Managing payroll involves processing employee paychecks (salaries, bonuses, deductions), adhering to labor laws, and maintaining adequate records. 

Business owners should learn how to manage payroll effectively because it directly affects their finances. Non-compliance with employment tax requirements resulted in nearly $31.4 billion in civil penalties assessed by the IRS in 2020. 

We gathered the best guidance to help make payroll as simple and painless for small business owners as possible. Here are the 12 best tips to outsourcing payroll services. 

1. Create a Payroll Calendar

A payroll calendar helps employees keep track of when they will be paid and when they need to submit their timecards. In addition, it facilitates the planning and execution of payroll tasks by your payroll staff. Once you’ve set up your pay schedule, most payroll software will automatically generate a payroll calendar for you, but you can also do it manually using a spreadsheet. 

When creating your own payroll calendar, follow these guidelines: 

• Analyze certain dates using a regular calendar so that you allow enough time for payroll processing. 
• When highlighting information, such as time card deadlines due to a holiday, use colored fonts. 

• Distribute the calendar to managers and supervisors so they can distribute it to their employees. 

Payroll calendars should show all pay periods for the year. This simplifies payment processing and reduces employee confusion about when they will be paid and what their paychecks will cover. Create a calendar template and save it to your hard drive. You can then update it as necessary.

2. Provide payroll training to HR staff

A human resources (HR) professional’s training includes payroll processing, but their expertise lies in recruiting and managing employee records. 

Organize payroll training sessions for your HR staff to improve your company’s payroll management process. Despite their different roles in an organization, the HR department and payroll department share essential functions. 

HR staff can benefit from payroll training in the following ways: 

• Increases collaboration between payroll and HR departments: Many payroll issues are linked to HR, so working together can lead to more innovative solutions. 
• Streamlines processes and reduces manual work: By consolidating some reports, you can reduce the amount of paperwork your staff prepares. 
• A more cohesive team: HR staff will be more sensitive to payroll processing time if they have a broader understanding of payroll team procedures. 
• Training prevents misunderstandings between HR and payroll employees and clarifies payroll policies for all employees. 

Your HR team’s knowledge of payroll policies will help your payroll staff communicate with employees more effectively. In the end, this improves working relationships and boosts the mood at work.

3. Assign payroll duties to your HR staff

It may be necessary to reallocate payroll duties if one or two payroll processors are having difficulty processing payroll on time. The new process should be documented and your written payroll policies should be updated so that everyone is aware of the new procedure. 

Regularly reviewing the new policies and processes is also a good idea. In addition to reducing employee stress, separating payroll tasks should help your payroll staff meet deadlines, handle volume, improve accuracy, and prevent fraud. 

Multiple people should handle payroll responsibilities instead of just one, including verifying and processing payroll and personnel data changes, approving payroll journal entries and changes, and reviewing and approving monthly payroll reports. 

4. Payroll Automation

Manual payroll processing takes a lot of time and money, and is easily susceptible to mistakes that can result in severe penalties. It is especially true for a growing business with an expanding staff. 

When HR and payroll staff are limited, payroll processing can be challenging. Time-consuming tasks can be easily automated by automating your payroll process. 

5. Implement a standard turnover process

Payroll staff turnover is painful because all companies have unique payroll processing intricacies; learning these can require significant time for new hires. Standardizing your turnover process can minimize the negative effects of losing team members to other companies, moving them to different roles, and temporarily filling positions when employees go on leave. 

You can implement the following ideas to streamline your internal and external turnover processes: 

• Consider promoting internally first to minimize new hires’ learning curves. 
• Use a buddy system where each payroll team member trains another. 
• Maintain standard process/role documentation. Provide a process flow chart and schedule as part of your payroll system documentation to make promoting payroll staff easier. 
• Keep your payroll templates up-to-date and save them in a drive accessible to everyone in your payroll department. 

You will be able to improve your payroll team’s productivity by creating a standard payroll process. Furthermore, it can reduce the risk of payroll errors, making your payroll department more reliable. 

6. Payroll Process Documentation

Payroll management begins with documenting your payroll process. It is helpful to use this strategy when analyzing and auditing your payroll system because it highlights each step and makes it easier to identify weak points. Make sure each payroll staff member understands their role after you develop a payroll process that works for your company. Document these procedures and share them with the payroll team. 

The payroll department should maintain a standard payroll processing manual. The process should include all payroll steps, reporting, and checking. Also, manual payroll processing instructions will be useful in case of emergencies. 

Identify the individuals to whom you will be giving paychecks and pay stubs, as well as the steps for printing and filing payroll registers and tax reports. 

7. Payroll Transparency

Employees often misunderstand the payroll system, which causes problems. Most often, this occurs in organizations where pay policies are not accessible to employees or are not adequately explained. The implementation of a wholly transparent payroll policy can resolve many payroll issues such as underpaid taxes or employee misclassifications (contractor vs. employee). 

Transparent payroll policies should include the following information: 

• Payroll process 

• Classification of employees 
• Salary determination 
• Responsibilities for employee reporting 
• Procedures for handling payroll errors at the company 
• Vacationable earnings (earnings used to calculate vacation pay) 

• Calculating wages and promotions 

Display the policy prominently throughout the workplace and make sure every employee has a copy. A similar update should be made to your employee manual. 

8. Don’t borrow from payroll tax funds

If your business is short on cash, you might be tempted to dip into your payroll tax funds. Borrowing from your tax fund, however, would be a serious mistake that you should avoid at all costs. 

A poor decision like this can easily be overlooked until your payroll tax payment is due. There is a risk of not being able to pay the IRS if you do not have enough money to replace the borrowed funds. 

Set up a separate payroll bank account to collect and contribute taxes. This will prevent payroll taxes from being used to pay for other business expenses. It is also possible for you to create a cash reserve for your business. When you run out of cash, you can access your emergency funds rather than payroll tax funds.

9. Payroll Audits

Occasionally, payroll computations are the subject of complaints. Frequent occurrences, however, show the need for regular audits of the entire payroll process. Manual timecard systems pose a high risk for discrepancies, especially for companies that still use them. 

It is also possible for automated systems to be affected by data entry errors, such as incorrectly recording a new employee’s tax status (married or single) or entering old pay rates. 

To ensure an effective audit, follow these steps: 

• Ensure that the dollar values match across all accounting, payroll, and cash documentation. 
• Integrate payroll software with your time and attendance system, and test plugins and add-ons regularly. 
• Use a check-in system or biometric sign-in hardware to automatically track employee login times. 

When employees raise concerns about payroll policies or have difficulty complying with them, you need to review your policies (and documentation) for accuracy and clarity. In order to complete tasks such as timesheet submission or timecard use properly and on time, employees must understand their role in the payroll process.

10. Recruit qualified payroll staff

A payroll employee’s ability to handle the demands of their job is crucial, or else they risk making errors, incurring costly penalties, and ultimately, experiencing job dissatisfaction. 

To handle the level of payroll tasks your company needs, businesses need to build a payroll team with the right skills. Consider candidates with glowing credentials as well as someone who can learn quickly and adapt to your work environment. 

For payroll positions, there are no industry-standard qualifications, but you can always look for payroll accreditations that demonstrate their math abilities. Experience, adaptability, and integrity are also important qualities. You can make all the difference in your business’ payroll operations by hiring payroll staff who have the right skills.

11. Employee Feedback on Payroll Procedures

It is never a good idea to assume that employees fully understand payroll procedures. Ask employees questions and encourage them to do so as well. 

By communicating, you can identify areas of misunderstanding, such as improper timesheet submissions or timecard use issues. Your staff will be more likely to support your changes if you invite suggestions for improvement. 

Hold an all-staff meeting to discuss payroll issues. Since everyone is directly affected by the process, employees will likely want to participate. Ask employees what payroll processes work for them and what areas need improvement at this meeting. You might be surprised by the creative suggestions you receive. It would also be a good idea to conduct a company-wide survey to determine employee satisfaction with the current procedures.

12. Payroll outsourcing

Paying employees accurately and on time is essential to avoiding staffing problems. When a company grows, tasks like payroll take more time and effort and can become overwhelming. 

Rather than managing payroll in-house, you can outsource it. With payroll software, you can still be involved in the process without having to calculate paychecks and taxes manually. The payroll software will handle the calculations and file and remit taxes for you, so you do not have to worry about that. However, you will still be responsible for managing the system and processing each payroll. 

If you are looking for a hands-off approach, you might consider payroll outsourcing. It may still be your responsibility to push through payroll, but overall, your outsourcing partner will handle most of your HR and payroll functions. 

Consider using a solution that can be changed over time if you are not sure which one is best for you. 

Conclusion 

Your ability to deliver accurate paychecks represents your brand and signifies your ability to retain employees. 

Payroll management should be at the top of your priority list. With a payroll strategy that supports your culture, you’ll always stay on top of this critical task. 

What criteria do you employ to choose the perfect outsourcing partner? If you need help in finding the right outsourcing partner, book a FREE APPOINTMENT with Outsource Asia experts today.