Tips to Make In House Payroll More Efficient

Editor's Note: Take a look at our featured best practice, Payroll Calculator for Small Business (Excel workbook). The main purpose of the template is to provide a payroll solution suitable for small businesses (up to 50 employees) that can not afford or do not want to purchase a payroll software. The structure of the template is designed to be user friendly and practical and to offer sufficient [read more]

* * * *

Processing payroll is an important task for any organization. As it is linked directly to the employees of the organization, it implies that it is linked to the company’s performance. A happy employee is more productive and is a valuable asset for any organization.

Major challenges that the organization faces to process their payroll efficiently is to process it on time and process it correctly. Timely and error free processing will enable you to release the payouts in time keeping your employee happy and content. Irrespective of the payroll cycle that you follow, it is important that you do it the right way every time.

Automating the payroll process through software like Paycom is the best solution to achieve a timely and accurate payroll processing. However, considering the cost it may incur, smaller businesses might opt for an inhouse processing method. Here are some tips to improve your payroll processing with ease while reducing the possible human errors:

Employee Classification: The benefits and the tax liabilities vary for every group of employees. Smaller organizations normally work on trust, however, wrong classification of the employees may lead to serious tax related issues later. If ignored, it may end up impacting your overall revenue as you might have to pay heavy fines for the same.

Self Service: The best way to ensure that the employee information is correct is to get it by the employee himself. The payroll processing  team, thus saves time and can focus on other tasks of payroll processes. This also makes employees liable for the information entered and the chances of errors also reduced.

Simple Policies: More concise the policies, simpler will be the payroll processing. Incorporating too many heads in the salary also makes it complicated. Simple and direct leave and attendance policy makes it simple to calculate and the chances of errors and rework can be avoided.

Tracking Dates & Deadlines: Creating a calendar for various sub processes of payroll processing is highly recommended. Keeping a tab and coordinating within the team becomes easier and chances of missing important dates is less likely. Starting from the dates for input requirements to calculations and due dates of all the taxes to be deposited. A smooth flow of process based on timelines can improve the effectiveness of your in-house payroll processing system. Setting up notifications and reminders is a good practice.

Direct Deposits: Making direct deposits is the best way to process the paychecks with minimal efforts. Almost every employee would have an account in one or the other bank thus electronic transfer eases the process and makes it faster. This also helps in maintaining the records electronically and the year end processing thus becomes easier. You don’t have to sift through paper files for reporting purpose.

Payroll Outsourcing: It is comlex and time consuming to process a payroll smoothly and without errors. Thus outsourcing the process to an external company takes the major burden off your shoulder. The outsourcing company also takes care of all your compliances related to taxes and deductions. Outsourcing costs you almost equal to the consolidated cost of salary of the employees who would be processing the payroll in-house. Also, the outsourced companies are well-versed with the laws and regulations to stay compliant.

Bookkeeping:  It is vital to deposit the payroll related documents as per the defined guidelines of the labor department. Missing these deadlines may lead to heavy fines. Maintaining the track of submission dates is one way of making the payroll efficient. Based on following the compliance deadlines, the remaining process may automatically fall in place.

Conclusion: The medium and small business may opt for in-house payroll processing to save on expenses. This may lead to a lot of human errors. Switching to an automated system that can be tailored according to your needs and budget will always be a good choice.

Do You Want to Implement Business Best Practices?

You can download in-depth presentations on Payroll and 100s of management topics from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.

For even more best practices available on Flevy, have a look at our top 100 lists:

• Top 100 in Strategy & Transformation
• Top 100 in Digital Transformation
• Top 100 in Operational Excellence
• Top 100 in Organization & Change
• Top 100 Management Consulting Frameworks

These best practices are of the same as those leveraged by top-tier management consulting firms, like McKinsey, BCG, Bain, and Accenture. Improve the growth and efficiency of your organization by utilizing these best practice frameworks, templates, and tools. Most were developed by seasoned executives and consultants with over 20+ years of experience.