Mastering the art of running a business means juggling multiple tasks. And let’s admit it, not all business tasks are enjoyable. A survey reveals that over 40% of professionals’ days are wasted on manual digital administrative processes. 47% shared their opinions on finding administrative tasks boring, and 48% believe it to be a poor use of skills.
One administrative task that is found to be daunting by many is payroll management, which can be a time-consuming dance for you or your human resources (HR) team or payroll team. But it doesn’t have to be. So, how much time are you wasting on back-end tasks, like running payroll manually?
Sit back, relax, and get ready to conquer the clock and make payroll a breeze as we uncover the secrets of payroll efficiency, and common delays to dodge.
Payroll Processing Explained
In a nutshell, payroll processing encompasses the many aspects of paying your employees accurately and on time. It generally involves calculating employee hours, applying relevant tax rates, deducting any applicable deductions, and distributing accurate payments to employees.
Payroll processing can look different for every business. For example, some businesses may conduct payroll in-house or designate their own payroll department to manage payroll operations internally, while others may outsource payroll to a third-party payroll provider.
Outsourcing payroll eliminates a lot of the internal monitoring and effort that payroll often comes with, which is why many businesses may also use payroll processing software that can calculate employees’ pay, including deductions and taxes, and generate reports on employee hours and wages to make the process simpler and more efficient.
The Aspects of Payroll Processing
The payroll process begins with gathering employee time and attendance information and ends with issuing payments and recording payment information. Here are some of the key steps in the process:
- Gathering Timesheets: This is the first step in the process, and it involves collecting time and attendance information from employees. This information is used to calculate the number of hours worked and to determine the employee’s pay.
- The time it takes to gather timesheets may vary depending on your business, but as per the American Payroll Association, an average of 7 minutes is spent adding up a single time card.
- Calculating Wages: Once the time and attendance information has been collected, the next step is to calculate the employee’s wages. This involves factoring in overtime, sick pay, and any other relevant factors.
- Preparing Paychecks: Once the wages have been calculated, the employer prepares the paychecks. This includes deducting taxes and any other relevant deductions.
- Issuing Payments: The final step is to issue the payments to the employees. This can be done through direct deposit, paper checks, or other methods.
So how long does the process take from start to finish? Again, that depends on a lot of factors, such as the number of employees you may have, your industry, and more. However, according to American City Business Journals, the time to process payroll for some business owners adds up to 21 days over a year.
This may lead to another question: What’s taking so long?
Common Delays in Payroll Processing
The time required for payroll processing can differ among businesses, but certain common delays can extend the process beyond initial expectations.
Here are some of the most common payroll bottlenecks:
- Employee Timecard Delays: If an employee’s timecard is not received in a timely manner, this can delay the process of calculating their wages and issuing their paychecks.
- Incorrect Employee Information: If an employee’s name or Social Security number is not entered correctly into the payroll system, this can cause a delay in the issuance of the employee’s paycheck and may also result in incorrect deductions being taken from their pay.
- Manual Processes: Processing payroll without the help of a professional or software can lead to many inefficiencies, including learning curves, tough-to-find data, and more.
- According to a survey, a significant majority of respondents (69%) highlighted the prevalence of payroll data issues, with the primary data challenge being the lack of suitable tools for effective data analysis.
- Bad Software: This may seem like it goes against some of the other information we mentioned in this article, but when choosing payroll software, make sure it’s one that covers all basis for your unique needs. Otherwise, you may find yourself managing even more than what you needed.
- Compliance Issues: Compliance is complex, which might go without saying. Changes in compliance happen frequently and could impact payroll through the need to make adjustments, which can add more time to your payroll plate.
There could be many more factors, like payroll mistakes, that impact the time it takes to process payroll, but these top five are ones that could be easily eliminated. Here’s how:
Ways to Run Payroll More Efficiently
First and foremost, one of the most important ways to add to payroll efficiency is to keep employee information up-to-date and accurate. This includes their name, address, Social Security number, and other relevant information. Now that we’ve got that out of the way, here are six more things you can consider to add some pep to your payroll steps:
1. Ensure all employees understand the policies when it comes to payroll.
Having an employee handbook can help contribute to payroll performance. This will help eliminate questions pertaining to important topics such as paid time off policies, leave policies, etc.
If you’re able to direct your employees to the handbook, you can avoid being bombarded with questions coming directly to you and taking time away from running payroll efficiently.
2. Organization plays a significant role in payroll efficiency.
As with many business functions, being able to stay organized will dramatically help when it comes time to process your payroll each week.
Wouldn’t it be nice not to have to scramble to ensure everyone has handed in a timecard, not missed any punches for the pay period, or make last-minute garnishment/direct deposit changes? All these tasks can make you have to stop in the middle of the payroll to resolve the items.
3. Time really is money.
Make sure to allow appropriate time each week to devote to running payroll. As a small business owner, you often run a mile a minute, trying to fit everything in.
Set some time aside each week to be able to handle payroll. This will ensure that you’re not having to rush through it and risk causing payroll errors.
4. Consider automated payroll systems.
Consider syncing your payroll functions with automated time and attendance software. This way, when someone punches in, you don’t have to worry about manually transferring that information to your payroll system. You’ll save time, as well as eliminate the possibility of data entry errors.
5. Be proactive in your payroll approach.
Julia Rohan, owner of pet services business Rover-Time explains that they take a proactive approach to improving payroll efficiency.
“It truly does come down to the team’s effort as a whole. For example, how proactive is the employee in adding additional notes to their punch on days when they’re running slower than normal? Do they take the time to anticipate management’s concerns or do they wait for us to question their reporting? One thing we’ve worked on is that push to get as much info as we can with each entry,” explained Rohan.
Being proactive also means staying on top of common employment due dates, metrics, and KPIs. Having and maintaining a payroll calendar can help with this.
6. Outsource your payroll functions to a trusted provider.
One of the easiest ways to improve your payroll process is to outsource to a trusted vendor. If you’re still running payroll in-house, here are a few things you should know:
A payroll provider can help eliminate common errors made when doing payroll in-house, like misclassifying employees, incorrectly, withholding taxes, or not understanding appropriate pre-tax/post-tax earnings and deductions.
Payroll processing is an important part of any business, but it doesn’t have to be a headache. By understanding the payroll processing process and the common delays that can occur, you can take steps to improve efficiency and reduce the likelihood of delays.
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