Payroll administration. It’s important. Vital, in fact. Paying your employees accurately and on time is key to retaining them, keeping them engaged, even hiring them (trust us, if your business has payroll issues, word will get out!).
And while your employees deserve airtight payroll in any hiring climate, it’s especially vital today, when job-hopping is more common than ever before. If you can’t pay correctly or on time, your employees will likely seek out an employer that can. When pay mistakes are egregious, some employees even consider legal action. On top of that, payroll issues are sometimes violations of the law that can put businesses at risk of investigations and fines.
Despite these high stakes, though, employee payroll management mistakes are still sadly common. Want to make sure your business avoids them? Here are the payroll administration errors we hear about most often, and ways to prevent them and course-correct:
It can be tempting to process one-off, occasional, and recurring pay deviations without keeping detailed notes on exactly how and why they were made.
This is a huge misstep.
Think about it: If you undergo an audit two years from now, will you remember why, say, a certain salaried employee had a pay decrease for just one pay period – information auditors expect? And audits aren’t the only reason to keep orderly notes. Accurate and ongoing employee payroll documentation safeguards your business in any of the following scenarios:
The takeaway here is: Documentation is key. Whether hard copy or electronic, set up an organization system that allows you to readily keep and find these records and make them accessible to other authorized payroll stakeholders. One file per pay period is a good rule of thumb.
Examples of payroll events to document include:
Do you outsource your payroll to a payroll processing company? While a lack of documentation may be common for in-house employees managing payroll, payroll processing companies don’t necessarily keep notes explaining specific pay changes, either. Keep this in mind when considering an outsourced payroll processing company versus a full-service outsourced HR firm like myHR Partner.
Mistake #1 is about documenting payroll changes, but what about the recurring payroll process?
Payroll processes that exist solely in someone’s head are a risky way to operate! Payroll administrators sometimes give notice, become unable to work, or want to take a long stretch of vacation. Without written processes to turn to, a company is exposed and at risk.
myHR Partner’s standard operating procedure protects against this liability. We create a written payroll process guide for each of our clients and consult it every time we process payroll on their behalf. The guide breaks payroll processing into clear, well-outlined steps and explains where to find all related documentation. It’s worth noting that myHR Partner creates the guide but is nonetheless the property of our client. If our working relationship ends, we pass it along – a huge advantage if another person or party takes over their payroll.
If you create a payroll processing guide, remember: The more detail, the better. Someone new should be able to jump in and process payroll using it and it alone. Screenshots of all key steps are a valuable addition.
Never discuss one employee’s pay with another employee who is not their manager. Straightforward, right?
Until it isn’t.
Payroll administration must understand who they can and cannot legally discuss pay information with. This applies to people within the organization as well as outside. Generally speaking, an employee’s pay rate and related information can be discussed with said employee, their manager, and human resources. But what if you receive an email from Jeff asking why his hourly pay rate is different from Karen’s, given they started on the same day and have the same title? Answer Jeff’s questions about his own pay, but don’t discuss Karen’s pay with Jeff at all.
If members of the same family work in your organization, remember to treat them just like you would treat employees who are not related. Don’t discuss one family member’s pay with another, not even if they are married or are company leaders.
For some myHR Partner clients, confidentiality is a driving reason behind their decision to outsource their employee payroll management.
Since 2020, remote work has become the norm or an option in many industries, making it more common than ever before for employees to live in one state yet work for a company based in another. Businesses physically located near a state border are also likely to have employees who live and work in different states.
This has a sizeable impact on payroll processing, given employee’s state income tax and state unemployment insurance are almost always paid to the state where the employee physically performs their work. However, state reciprocity rules and other special cases can create exceptions that need to be heeded for all applicable jurisdictions represented in your payroll. Take Vicente LLP, a myHR Partner client. Our team helped them accommodate employees in a wide swath of states – including high-regulation states like New York and California.
Periodically review the state tax setup for your employees, as mistakes in this area can be time-consuming and costly to correct and, yes, can have a bearing on employees’ take-home pay.
Rare is the pay period that’s unaffected by holidays or other calendar events – events with the power to delay employee pay.
Plan ahead for payroll processing to make sure you’re considering all possible calendar events before you begin – key to getting paychecks out on time. These include banking holidays that can impact payroll submission deadlines. Monitor payroll changes as they come in, too, so you can ask questions and get clarification where needed before payroll processing day.
Remember, as an employer, you have a duty and a legal obligation to pay your employees accurately and on time. All of the other dos and dont’s of payroll management are in service of this one overarching goal!
Does payroll management still feel daunting? Turn to myHR Partner for payroll administration.
With myHR Partner you get a dedicated team of payroll management professionals who abide by the best practices outlined above, and many more. We work with your chosen payroll vendor to get your employees paid accurately and on time. myHR Partner guarantees a response to any inquiry within 24 hours (often much less!). Better yet, our payroll management services are soup to nuts, meaning we handle every last internal aspect of the payroll process on your behalf.
Ready to put employee payroll in the hands of time-proven, responsive professionals so you can focus on building, growing, and improving your business? Reach out today for a free myHR Partner consultation.