Payroll processing is one of the most critical aspects of the global accounting and business fields.
It's also something that has to be done tediously every week and with accuracy as your employee's lives depend on it.
The main purpose of payroll processing is to fairly and accurately compensate all employees for their work. There are various ways to accurately and routinely process monthly payrolls; however, which procedure would be best for your business?
To ensure accuracy and reliability during monthly payrolls, you should track deadlines, create written policies, maintain records, enhance time and attendance, correctly classify employees, and file it on time. The best payroll practice will involve continuously improving and upgrading the system.
Creating accurate and routine payroll processing requires implementing the correct payroll management plan. Businesses with the best payroll practices are known to adapt and evolve with the ever-changing tax laws and economic environments. While your current payroll system may be sufficient, this article will discuss how it can be further developed.
Here we go.
Best Payroll Processing Practices to Implement Now
Payroll processing is an often-overlooked component in successful businesses globally. However, many smaller and unsuccessful companies underestimate the importance of practice, leading to costly errors.
To create an appropriate and effective internal payroll processing system, it is essential to implement certain non-negotiable steps. While the chosen system and implementation are vital, businesses should account for any future changes to federal tax laws and the evolving requirements of your company.
If your company’s implemented payroll system has not experienced any challenges over the last few years, you do not need to significantly alter it. However, you must continue following industry-wide best practices to further develop and solidify your company’s payroll processing system. The best payroll practice will require you to streamline your current process by implementing minor alterations.
Below are some of them.
1. Accurately Track Deadlines
Best payroll processing practice dictates that accounting for and tracking employee payment deadlines is critical.
In each economic sector, country, and industry, legal payment deadlines are in place. These deadlines require companies to pay their employees fairly and timeously, or they could face severe financial penalties. In most global economic sectors, company employees receive their remuneration monthly or bimonthly.
Best practice prescribes that businesses should always pay their employees on time, which requires a consistent, reliable, and accurate tracking system. Many modern companies have implemented a digital calendar, while others have maintained their traditional pen-and-paper approach.
2. Implement a Written Policy
While implementing an official written payroll processing policy in a company may seem obvious, many businesses fail to do so, resulting in unnecessary errors and missed employee payment deadlines.
Moreover, some companies have an official handbook but lack a dedicated employee payment payroll processing manual. Payroll manuals benefit the entire system as they clearly state the company’s payment procedures while answering any questions employees may raise.
Employees frequently ask questions like how much paid leave they get, when they should receive their payments and company tax contributions. If your company has a dedicated payroll manual, an incredible amount of time and company resources can be saved.
3. Maintain Complete and Accurate Records
Companies need to maintain complete and accurate employee payroll records. Companies that fail to maintain accurate and reliable employee records could face legal challenges. While some companies have an enormous number of employees, making it challenging to maintain accurate and reliable records, modern technology exists to digitally keep complete records. In addition, modern software can safely and securely store your data on a remote server for years, reducing the likelihood of any unnecessary legal challenges arising.
Remember: Best payroll payment practice dictates that companies maintain complete records for pay stubs, retirement annuity maintenance, and any tax information for at least 5 years.
4. Enhance Attendance and Time Tracking
Employees should never be required to track their attendance and work time, as this could lead to unnecessary payment disputes.
If your employees must currently track their own time and attendance, industry experts recommend immediately implementing an automatic tracking system. By allowing your employees to seamlessly clock in and out, monetary disputes can be avoided, and company resources can be saved. In addition, company managers can identify dedicated employees by their monthly overtime benefits.
5. Correctly Classify Employees
Correctly classifying your employees as full-time, independent contractors, or part-time workers is essential to best payroll payment practices.
If you do not correctly classify your employees, you will open your business up to unnecessary legal challenges, and you may even find yourself at the wrong end of the IRS’s scope. Companies often overlook correct employee classification, incorrectly assuming which employees are tax-exempt.
6. Upgrade Current Payroll System
Depending on your company’s size, the number of payroll deadlines can be significant. Meeting your payroll deadlines should be non-negotiable, as the incurred financial losses are often severe. To avoid any payroll payment deadlines being missed, industry experts recommend upgrading your current payroll system to an automated process.
By automating the process, your company can seamlessly:
If your company’s current payroll system cannot easily complete these requirements, upgrading it to a more modern and advanced version is time. Some companies can easily perform payroll automation; however, it is important to measure the time saved by upgrading to a more recent version. If the amount of time saved is significant, upgrade your system and increase your profits.
7. Upgrade Payment Methods
While it may seem slightly comical, some companies still pay their employees with physical cash or checks despite the practice being enormously outdated.
Best payroll practice dictates that implementing an automatic direct deposit system is the first step to upgrading your payroll practice. Companies can pay their employees’ money directly into their chosen bank accounts by utilizing a direct deposit payroll system. In addition, your company will save time, increase yearly profits, and eliminate the likelihood of any unnecessary mistake being incurred.
An unseen benefit of automated direct deposit payroll practices is accurate, reliable, and important end-of-year reporting. Companies that can digitally and easily access their payroll history will reduce any future payment disputes, decrease their tax burden, and enhance employee productivity.
Accurate, reliable, and routine payrolls are essential for any successful company. If your company does not currently have an appropriate payroll processing system, there are many quick solutions in this article. Building an enormous, profitable, or joyous company is no easy feat; however, a fantastic first step would be implementing a modern and beneficial payroll system.
(Related article: 9 Best Practices for Onboarding Contractors to Create a Sense of Team)