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9 Ways to Make Payroll More Efficient

·5 min read

Show of hands: Who loves running payroll and managing employee benefits?

Sure, our friends in accounting and HR might secretly enjoy these tasks. But the rest of us? We’d just as soon forget it.

We can’t, of course. Every business with contractors or employees needs some sort of process for paying them. Businesses that offer job benefits to employees often need separate systems and processes to manage those too.

Keeping the books, managing payroll, keeping track of employee benefits: none of this is rocket science. Still, it’s crucial for small business owners to find ways to make it all easier. To keep things running smoothly. And to avoid mishaps and mayhem that could have been prevented.

Here are nine ways to simplify payroll and other HR processes in your business while still getting the job done.

  1. Don’t Do Your Own Payroll to Avoid Service Fees

First things first. If you’re doing your payroll by hand to avoid service fees, stop. You have better things to do with your time. And if you’re paying an internal employee or contractor for this service, so do they. Payroll and bookkeeping are among the first non-core business functions you should outsource as you grow.

  1. Take the Time to Research Your Options and Choose a Software That Fits Your Business Needs

According to payroll service provider OnPay, 50% of small businesses use accounting software and 60% use payroll software. That’s millions upon millions of enterprises.

Dozens if not hundreds of reputable small-business bookkeeping and payroll processing providers exist to serve this vast market. Businesses seeking a good match for their needs should expect to find a partner capable of providing it.

Yes, this means taking more time to research and evaluate potential payroll partners. But bookkeeping, payroll, and HR are too important to cut corners. A little extra time is a small price to pay to find the right fit. And, hopefully, to begin a relationship that stands the test of time.

  1. Make Sure Your Provider Is on Top of Taxes

Payroll taxes are complicated. Really complicated. In fact, for smaller employers, the most valuable service a payroll provider can offer is to accurately manage your local, state, and federal payroll tax obligations.

Your provider should calculate and collect all required payroll, unemployment insurance, and workers compensation taxes. It should stay abreast of tax rate changes as they occur. It should make periodic tax payments or deposits as required by law. And it should properly file and pay year-end taxes with no action required from you.

Accept nothing less.

  1. Always Keep Accurate Records of Hours Worked

Use time-tracking software in parallel with your payroll system to ensure accurate and complete recordkeeping. Require hourly employees to clock in and clock out, even for regularly scheduled shifts. Have salaried employees note their hours worked as well, especially if you need that information for billing purposes.

You’ll need these records if any tax or labor agencies come calling. You’ll also need them to ensure your employees are fully compensated (but not over-compensated) for their time.

  1. Don’t Immediately Delete Separated Employees From Your Payroll System

Don’t immediately remove departing employees from your payroll system on their last day. First, you’ll need to process their final paycheck, which should include any unused paid time off. After that, you’ll need them in the system until the end of the tax year. That is, until your payroll provider sends out their final W2 and files payroll taxes for their last year.

  1. Make Sure Your Employees Have Single Sign-on Access to Their Own Payroll and Benefits

Your employees shouldn’t have to bother you or your HR lead with basic questions about pay and benefits. They should be able to find answers on their own. Use a solution that offers single sign-on access payroll data (including pay stubs), paid time off, and employee benefits information.

  1. Pay All Your Employees on the Same Day

Even if you have a mix of hourly, salaried, and commission-based employees, pay them all on the same day. And post your company’s annual payroll schedule online or in the office so there’s no confusion about the next paycheck. This will save you time and resources and make your employees’ lives easier.

  1. Never Cut Paychecks Outside Your Payroll System (And Don’t Pay Cash Bonuses Either)

As tempting as it sounds, it’s not worth the possible tax consequences, nor the bookkeeping headaches. (“Where did all that money go, anyway?”) An occasional “under the table” gift card on birthdays and holidays is fine. An entire paycheck in cash is not.

  1. Consider a Semi-Monthly Schedule Instead of Biweekly

If your company only employs salaried workers, consider a semi-monthly payroll schedule instead of the more common biweekly schedule. Semi-monthly payroll runs twice per month, usually on the 1st and 15th, instead of every two weeks. This adds up to 24 pay runs each year, instead of 26.

Why semi-monthly? Because biweekly payroll runs occasionally include a third monthly run. A third monthly run may affect your business finances for that particular month.

Are Your Payroll and Bookkeeping Processes Working As Well As They Could?

If you’ve read this far, it’s likely that your honest answer to this question is “no.”

That’s okay. Many small-business owners aren’t satisfied with their accounting and HR partners. Others are simply tired of doing everything themselves.

You deserve a better, more efficient payroll and benefits experience. And that experience is absolutely within reach if you can just follow these nine tips.