Run a Google search for “why people hate payroll departments” and you’ll come across endless articles bashing human resources.
Some of the many reasons commonly cited include overcomplicated processes, incompetence, and failure to address all but the least important problems. While not all companies lump payroll into HR, the criticisms can often still apply. Legacy software, inefficient procedures, and employee frustrations can be endemic to payroll.
To solve these problems, most organizations should take a multi-pronged approach, addressing employee development, siloed or unwieldy workflows, and technology issues. Hire and train good employees, hand them well-crafted, up-to-date SOPs, and give them the tools they need to do their work quickly and accurately. Below is a look at some of the best ways to troubleshoot and optimize your payroll processes.
1. Work With a PEO
If you’ve got the funds, the easiest and perhaps most obvious solution is to outsource your payroll to third-party professionals. A Professional Employer Organization, or PEO, can manage your payroll, along with benefits administration, certain human resources functions, and other related operational tasks. In some cases, they might even handle additional tasks, like recruiting and retaining talent, or managing taxes and tax compliance.
One major advantage of working with a PEO is that they can often help you secure better medical, dental, and vision benefits at a lower cost. This is because, by working with several other companies like yours, they gain access to more affordable rates for coverage. A PEO will also already have software and systems in place to handle deposits and other payroll logistics. Though a PEO is an investment, you could still save on implementing internal platforms.
Another advantage to working with a PEO is that the right one will be much more scalable than internal payroll. These companies already have systems in place to handle things like overseas onboarding and compliance with other countries’ laws. For companies that plan to outsource other functions or hire lots of remote talent, a PEO is often the best option. A PEO can free your company up to focus on new initiatives, products, and sales goals, instead of operations.
2. Upgrade Your Payroll Software Systems
If outsourcing isn’t an option, it might be time for a tech stack upgrade in your payroll department. If you’re like most businesses, it’s likely you’re managing some combination of clunky or redundant systems, frequent errors, and time-consuming manual processes. In fact, in a recent survey, a whopping 85% of respondents said they had problems with their payroll technologies. These problems can lead to compliance issues, missed deadlines, and more.
To choose a new payroll platform, consider the size of your workforce and whether most employees are salaried, hourly, or contract-based. Make sure your system features a direct deposit option and integrates seamlessly with HR and other software you use. Be highly selective when it comes to security and reputation — a breach could be a legal and financial nightmare. Always look for streamlined and user-friendly software, with a mobile option.
Many companies are now using cloud-based payroll systems, which have a number of advantages over legacy systems. The biggest advantage is that any user can access real-time payroll information from just about anywhere. With more and more companies sticking to remote and hybrid work models, this accessibility is beyond necessary. Reputable cloud-based systems are also more secure, and are automatically updated when laws and regulations change.
3. Re-Train Your Employees
Sometimes, hiccups in your payroll processes are about the human side of things, not just the technology. If your payroll department is drowning in late timesheets and inappropriate overtime requests, you might have a people problem on your hands. It could be time to streamline workflows within your payroll or HR department or work with all your employees to systematize payroll (or both). Either way, your systems need to change, not just your software.
To smooth things out, start with updating, clarifying, or creating a detailed payroll policy, including all rules and deadlines. Make sure all of your employees understand the policies, and any disciplinary consequences for non-compliance. Per the FLSA, you must always pay your employees on time, but you can discipline them (eg. warnings, suspensions) for late timesheets. Remind employees to check for accuracy before submitting their timesheets, not after payment.
Poor or inefficient systems can sometimes be attributed to issues on the payroll team’s side. For example, inefficient record-keeping or a lack of communication can lead to broad, systemic issues. Frustrated employees may stop complying with company policies when payroll is slow to respond or resolve issues. Implementing clear policies and procedures, and retraining or replacing employees when necessary, can boost efficiency and morale throughout your organization.
A Simple Way Forward
While weak payroll processes can hurt your organization in innumerable ways, implementing small changes can lead to radical improvements. Simple improvements like switching to a PEO or giving employees access to app-based timesheets can make all the difference. Anything that makes an employee’s life just a little bit easier can do wonders for organizational morale, engagement, and retention.
Take small and strategic actions, updating and sharing policies, making lean software upgrades, and opening clear channels of communication. Make sure you’ve correctly diagnosed the problem, before making a huge investment in enterprise software or multiple internal hires. A good place to start is by surveying or checking in with employees and asking about their experience with payroll.