HRM ARTICLE FOR BEST PAYROLL MAINTNENCE

1. Best Practices for a Successful
Payroll System
By Megan Webb Morgan

2. 35% of the average HR department’s time is
spent on payroll alone. In order to maximize
the efficiency of your payroll system, and
Prevent errors, you need to follow these best
Practices for managing your payroll system

3. It seems that everywhere you look in today’s still sputtering
economy companies are striving to find ways of doing more with
less; jobs are eliminated and the survivors have to work harder,
employee reward budgets are trimmed to the bone or pay levels
frozen, and the concept of “performance = reward” doesn’t seem
to function like it used to. Across the economy you can hear the
constant litany of cut, cut, cut.

4. A changed philosophy
Companies fear wasting money on employees who don’t
perform, so they often limit the administrative increases so
often granted by their reward programs. They feel they can’t
afford a strategy that increases payroll without a
corresponding increase in ROI. However, they
could increase the amounts paid to key employees
while restrictingthe level of those who perform . . . less
well. That would place the high achievers at a fair or even
generous pay level, but these winners would be only those
who deliver an ROI back to the company. You can afford to
reward high performers

5. 1.A Make Your System Transparent
One of the easiest ways to prevent accidental time theft, mis-classification of
employees, underpaid taxes, and other common payroll issues is to produce a
pay policy and put it in writing. Post it prominently and provide a copy to every
employee.
The policy should lay out:
 How employees are classified. Wrongly classifying employees as exempt,
nonexempt, or contract can put you in violation of the Fair Labor Standards Act
and place you at risk of a lawsuit or audit.
 How wages, salaries, promotions, and raises are calculated; how the pay
process works; when changes to payroll go into effect; and how the company
deals with payroll mistakes.

6. 2. Avoid Manual Processes
Are you still calculating payroll by hand or in an Excel
spreadsheet? The American payroll Association estimates that
error rates from manual payroll processes can cost you 1% –
8% of your total payroll. The more you automate your payroll
system with a payroll services provider or payroll software
program, the fewer errors you will have to pay for out of pocket.
 Simple ledger mistakes are frequent in manual systems due
to its reliance on humans to transcribe hours and calculate
wages. These systems are also easy for employees to
manipulate.

7. 3. Regularly Audit Your Processes
Whether you utilize a manual timecard system or one that is
computerized, you should audit your processes at least once a
year. Even automated systems can produce errors. If these are
not caught in time, they can wind up costing you. You may
overpay an employee due to a math error, incorrectly classify a
new employee’s tax status, or fail to increase the pay rate of an
employee who was promised a raise.
 Double-check all of your paperwork and processes to ensure
everything is functioning properly.
 If you are using add-ons or plugins to integrate your payroll
software with your time and attendance system or
accounting program, make sure that all of the connections
are transferring data correctly.

8. 4. Prevent Time Theft
Time theft occurs when employees intentionally
mis-record their hours, take overly long breaks,
spend work hours on non-work-related activities, or
use “buddy punching” to check in when they aren’t
present.
 Implement a check-in system that automatically
records an employee’s hours when they sign in
or swipe their card. You can further decrease
fraud by utilizing biometric sign-in hardware
such as a fingerprint scanner.

9. 5. Stay Up-to-Date
IRS tax tables and Federal and state labor regulations change from year to
year. It is important that your knowledge of these regulations is current. You
can download the latest tax tables from the IRS website. If you use payroll
software, make sure that it automatically updates each year so as to keep you
in compliance.
 Pay particular attention to changes in regulations governing: income tax
withholding, state unemployment taxes, child support withholding, and
fringe benefit calculation and taxation.
The best practices for business payroll center around preventing errors and
fraud that are commonly found in manual payroll processes. Transferring your
payroll to a specialized software system or third-party administrator can keep
your payroll in better shape. Whether or not you choose to go this route with
your payroll, make sure that your process is transparent, that you audit it
regularly, and that you keep it current with state and federal labor laws.

10. The Management Fear Factor
Some managers fear what would happen if they took a
tough line on performance = reward.
 They fear that employees are somehow “owed” annual
salary increases. “We have to give them something.”
 They fear their ignorance over how to conduct effective
performance appraisals. “Do these forms really
measure performance?”
 They fear alienating the majority of average
employees
 They fear what would happen if they exercised the
discipline necessary to manage employees – because
they want to be liked.

11. With a process designed to monitor and weed out the lower performers,
and at the same time pay the higher performers well, over time your
new practice would retain more of those you want and rid yourself of
those you don’t. The employee performance bar would rise, fostering a
more dynamic work environment that will in turn feed business
performance

12. 
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 BY VISHNU ARAVIND K
 PRESIDENCY COLLEGE