Mistakes and inefficiencies with payroll can lead to serious consequences. Late paychecks can demotivate employees resulting in lower morale, reduced productivity, and high turnover. If that’s not enough to cause concern, payroll inefficiencies can also result in fines and legal challenges.
While providing compensation is employers’ leading obligation to their employees, payroll is often disorganized and inefficient. It can be even more complicated when considering remote work. But it doesn’t have to be. Outlined below are four ways to make your payroll system more efficient.
1. Outsource Your Payroll
Business owners wear many hats. Along with improving their product or service, they also have to juggle the responsibilities of managing a team. Trying to tackle additional tasks like payroll takes time away from these other essential duties. If business owners want their organizations to thrive, it’s important that they choose where to spend their time wisely. Bringing in outside help to manage payroll gives leaders back time to focus on other business tasks.
However, small companies may not have the financial resources to hire a full-time HR professional. Outsourcing payroll to a professional global payroll service provider is typically a more cost-effective option. Payroll service providers help ensure that your team receives on-time, accurate payments for their work.
If you have a remote team, keeping state and international labor regulations straight can be challenging. Trying to manage everything alone puts organizations at risk of accidentally breaking the law, costing small businesses valuable money they need to stay afloat. Outsourced global payroll companies are experts in payroll laws across the globe. With their help, small businesses can comply with payroll regulations no matter where their teams are located.
2. Create a Payroll Schedule
Implementing a monthly payroll schedule determines how frequently companies pay employees.
Predictable employee payments help workers better manage their finances and help companies stay on top of business expenses. When creating your company’s payroll schedule, you need to consider a few factors.
First, what’s your company’s cash flow rhythm? Payroll is the largest expense for many businesses, so it’s important that it’s synced up with cash flow. Next, companies need to consider state regulations. Most states have laws around the minimum number of times companies are required to pay employees per month. Lastly, what are the market expectations in your industry? If your company’s payroll schedule doesn’t align with employee expectations, they may decide to work for another organization.
Once you’ve considered the above factors, it’s time to choose your payroll schedule. Popular schedules include weekly, biweekly, semimonthly, and monthly. Each payment schedule has its own perks and drawbacks, so it’s important to do your research before implementing one. While it’s possible to change your payroll schedule after it’s implemented, this can be extremely disruptive and aggravate your team.
3. Go Paperless
While most elements of business have gone digital, some companies are still processing payroll manually. This leads to hours of time spent sifting through paperwork, mailing paychecks, and reviewing employee attendance on a printed timesheet. Switching to a paperless payroll system lets companies handle these tasks electronically, saving both time and money.
Paperless payroll simply refers to an employee payment system that operates digitally without using paper. Most payroll software includes features like virtual timesheets, pay stubs, and W-2 forms. Since paperless payroll is processed automatically online, employees can feel confident knowing they will get paid on time, regardless of unexpected events or holidays. Some programs also allow employees to request vacation days and other time off.
On the financial side, companies can save some serious cash by ditching paper checks for digital payments. It’s estimated that sending out paper checks can cost companies over $2,000 every month. While that may sound like a lot, the numbers make sense once you consider the bank fees, postage, and employee labor that goes into processing paper checks.
4. Stay Informed on Tax Requirements
Paying employees around the country isn’t always a simple process. Every state has its own set of regulations that dictate how workers are paid. Failing to abide by these regulations can result in penalties like fines, negatively impacting your bottom line.
Along with state regulations, there are also federal laws employers must follow. Numerous legislations exist that companies should be aware of, including the Equal Pay Act and the Fair Labor Standards Act. The Equal Pay Act prevents employer discrimination based on gender and requires that employers pay men and women equal pay for equal work. The Fair Labor Standards Act protects employees from unfair pay practices. The rules of this legislation specify minimum wage, when employees are on the clock, and when workers should get paid overtime.
Along with laws around pay, organizations must also stay up to date on payroll tax compliance. This can be challenging for companies that have employees across the country since no two states are alike regarding payroll tax laws. If you’re concerned about staying compliant, consider working with a payroll services organization.\
Prioritizing Payroll Efficiency
Inefficient payroll systems can cause a myriad of problems. However, making a few simple changes to how you manage employee pay can transform the payroll process. This, in turn, improves your employee engagement and reduces your chances of encountering regulatory fines. If you’ve been struggling with inefficient payroll practices, try implementing the strategies listed above.
