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5 Issues to Look Out for When Analyzing Payroll Processes

Businesswoman with financial symbols coming from her handSome businesses spend up to 60 percent of their gross revenue on employee payroll. While this may seem a bit excessive, a team of knowledgeable and motivated employees is the cornerstone of any successful business. Offering competitive pay and great benefits is the best way to ensure your company gets the top talent in your industry.

One of the main things you need to do when trying to learn about a payroll system and how to improve it is to perform routine audits. The biggest mistake you can make as a business owner is assuming your payroll is without problems. While these problems may be minor, they can become extremely troublesome the longer they are left in place.

Here are some of the issues you need to look out for when analyzing your payroll process.


5 Issues To Look Out For When Analyzing Payroll Processes

1. The Amount of Information Being Put on Paycheck Stubs

Whether you hand out physical paychecks or send statements via email to employees regarding their pay, you need to assess just how much information is being shared. Most paycheck stubs will feature a breakdown of the hours a particular employee has worked and any deductions that have been taken out of their pay. However, there are some pieces of information that should be left out.
For instance, if the paycheck stubs you are handing out to team members feature their entire Social Security number, you need to change this practice immediately. If this information falls into the wrong hands, it can lead to an employee having their identity stolen. Ideally, you only want necessary data of a non-sensitive nature on these paycheck statements.

2. Putting the Power of Payroll Processing in One Person's Hand is a Mistake

Trust is a key component of a successful employer/employee relationship. Showing employees that you trust them and value the work they do can keep them loyal. However, there is a difference between trust and being negligent when it comes to delegating responsibilities.

If you have assigned the task of process payroll to a single team member, you need to make a change immediately. With one person handling payroll processing, the chance of fraud and theft taking place increases substantially. Rather than allowing one person to have this power, you need to break this job up into smaller tasks and delegate them to multiple employees. Doing this can help you prevent big problems down the line.

3. Make Sure the Pay You Offer to Employees is Competitive

Keeping valued team members happy and loyal can be a difficult job. One of the main things you need to focus on as you audit your payroll is the pay you are providing employees. Doing a bit of research can help you assess the industry-standard for pay. If you see that you are paying your employees far less than a competitor, you need to think about making a change.

Neglecting to offer more pay may lead to your company losing lots of valued employees. The increased pay you offer to hard-working team members will be worth it considering the money they can help your business make.

4. Take Human Error Out of the Equation

Is your HR department still figuring and processing payroll by hand? If so, it is time to embrace the power of cloud-based accounting and payroll software. Humans are bound to make errors when tasked with jobs like this. Instead of letting these errors lead to money being wasted, you need to let technology play a part in payroll processing.

Cloud-based payroll systems are both accurate and secure. Since these systems can be accessed from anywhere securely, employees can work on payroll from home if needed. The money invested in this technology will be well worth it in the long run.

5. Misclassifying Employees is Common

Another problem you need to keep an eye out for when auditing the payroll process is employee misclassification. Most businesses use a mixture of freelance, salaried and hourly pay employees. Each of these employees will need to be classified differently to ensure no red flags are raised for the IRS. If you are unsure about how to handle employee classifications, you should consult with a knowledgeable accountant.

Routine Payroll Audits are a Must

As a business owner, your main job is to ensure everything runs smoothly. This is why performing regular payroll audits is so important. With the information from these audits, you can optimize this process for success.


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About the author: Wendy Dessler is a super-connector who helps businesses find their audience online through outreach, partnerships, and networking. She frequently writes about the latest advancements in HR, tech & digital marketing and focuses her efforts on developing customized blogger outreach plans depending on the industry and competition.


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