Improve Your Payroll Process in 7 Steps

Payroll is a highly critical business function in any organisation. One wrong calculation or a slightly delayed salary disbursement may result in unhappiness ensuing amongst employees. When payroll mistakes happen on a recurring basis, this causes employees to feel financially insecure in the organisation’s financials. This may result in low employee engagement levels and high turnover rates.

Despite payroll being one of the most critical business functions, it is a time-consuming and repetitive process. In-house payroll processing demands high levels of attention to detail. As headcount increases, that demand increases in parallel.

It then becomes imperative to understand how payroll processing works and ensure that it is done well. To help you get on the right track, here are some standard payroll processing steps that you should adhere to in order to ensure that your employees get paid accurately and on time.

Consolidate your changes in your employee data

Employee data needs to be updated on a regular basis to ensure accurate payroll calculation. Items such as change in bank account number, employee address, or even inclusion of dependents, needs to be tracked and updated into your HR management system.

Plan a payroll schedule

Are your employees paid on a monthly basis? Or are there a handful of employees that are paid on a weekly basis? Have a fixed payday schedule so that employees can expect to receive their salaries on that particular day. On the payroll team’s end, it allows you to work backwards and plan for your payroll processing timeline.

Calculate employees’ salaries, including any allowances or deductions

Run the calculations for your employees’ salaries, taking into account their salary payment type – be it weekly or monthly. Ensure that you include any allowances that each employee is entitled to, such as transportation allowance, meal allowances, or overtime. Concurrently, ensure that mandatory deductions are taken into account, such as tax deductions, provident funds or social security funds.

Disburse salary payments to employees on payday

This step may sound simple but should not be undermined. Depending on whether salaries are directly credited into employees’ bank accounts or issued as paper checks, always factor in a couple of additional days should there be any delay in payroll processing. If your payroll team uses direct bank deposit, ensure that there are sufficient funds in the organisation’s corporate accounts before disbursing salary to employees.

Issue payslips to employees

Electronic payslips are commonly provided to employees via email or accessible through the employee self-service portal. However, you may need to print out hardcopy payslips for employees who do not have access to a computer, such as drivers or manual labour workers.

Submit statutory filings to the respective government bodies

Depending on whether you are processing payroll for a single country or a region, you may have to submit different tax filings to various government bodies. Make sure that employees are classified correctly in order to ensure correct tax contributions or withholdings with the respective statutory board.

Closing of payroll for the month

Once you have completed processing payroll for the particular month, it is time to do some proper record-keeping. All payroll reports, be it softcopy or hardcopy should be securely stored. Concurrently, it should be maintained in such a way that these records can be easily retrieved for future purposes such as audits or year-end tax processing.

Processing payroll is no easy feat. If you find that your HR team is struggling and lack the relevant payroll expertise, it may be advisable to outsource your payroll to a third-party payroll vendor. These external payroll vendors specialise in payroll services and expertise, helping to take the stress out of payroll processing and its complexities.

Most of these payroll vendors also provide a suite of HR-related software services to complement the existing payroll services. This may include leave management software or expenses management software. Some may even integrate their payroll software services with your existing HRIS to facilitate seamless transfer for employee data for payroll processing purposes.

Besides being a complex business function, payroll is one of those business functions that is at high risk of fraud and embezzlement. If you are processing payroll in-house, conduct regular audits to ensure that your payroll software is robust and that data is saved securely on the organisation’s server. There should be a limited number of users that have access to these payroll records. If you have engaged an external payroll provider, the majority of these third-party payroll vendors protect and store your organisation’s payroll data on encrypted cloud-based platforms. This helps to provide an additional layer of security on your payroll records.

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