Payroll management can be defined as the management of employee’s financial records, wages, salaries, bonuses, deductions and net pay in accordance with the labor laws of the nation. While payroll management is not easy but it is significant that it be managed correctly because the consequences of deviation in payroll management may lead to financial and reputation loss of a company.
Untimely filing of taxes, not getting accounts audited, non-compliance with TDS regulations, and wilfully evading tax can lead to penalties and imprisonment. For example: If a business or an organization fails to file tax deducted at source (TDS) or tax collected at source (TCS) in the provided timeline or on and before the deadline, they will be fined with a penalty of Rs 200 per day for the delay. Along with this, the tax authorities may also charge the company with a penalty for incorrect information or non-filing of TDS or TCS returns before the due date. The penalty be anywhere between Rs 10,000 and Rs 1,00,000.
Hence, we have listed down the top 12 tips that will help in handling payroll challenges that may come your way:
1. Payroll Calendar
Besides helping the employees understand when they will be paid, a payroll calendar is also beneficial for the payroll staff as it helps with the planning and implementation of payroll tasks. While automatically creates payroll calendars, you may use a spreadsheet in the absence of this feature:
Use a normal calendar to analyze the dates that may need a lag so you have enough time to process payroll.
Using colored fonts to highlight certain information, such as early time card deadlines because of a holiday that may be coming up, is a wise idea.
All supervisors should be handed out a copy of this calendar so the employees are aware of their payroll.
A good payroll calendar shows all the pay periods or dates for the financial year. This makes payment processing easy as it eliminates any confusion in employees about their pay dates and the time frame their paychecks are going to cover.
Create an effective calendar template and save it for future use when required.
2. HR Staff Should Attend Payroll Training
Although payroll processing is a part of the HR department, their skills are generally focused and diverted to recruitment and management of employee records. However, if you do not want conflicts in payroll management, it is wise that you let the HR staff under payroll training sessions. Both payroll and HR departments are co-dependant on each other and their functions are crucial for successful business.
Payroll training will help avert confusion or misunderstandings between HR and payroll department workers, as HR would have given all employees more clarity on payroll policies. This helps in improving the work atmosphere and boosts healthy work relationships between not just two departments but also between employees and management staff.
3. Stay Updated on State or Central Procedures
All employers must stay updated with all the current tax obligations of the state. Employers must also be aware of any changes in state and central reporting requirements. Changes may be imposed for different reasons, including hiring remote employees, employee relocation, business relocation, etc. Accurate information must be gathered and updated in business so payroll and taxes are computers accurately according to the current changes. Failure to do this can lead to grave penalties for the business.
4. Standardize Turnover Processes
Every company has their own payroll processing and none of them are void of intricacies. These things are not easy for a new employee to learn. Standardizing the turnover process can help negate the effects of losing team members to new opportunities, temporarily filling positions when employees are on leave, and moving them to other teams. Here is what can be done:
Internal promotions can minimize the learning curve of new hires.
Introduction of buddy system in the business can also be helpful. Here, a member from the payroll department trains another member of the team to learn the payroll tasks besides their individual KRA’s.
A process flow chart and schedule should be included in the payroll documentation so managing roles after the promotion of payroll staff are not difficult.
Payroll templates should be updated, saved and given access to all the payroll team members.
A standardized payroll process helps in improving the productivity of the payroll team and reduces the risk of payroll mistakes.
5. Automated Payroll
Manual payroll processing makes your business vulnerable to mistakes which may ultimately lead to fines and penalties. Payroll processing is also a time-taking process – a challenge for the payroll staff. Automating the payroll process doesn’t just save time but also ensures that there are no mistakes in the calculations.
6. Distribute Payroll Duties
We know that payroll can be complex and if you have a limited number of employees taking care of it, they are likely to make mistakes. You should consider relocating their payroll duties. However, everything should be documented and the new process should be communicated to everyone concerned.
Dividing payroll tasks will ease the burden on a certain employee(s). It will also help prevent fraud, reduce inaccuracy, process payroll for a greater number of employees, help to meet all necessary deadlines, etc.
7. Have a Transparent Payroll Process
Employee misunderstanding of the payroll lead to issues and unrest among the employees. This is especially when payroll policies are not accessible easily to the employees, or they have been vaguely presented. Having a transparent payroll process policy can help in solving several issues, such as employee misclassification, underpaid taxes, etc.
A transparent payroll policy should have the below-mentioned information:
- Payroll process system
- Employee classification
- Salary determination
- Employee reporting responsibilities
- Company procedures for handling payroll mistakes
- Levels of vacationable earnings
- Calculation of wages and promotions
The policy should be printed and displayed in a prominent place for all employees to read. It should also be made available online in a portal to which all employees have access to.
8. Document Your Payroll Process
This is a crucial step in effective payroll management. When the payroll system is documented, it reveals the intricacies of the payroll system step-by-step. This helps identify weak points (if any) in the process and allows you to eliminate these errors or weaknesses. Once a good payroll system is developed, it should be shared with the payroll team, ensuring each one understands how payroll processing is to be handled henceforth. It would be wise to include how to process payroll manually in case of emergencies. It should also contain steps to print and file payroll registers and tax reports and the names of concerned individuals responsible for taking pay stubs and paychecks.
9. Complete Onboarding Paperwork on Time
When an employee comes aboard, the employment forms should be completed on time. These forms comprise new hire data that allows you to classify and compensate your employees according to the legislation of your state or country. Even the onboarding documentation should be done when an employee is hired. This ensures that the payroll is executed correctly.
10. Audit Your Payroll Process
Occasional complaints related to the payroll are acceptable, but when these issues and incidences become frequent, you must take the necessary steps to correct them. Therefore, the payroll process should be audited regularly. While automated payroll processing is great, it is not free from errors. Incorrect data entries, such as entering old pay rates, can cause errors.
Here is what you can do for an effective audit:
- All the payroll, accounting and cash documents should be verified and reconciled to ensure the values match the records throughout.
- Test the Process to make sure the add-ons, plugins, etc., are duly integrated with the attendance and time sheet. The payroll solution should be updated to the latest version.
- Automatic login detection of employees should be installed.
Outsourcing payroll ensures that all this is taken care of by the third-party service provider who is taking care of your payroll.
11. Hire Qualified Payroll Staff
You should never compromise on who you are hiring to take care of your payroll system. Payroll is vital to the business and has no space for erroneous jobs as it easily incurs costly penalties, loss of reputation and dissatisfaction among workers. Hence you must ensure that experienced, knowledgeable and skilled people are responsible for payroll processing in your company.
12. Outsource Your Payroll Tasks
Payroll is time-consuming and requires a lot of effort. It is also important to process payroll each month because it ensures the smooth functioning of the organization. It may not be possible for a growing company to give its undivided attention to processing payroll. But with skilled people and good payroll will be flawlessly processed each month. Third-party service providers have both knowledgeable manpower and the technology to process payroll without errors.
Outsource Payroll to Paysquare to Solve Payroll Management challenges
We already discussed that payroll can be hectic, but it is also significant for the smooth functioning of the business. Therefore, you must ensure that you have the right people and the right technology to do the job. Considering the intricacies of payroll processing, it is only wise for small and medium size businesses that they outsource their payroll to a reliable service provider like Paysquare. Over the years, we have earned the confidence and trust of our clients in India and overseas by taking care of payroll problems and solutions. Outsourcing your payroll to us will allow you to concentrate on your core business while we always provide error-free payroll.