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Payroll Best Practices 8 Payroll Best Practices

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 By Alison Diana

Payroll Processing Best Practices That Anybody and Everybody Should Implement

Payroll, a necessary component of any organization, can be a leader in the area of cost-cutting and efficiency, and a shining example of best practices that can be mirrored elsewhere in the company.

But while it's always interesting and often informative to learn from other's successes and failures, one key factor to take into consideration is your company's culture, say experts. What works for one business could easily lead to headaches and expenses at another. Conversely, what didn't work for your competitor could be perfect for your organization.

The reasons for pursuing best practices in payroll processing are glaringly apparent: Those using best practices in the Fortune 1000 spend $85 per employee annually on payroll while those who do not follow industry recognized payroll best practices spend up to $715 per worker, according to the Hackett Group.

"The goal of every company is to become a low-cost, high-service provider," Cliff Struhar, director, told Business Finance magazine. "A best practice payroll system can pay significant dividends."

8 Payroll Processing Best Practices

  1. No man - and no payroll software application - is an island. It is vital that your payroll system to integrate with electronic time and attendance, finance, tax reporting and human resources, among others. Integration eliminates duplicate data entry, reducing the possibility of errors, and ensures both timeliness and consistency. Web access, whether using an HR portal or a cloud payroll system, means all authorized users can securely view data, where and as needed.

  2. Businesses also are wise to consolidate their payrolls, especially during this time of mergers and acquisitions. Having multiple pay periods is expensive and time-consuming and leads to duplication of efforts, departments and costs. When an organization migrates from biweekly to monthly or bimonthly pay periods, they can reap overall savings of 30% to 50%, Struhar said.

  3. When selecting payroll software, it's important to choose an application that includes analytics and custom reporting tools that can help managers decide on raises, overtime, bonuses and other financial matters, experts recommend. Without these tools, managers lack the big picture data they need to make informed decisions and ensure compliance.

  4. Many companies find it worthwhile to partner with a third-party proficient in providing payroll services. After all, your business is expert at making this or selling that. The ADPs and Ceridians of the world are expert at managing and overseeing outsourced payroll. For some businesses, handing-off this task makes sense, in dollars, hours and headcount.

  5. Just as no business is the same, no employee is the same. Or, at least, no group of employees is necessarily the same. While businesses would like all employees to embrace direct deposit, that is not always feasible. Yet some companies - especially in industries like services and agriculture - have successfully moved workers to payroll debit cards. Even taking a step toward a common delivery method is a move in the right direction to achieve best practice performance.

  6. By knowing your company's culture, you can more easily achieve your payroll goals. To encourage people to sign up for direct deposit, a pharmaceutical company began mailing payroll checks. Employees with direct deposit got their paychecks far faster than those who waited for a paper check, and today, 98% of the staff use direct deposit.

  7. It is, of course, important to stay informed, both through reading and meeting with peers at professional conferences and workshops. Organizations like the American Payroll Association hold sessions throughout the year and provide the opportunity to network.

  8. Focusing on end to end processes pays off - for both you and your business. "Good business processes incorporate best practices. Without the right business processes, it is impossible to achieve desired results – especially in a company’s payroll," said the Hackett Group. "Do not underestimate the importance of being process oriented when it comes to performing critical payroll functions for your company. Whether you are new to an organization or have been there for years, it is crucial to first understand your environment before creating and implementing new processes."

Think about how your department interacts throughout the company, about how your group is perceived and its responsibilities. How can you extend your role, increase your value and improve productivity? Payroll best practices offer methods to replicate what has been proven successful for others multiple times over. End

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Those using best practices in the Fortune 1000 spend $85 per employee annually on payroll while those who do not follow industry recognized payroll best practices spend up to $715 per worker.


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