Getting payroll right is important. Businesses everywhere make mistakes, and doing so can be costly. In the US alone, 6.8 million payroll tax penalties were issued by the IRS in a single year, costing businesses a combined $4.5 billion (around £3.5 billion). One potential reason for this is an attempt to rush through this important job.
It is clear that payroll takes up a lot of companies' time. Research conducted by Namely has found that 25 per cent of payroll leaders spend more than half of each working day on these activities. However, attempts to get through payroll quickly can lead to mistakes that can cost companies money.
How can you speed up payroll without creating costly errors? The answer is to make the job more efficient. Here are some of the best ways in which to do this, saving yourself time and money.
Move to the cloud
Joint research from Fosway Group and HRN has found that roughly 45 per cent of payroll in Europe is deployed on companies' premises, while only around 15 per cent in the cloud. However, Namely found that 45 per cent of firms are planning to move their payroll to the cloud in the next two to three years.
The reason for this in most cases is simple. Two-thirds of businesses believe it will reduce manual work, and experiences with the cloud so far have suggested that this is indeed the case. Using the cloud is a simple way to improve efficiency, and while it can be a timesink to set it up in the first place, it can save a lot of time in the long run.
Does your business have dozens of different job grades, health plans, benefit packages and so on? If so, this could be contributing to the problem. Research conducted by the Hackett Group found that the most efficient HR departments have 70 per cent fewer job grades than the average, for example.
Reducing complexity in this manner makes payroll much more streamlined, reducing the amount of time each individual job takes. If there are pay grades and job descriptions that could be consolidated into one, then doing so could easily save you time.
Payroll traditionally involves huge filing cabinets full of physical documents. However, this is an incredibly inefficient way of doing things, and it can cost a company an enormous amount of money. The Paperless Project has found that just misfiling a document can cost a company $125 (£99) in lost time.
Losing a document, on the other hand, can cost a business from $300 to $700. You might think this won't happen to you, but on average in the US, large businesses lose a document once every 12 seconds. This is a massive time waster, and making sure all your 'paperwork' is in a computer system can increase your efficiency.
Outsource where necessary
While there are certainly advantages to keeping your payroll centralized, many companies find themselves in unwanted situations because of it. This is especially true in this era of corporate mergers, businesses branching out into different locations and an increased reliance on freelance staff.
All these different areas of a firm can make payroll difficult and time-consuming. There are definite advantages, therefore, to outsourcing aspects of it to other companies. Talking to Business Finance Magazine, director of the Hackett Group Cliff Struhar said: "Outsourcing is often a viable and desirable option. It allows companies to reduce direct payroll costs and, in some cases, improve delivery and service."
Establish a chain of accountability
Payroll errors cost a business time. One of the biggest headaches is chasing up what happened and what can be done about it, and this will only be made worse if there is no clear best practice in this area. If an error occurs, the person who made it needs to know exactly who to report it to and what actions to take.
In order to achieve this, it is best to have a chain of accountability. Employees and managers need to know exactly what their responsibilities are when it comes to payroll. Multinational software firm Oracle recommends this is paired with transparency, so staff know exactly what payroll processes go on.
Constantly review your processes
Finally, you need to make sure you never think of your payroll system as 'fixed'. Sooner or later you will end up becoming inefficient again as new processes become necessary, unless you make an effort to constantly adapt and improve.
Jonathan Dowden, payroll expert for Sage UK, wrote in RealBusiness that "organizations need to keep an ear to the ground to monitor for complaints, and actively request feedback from employees about how the process can be improved". This way, you can fix problems before they spiral out of control and make sure your payroll practices stay as efficient as possible.