Payday. Typically a day to look forward to: the excitement, the joy of a job well done, the money! While this is true for the majority of individuals, if you’re in charge of the payroll process yourself, payday may feel like more of a daunting task than a reason to celebrate. In short: paying people correctly and on time is a lot harder than it looks, and one of the most crucial aspects of your business. Payroll mistakes and delays can have a significant impact on your organization's cash flow, risk profile, and overall employee experience.In turn, this can lead to lower productivity and negatively impact employee performance—something to avoid at all costs.
There are also compliance requirements and ongoing legislative updates to consider. Knowing and understanding local rules and laws in new states or countries as you scale may also make it harder for companies that are looking to expand their reach. Thankfully, technology has come a long way in helping payroll be more seamless and less stress-inducing. Forward-thinking companies are abandoning manual payroll procedures in favor of instant, automated tools, implementing a much more efficient payroll system.
In this article, we’ll show you how to navigate the ever-changing world of work with eleven strategies to optimize your payroll processes.
Streamline your payroll process with these 9 strategies
Processing payroll takes many steps: double-checking all inputs, making sure employee information is recorded correctly, and so much more. It has a well-deserved reputation for being one of the most difficult and time-consuming tasks in the business world. Understanding how to spend less time on payroll or how to streamline payroll processes is essential. Let’s see how you can make your payroll process more efficient and minimize room for human error.
1. Centralize, update, and digitalize your records
Mistakes are common when payroll teams use several different systems to handle employee records and data. Having data across disparate systems like this is a recipe for disaster. Putting your payroll, time, and HR data into a single digital system can help you avoid the chaos at the end of each pay period. Another benefit of centralization using a digitized record system is that you’ll be able to look at your payroll data in real-time, instead of having to wait for batch processing to see changes that need attention.
2. Make one-off payments easy
Unfortunately for payroll, not everything fits into a neat and tidy little two-week pay cycle box. There may be instances where you need to pay a worker for a weekend of training, or send a one-off payment for missed hours if they forgot to clock in for their last shift. Perhaps you want to pay someone a bonus payment or holiday pay. These situations can all mean running individual payroll for just one employee at a time–something tedious and time-consuming. And if you’re dealing with multiple workers who need one-off payments like this at a time, that can add up to a handful of hours for your payroll team.
Using a free digital platform like Branch, however, allows you to send instant one-off payments whenever you need, so workers can access their one-off, off-cycle payments instantly and without delay. Less hassle for you, and less hassle for your workforce.
3. Address payroll errors immediately
There’s nothing that causes more employee complaints than delayed payments or incorrect payments. A recent survey of 4,000 employees showed that 44% of them had been paid late, and that it would make them consider quitting their positions if they were paid late or incorrectly again. Payment errors, such as bounced checks, delayed payments, and uncredited checks in traditional banking can cost your team hours in reconciling or resolving your transaction with unhappy employees.
A digital platform like Branch can show you immediately if there are any issues with payments. You get real-time data on whether or not a payment is posted, as opposed to waiting 48 hours to see if there’s an error and then spending even more time trying to correct it. This gives your payroll team prompt visibility into when payments are sent (or not) and allows you to resolve any transaction issues right away.
4. Establish a payroll policy
Putting together a handbook or manual that explains all parts of your payroll process is another way to make payroll management easier and more effective for everyone.
Grace Berry, accountant at DSLX, shares:
"Processing payroll can be a huge pain at the end of each month. There's no easy-to-follow guide out there for those that are new to the task, and there's little information to guide you through the process for your first time. I'd highly recommend using a software to help get this process running smoothly, as we do at DSLX. We're currently processing payroll for a small team, but, when we're going to scale we'll need to implement a payroll policy to ensure everything is delivered on time and with minimal error at the end of each month."
After going through the payroll process once or twice, you should know what’s working and what isn’t. It’s super important to list this process. Examine the list, include key stakeholders and identify areas you can streamline, cut, or outsource to tech. A well-written procedure for payroll also makes it easier to onboard new payroll department employees as you grow, making it a win-win solution.
Speaking of tech…
5. Don't ignore data security
Payroll systems, like all business systems that hold private and personally identifiable information, need an extra layer of security to make sure that only authorized people can use them. That’s why data loss prevention should also be prioritized to ensure everything keeps running smoothly.Unexpected occurrences like natural catastrophes, equipment malfunctions, or even human error can cause system failures and data loss.
The best cloud-based payroll systems add an extra layer of security, making it less likely that data will be lost or stolen. They’ll also notify you immediately if any suspicious or fraudulent behavior is found.
6. Verify worker classification
Workers are misclassified more often than you might think, which can cause problems with the IRS. It's important to know the differences between full-time and part-time workers, 1099 independent contractors, and W2 employees.Your payroll process cannot be optimized unless every worker is properly classified. This will help you file their information accordingly and figure out what payroll taxes you need to pay. When their worker classification status is clear, it's not only easier to pay them but also to send their tax withholding to the IRS.
7. Maintain detailed documentation
Accurate record-keeping is an important component of payroll management. The IRS requires businesses to keep payroll data for at least four years. A payroll solution with a strong and secure storage system can help you keep information organized and easy to find, so you don't have to send in piles of paper like in the old days, or end up digging through messy files you’ve accumulated over the years.
8. Use direct deposit
By setting up direct deposit, when payroll is complete, you’ll have money sent straight to employees' bank accounts by notifying your bank or a different direct deposit provider. If you use modernized payroll software that includes direct deposit, it may not take any more time to pay your employees. Since the payroll software knows exactly how much each employee should be paid, you won't have to add extra information or calculate payroll to make direct payments.
Still, before making direct deposit mandatory, you should look into what the federal and state laws say about direct deposit in your area.
9. Use payroll debit cards
A payroll debit card is a card that businesses can give workers and put their earnings on. This card gives your employees easy access to their funds and may be used like a debit card.
Unlike direct deposit, Branch’s Payroll Debit Card does not require workers to have a bank account. In contrast to typical checks, a worker without a bank account is also not charged any fees to access the funds.
Using Branch, you may eliminate visits to the bank for change, as well as adding tips to your workers' paychecks and having them wait two weeks, with automatic cashless tipping.
Let technology save you time–and money–on payroll management
Managing payroll can be a daunting task, especially for businesses with special considerations like paying 1099 contractors, working with a limited payroll team as you scale, or trying to send one-off payments to your growing workforce.. Companies have a hard time keeping their payroll systems running smoothly because there are so many different tax requirements, wage standards, and pay rates and benefit preferences to take into account.
Despite its reputation, payroll processing doesn’t have to be a lengthy or time-consuming operation. If you implement the eleven strategies above, you’ll minimize the time required to process payroll while still adhering to all legal requirements.
By upgrading your company's approach to payroll and switching from laggy, manual processes to real-time, digital payments, you’ll be able to increase productivity, decrease errors, and improve business performance.