get started with an employee portal system:
- Figure out your needs: What features do you want your portal to have? Prioritize things like pay stub access, personal information updates, and time-off requests.
- Pick the right software: Choose a secure software service that fits your needs and integrates with your existing HR or payroll software. Even better if your payroll or HR software solution comes with an employee portal already built in.
- Train users: Set up training for HR staff and employees to make sure they know how to use the portal. There’s no point setting this all up if no one knows how to use it.
Yes, it’s a bit of work to set up an employee portal system. But a little bit of elbow grease upfront will save you tons of time and effort down the road.
4. Run Regular Payroll Audits
You can set up all sorts of great policies and processes for managing payroll, but like a house or a car, your payroll needs regular maintenance. Auditing—aka, reviewing—payroll regularly is the best way to do this.
I know, I know. A payroll process is a lot different than the car you’ve got sitting in the driveway. But the comparison tracks. As with a vehicle, things change in a payroll process with regular wear and tear. Mistakes get made. Information gets incorrectly inputted into a system.
Running regular payroll audits helps you spot these things early or avoid them altogether.
Regularly auditing your payroll means making sure all payments have been calculated correctly. It also means double-checking that everything you’re doing follows both company policy and all the relevant laws.
Payroll audits benefit everyone on your team. For employees, regular audits help make sure that they’ve been paid accurately and on time.
Audits provide a clear overview of payroll expenses for managers. This helps them create budgets that work well for the company. They can also keep tabs on salaries and wages to make sure their teams are compensated fairly.
For HR and payroll teams, audits can identify errors in the payroll process before they spiral out of hand. They reduce the risk of costly penalties for non-compliance with tax laws and labor regulations.
And for your business, regular payroll audits help protect you against fraud and fines alike. They also give your company a reputation for being fair—and serious about legal compliance.
Here’s a quick guide to implementing an auditing process:
- Plan the audit: Figure out what frequency would suit your company best. Annual audits are common, but more frequent reviews (quarterly, for example) might be better. For one thing, they spread out the burden of auditing. Imagine doing everything at the end of the year. If you think you can handle that, go for it. If not, aim for quarterly or even monthly audits.
- Gather documentation: As you get ready to run an audit, collect all your payroll records in one place. This includes time sheets, pay stubs, tax documents, and records of benefits deductions.
- Review compliance: Look at all the payroll records. Make sure all the wages paid, deductions made, and benefits contributions taken out are accurate. Take a close look at the latest labor and tax laws, too, and check your records against them.
- Correct errors: Address and fix any issues found during the audit right away. Take note of the audit findings and plan out steps to prevent future mistakes.
Need more details on how to take these steps? Our guide to running a payroll audit can help.
5. Regular Training for Payroll Staff
This may be the final tip, but it’s incredibly important. Regular training for any staff members who manage payroll is what keeps the other tips relevant. Payroll and HR software change all the time. You might even find your company switching from one software service to another. Or from one set of policies to another. Or from one way of processing payroll to another.
You get the idea.
Something is always evolving. Regular training keeps your staff updated on everything from new laws to the best ways to manage payroll. This means more accuracy and stability all around.
Employees get their pay correctly, managers can make better budget plans, and the company stays out of trouble with tax laws. Without this training, mistakes and legal issues could happen, leading to unhappy employees and possible fines.
To start, figure out what training the payroll team needs and set up a training plan that covers the latest tools and rules.
Make sure there’s enough money and time for this training. It might also help to bring in experts for special topics. Encouraging staff to get payroll certifications can boost their skills and confidence.
Keeping the payroll team well-trained helps the whole company run like a dream.
Tips for Avoiding 2 Common Payroll Errors
1. Misclassifying Employees
Employee misclassification happens when a company labels a worker the wrong way for payroll and tax purposes. So, for example, a company might label someone as an independent contractor when they actually count as an employee under federal law. Or vice versa.
This also happens a lot with overtime, too—for example, when an employer thinks a worker doesn’t qualify for overtime under the Fair Labor Standards Act (FLSA), but they do.
Employee misclassification can lead to all sorts of headaches: underpaid employees, back pay, back taxes, or even hefty fines.
So why does employee misclassification happen? Usually, it’s because there’s innocent confusion about the federal laws, which have a habit of changing ever so slightly every few years. Or sometimes, it’s because a company overlooks the fine print in an attempt to save money on payroll costs.
To avoid misclassification, your HR team should regularly review important payroll and labor laws. Keeping up with the latest laws and doing regular audits can help prevent these expensive mistakes.
2. Inaccurate Timekeeping
Inaccurate timekeeping happens when the hours that employees work aren’t recorded correctly. This is a big deal for hourly workers because it can mean they get paid too much—or too little. Which is a headache for your company either way.
This kind of mistake usually happens when there’s an outdated system in place for tracking time. Physical time cards are a thing of the past. And if they’re not, they should be.
To avoid this type of mistake, companies can use time clock software. These software services allow employees to easily—and accurately—log their hours. Some even integrate with your HR or payroll software, which makes running payroll that much easier.
No matter which type of time clock software you use, remember that regular training for both employees and managers is important. If everyone knows how to use these tools correctly, you’re that much closer to immaculate timekeeping.
If you need help choosing good time clock software, we’ve got you covered. We can also help you figure out how to calculate payroll—for hourly and salaried workers alike.
