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How to Manage Payroll like a Pro

November 4, 2024 Kevin Kenealy payroll management Comments Off on How to Manage Payroll like a Pro
How to Manage Payroll like a Pro

You have employees. They need to be paid. So, you pay them. Sounds easy enough, right? Well, not exactly.

One of the primary functions in any business is payroll management. In this way, compensating your employees will need to ensure that the process: is accurate and timely; complies with taxation laws and employment regulations; has updated records.

There is a huge amount that needs to be done to do this properly and so it can quickly become an arduous process.

If you have recently taken on payroll functions in your company or are looking for ideas to help improve your process, the tips provided here will help you become a payroll management master.

Find a Good Payroll Service

Though payroll can be executed via spreadsheet and manual payment processing methods, there’s no need for it with the number of genuine payroll services on the market. Using a dedicated system for automated payroll processing and administration is indeed a wise move.

Identifying your needs helps you choose the right payroll system. Things to consider: A few key things are

State where your employees are located: Payroll laws and regulations differ from one state to another, and it only becomes more complicated as you pay workers outside of the U.S. Payroll companies vary today: some, like Patriot, are only for U.S. based companies; others, like Deel and Papaya Global, enable global payroll teams.

  • How employees would like to be paid:  Will workers receive paper checks, or do you and your workforce care about direct deposit capabilities?
  • Payroll frequency: What kind of processing times do you require, and how often will you run your payroll?
  • Payment Types: What are the pay types (hourly, salary or fixed payments) and groups (full- & part-time employees or contractors)? Most payroll companies service all types, but companies like Gusto provide additional savings when you only need to pay contractors.
  • How is payroll run: If it is done in-house by someone within your company, how much does your system need to be user-friendly? If you intend to outsource the whole function, you might even go with a full-service payroll provider such as ADP or Paychex.

You will then know how to choose the right payroll service provider for your business based on your current and future requirements.

Understand Federal, State and Local Laws

Payroll professionals need to be aware of the laws regarding pay and taxes. Payroll laws are state-specific and you have to learn about every state where you have employees.

Sounds like a lot to stay on top of? Read our PEO guide to discover businesses which can help keep you compliant. This is especially critical if you are conducting any nearshoring of services.

Many of the payroll platforms have built it workflows and automations to keep you compliant with pay and tax changes.

Leveraging resources out of their system admins knowledge base, webinars and blogs is a super way to remain in the know. Also, attending training like in Las Vegas, Nevada every fall keep you current for your job duties and job responsibilities when it comes to executing payroll effectively.

Set Up Reporting and Approval Methods

Compensation administration is a process to set out how we will structure pay (salary vs hourly), calculate, track (hourly) approve and distribute compensation.

Need to define the process for things like, time tracking and approvals for hourly employees; time off request and deductions from pay. Implementing guidelines and accuracy checks is critical to achieving a neat, prompt process while minimizing errors.

Organize Your Payroll Calendar for the Year

What is your pay cycle for employees: weekly, biweekly, semimonthly or monthly? With that in mind, you need to be sure to stick with a payroll schedule that is as manageable as possible while still meeting your workforce requirements.

The most common pay frequency is bi-weekly, which can be convenient for both salaried and hourly employees and a little easier on a small business. For businesses where a majority of the staff are hourly employees, it may be beneficial to use a weekly payroll schedule.

Once you determine how often you will pay your employee, set an time on when to do payroll task according to your schedule and let them know of the pay schedule for smooth payroll process.

Decide Method to Pay Your Team

Direct deposit has become a common way to disburse employee paychecks. Another option is to pay your employees via paper checks. Payroll cards are yet another option that provides flexibility for the employees.

Figure out what methods of delivery will work best for your workforce and that you have the facilities/capacity to deliver effectively via those means.

Verify That Payroll Paperwork for New Employees Is Filled Out

When hiring a new employee, you need to collect all pay documents filled out. Federal and state tax forms are part of this.

Complete enrollments for direct deposit, company-sponsored benefits, and any other deductions the employee will enjoy if they are eligible. In most cases, you can set up your payroll software to automatically incorporate these enrollments as part of the onboarding process (or whenever the person is eligible for them).

Conduct a Review of Pay Adjustments for the Current Pay Period

On occasion the payroll is extremely uniform from pay to press. However, there are on occasion changes that happen and you want to be aware of and check before processing your payroll for each pay run.

You need to approve any changes made by employees when they update their tax withholdings, change amount deducted from pay or get additional payment for bonuses and overtime. Depending on your payroll system, you may receive post outgoing notifications when special or non-standard pay actions occur in a given pay period.

At other times, they will have to manually document those changes and get the necessary approvals before undertaking additional steps. So, pay attention and read through them attentively.

Review Payroll Submissions with Your Payroll Team

Linking to the last tip, some payroll systems (e.g., ADP) optionally show you a side-by-side comparison, of the previous period payroll total and your current approval. It provides an opportunity to review before payroll is processed – double checking and understanding any large dollar amount variances in paychecks that were generated.

Set a second pair of eyes create an approval list before your payroll is sent for payments as well. It provides one final chance to verify the accuracy before transferring funds.

Process Payroll and Prepare Payroll Forms

Payroll taxes have typically been paid by employers and paper work needs to be done with the federal, state and local entities. Pro Tip: Always keep a secondary bank account for these taxes to be paid early.

Most payroll platforms will automatically file required forms, pay the taxes from your designated account(s), and keep the documentation for storage compliance that you need to do yourself to some extent (this is typically granted when you initially set up).

It can certainly be done manually, but the consequences of noncompliance can be harsh. By automating this through your payroll service provider, you will have one less task (but an important one) on your plate.

Maintain Accurate Records

You will want to keep some basic data on each employee- their name, address, date of birth and social security number. You will also want to record the payment and frequency of each employee.

If you are tracking non-exempt employees, then you’ll want to ensure that your record-keeping system meets the Department of Labor Fair Labor Standards Act, as well, where you are logging hours worked and work schedules accurately.

Comprehensive record-keeping also means that no employee leaves – whether you are the first or not – without following appropriate termination procedures, promptly remitting any final paychecks according to specific state guidelines and ensuring paycheck deductions cease if applicable.

Perform Periodic Audits of Your Processes, Systems and Practices

Periodic audits will often reveal a method to streamline payroll, at the very least. Discuss with employees and managers about problems or mistakes they are facing in their work, and how these issues can be resolved.

Check past payrolls you have processed to make sure there were no mistakes, or if there were any mistakes that they were resolved. Lastly, speak to your payroll team members and/or the services provider representatives about tools and resources that can be used for improvement of the process going forward.


Top Preventable Highly Expensive Payroll Administration Errors – Part Two

September 16, 2020 Kevin Kenealy payroll management, payroll processing Comments Off on Top Preventable Highly Expensive Payroll Administration Errors – Part Two ,
Top Preventable Highly Expensive Payroll Processing Management Mistakes by The Payroll Company 505-944-0105

Payroll mistakes can be very costly for any business. The mistakes normally occur within a company’s payroll department. Payroll mistakes can mean $1000’s of dollars in expensive fines and penalties from the IRS, a downturn in employee morale, and potentially they can cost a business its existence. The primary reasons these problems happen are due to errors made by company’s doing payroll themselves. Featured here are the top preventable payroll processing and administration errors and what to do about them.

Employee Overtime Hours Regulation Rules

When hours worked by company staff exceed 40 hours, there are state and federal laws that dictate overtime pay be paid. There may be certain state, federal or locale rules on regulations governing overtime, but overall rules and laws ordinarily mean the commonly followed practice is to pay time and half for employees working more than 40 hours. But, due to the fact there are multiple laws and certain exceptions where overtime statutes come into play, this area is part of payroll processing where errors happen quite often.

Payroll Deductions for Court Awarded Legally Mandated Payroll Garnishments

Because payroll garnishments are not a regular task for company payroll departments to deal with, it is a payroll processing area ripe for mistakes. Income garnishments mandate employers must comply with the court order. If an employer does not comply with the order or if they make mistakes, the company may be fined or charged penalties.  

Payroll Rules and Laws Regulatory Conformity

It is fact of payroll that rules, laws, and regulations are in a constant state of flux and businesses must always be up to date and comply with any changes. Large changes occur virtually every year on either the state or federal level and many times both. Businesses normally work to be current with respect new payroll rules, laws and changes in the tax code, but many times there are such are large number of regulatory compliance updates that need to be done that mistakes get made which can be costly to the business in fines and lost time.

Tax Code Regulatory Rules on Employee Classifications

Particularly now in 2020, businesses employee multiple workers falling under several classifications. Workers are comprised of full-time employees, part-time employees, permanent part-time employees, gig-economy contract employees and a variety of different types of industry vendors. Because of the plethora of types of workers and multiple job classifications, this may result in major payroll mistakes and problems that cannot be ignored.

Businesses workers must be properly classified for vitally important tax reasons. If an employee is not classified correctly, it the outcome can turn into taxes due not being paid. The IRS will mandate the business pay the taxes that were not paid on employee income and most likely on top of the taxes owed there will be additional penalties and fines added to the total. This is the last thing any business needs because it can be crippling and destroy the business.

Compliance with Federal Payroll Tax Deposits and Payments

Each month on the 15th, businesses know that federal tax deposits must be submitted to the IRS if the company collects taxes from the paychecks of its employees. The IRS will levy fines and penalties on tardy payroll tax deposits. The penalties are 0.5% of the business’ monthly payroll taxes due and 25% penalty for seriously tardy tax deposits.

Summing it All Up

 Payroll processing and payroll management is complicated and difficult to stay in compliance with. Businesses deal with several payroll issues including the costly mistakes, expense and lost productivity when payroll in-house does payroll, payroll record keeping, integration with human resources and employee benefits, tracking employee time-off and sick leave, the complexity of payroll deductions, and compliance with federal payroll tax deposits and payments, just to name a few. Ultimately a business must get current and stay current with all aspects of payroll and its management, but it is difficult to do. The best solution to resolve most if not all the problems mentioned here is to hire a payroll processing company that offers an all-in-one solution. Going that route is easy, its not that expensive, and the company will be better off for it.  


Top Preventable Highly Expensive Payroll Processing Administration Errors – Part One

September 3, 2020 Kevin Kenealy payroll management, payroll processing Comments Off on Top Preventable Highly Expensive Payroll Processing Administration Errors – Part One ,
Top Preventable Highly Expensive Payroll Processing Management Mistakes by The Payroll Company 505-944-0105

Payroll mistakes can be very costly for any business. The mistakes normally occur within a company’s payroll department. Payroll mistakes can mean $1000’s of dollars in expensive fines and penalties from the IRS, a downturn in employee morale, and potentially they can cost a business its existence. The primary reasons these problems happen are due to errors made by company’s doing payroll themselves. Featured here are the top preventable payroll processing and administration errors and what to do about them.

In-house Payroll Department Administrative Employee

Across the country, many businesses big, medium, and small, process payroll internally and regrettably manually. When payroll is done manually it normally involves timecards, paper reports and difficult tedious processing time managed by a payroll clerk or a human resources department. Mistakes get made when adding up payroll hours and then calculating the taxes due, insurance premiums owed and then generating company employee paychecks. Mistakes in any error can be drastically costly.   

Document Record Keeping for Payroll

Maintaining proper employee and payroll records is legally required. Keeping all the records in an organized way that works and is correct is critical. Doing it right can be as easy as setting up an easy follow system along with maintaining all records in a separate location or keeping them electronically, instead of maintaining a hard copy record of both reports and payroll checks.  

Setting Up Payroll and Integrating it up with the Human Resources Records

When it comes to payroll processing programs, personnel systems and company benefits it is found that the software technology for each area cannot be integrated. Ideally each of these programs should be able to “talk to each other” through integrated software programming.

Employee Paid Time Off and Sick Leave

Calculating employee sick leave and paid time off by hand is a ongoing job that is ripe for errors. Timecards are still around, as are basic electronic time sheets, but they are both ways of doing time keeping ripe for mistakes as well. On top of payroll problems and grave mistakes is the ever present need to track employee time off and sick leave, which can lead to ineffective management of a business because not knowing when people are working or who is sick can lead to poor business results, which can mean grave issues for business.  

The Critical Importance and Complexity of Payroll Deductions

Processing payroll is a basic task. However, payroll clerks, payroll departments and business owner can tell you, the deductions employees have coming out of their check is technically difficult and requires certain intricate configuration.  Because there are multiple employment laws related to both federal and state income tax deductions, it is simple for employees and businesses handling payroll processing to make mistakes. On top of payroll processing being and intricate job, it happens to be a component for a business where errors occur while completing the task.

Summing it All Up

 Payroll processing and payroll management is complicated and difficult to stay in compliance with. Businesses deal with several payroll issues including the costly mistakes, expense and lost productivity when payroll in-house does payroll, payroll record keeping, integration with human resources and employee benefits, tracking employee time-off and sick leave, the complexity of payroll deductions, and compliance with federal payroll tax deposits and payments, just to name a few. Ultimately a business must get current and stay current with all aspects of payroll and its management, but it is difficult to do. The best solution to resolve most if not all the problems mentioned here is to hire a payroll processing company that offers an all-in-one solution. Going that route is easy, its not that expensive, and the company will be better off for it.  


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