Payroll is one of the most important HR processes in any business, ensuring that employees are paid accurately and on time. However, many organisations are still using inefficient, out-of-date payroll software, or relying on manual payroll processing. As well as costing time and money, these insufficient methods could lead to mistakes that could leave the business liable for penalties.
In this article, we’ll share how to streamline the payroll process in your business, offering five top tips to ensure fast payroll processing that is also reliable. We will then answer some frequently asked questions about payroll.
Following payroll best practices is important to minimise the risks to your business, and to ensure a smooth, positive experience for your employees.
We’ve put together six effective ways to streamline your payroll process to guide you and your team:
1. Carry out periodic payroll audits
It’s important to regularly review your payroll processes to highlight any errors or areas of improvement. If you’ve encountered a problem, you must carry out an audit as soon as possible to minimise the impact, and to strengthen trust within your organisation. You should aim to conduct an audit of your payroll processes annually to avoid costly errors, and to ensure that any legislative changes have been taken care of.
Even if you’re not experiencing any issues with how you currently perform your payroll processing, periodic audits will help you to spot potential problems before they arise. It also gives you the opportunity to find ways to save time and reduce manual tasks; just because your current process is adequate, doesn’t mean that it can’t be improved.
2. Utilise payroll automation
As the modern workplace has developed, HR teams have started to incorporate more and more technology into the process of payroll. Paper-based forms and payslips have been replaced with faster, more accurate electronic payroll processing, using sophisticated HR payroll software with intelligent automation.
Automating the payroll process removes time-consuming administrative tasks, minimises the risk of human error, and makes it easier to meet your compliance requirements. Even small businesses with just a few employees will notice the time-saving benefits of payroll automation. Most payroll systems offer seamless integration with other HR tools, further streamlining processes and improving data accuracy to avoid payment errors.
3. Communicate with your workforce
Your employees are a great source of feedback and information about your payroll processes. Depending on how and when they’re paid, they may interact with the system weekly or monthly to upload timesheets or check their payslips. They are also the people who are most directly affected in the event of late payment or an error.
As beneficial as it is to be aware of payroll best practices, not everything will apply to or be suitable for your business. Finding out exactly what your employees are experiencing will help you to address the real issues within your specific payroll processes and show that you care about your workforce. After implementing a solution, make sure to communicate this with employees and key stakeholders to make sure they feel heard, and are aware of any changes that may impact them.
4. Stay up to date with payroll legislation
Make sure to keep an eye on any changes to payroll legislation, as the sooner you know about a change, the sooner you can implement any changes to support it. Along with tax liabilities and employment rights, changes to Statutory Sick Pay (SSP), holiday entitlement and parental leave will have an impact on how you pay your employees.
Following HR-related websites and blogs is a great way to keep up to date with any changes, and to help you better understand how they will affect your company. It’s a good idea to sign up to relevant email newsletters to make sure you never miss an update. Wherever you get your information, always check gov.uk for the most accurate information.
5. Consider outsourcing your payroll
While many businesses choose to handle it in house, outsourcing your payroll is a great way to improve and streamline the entire process. From freeing up time for other essential tasks to reducing the compliance burden, putting your payroll in the hands of the experts, outsourcing can really take the pressure off your HR team.
Although there will be costs associated with outsourcing, these will be offset by the time and money saved on performing manual tasks, rectifying errors and, in the worst cases, fines and legal proceedings in the event of noncompliance. It might seem daunting to trust a third party with this important area of your business, but with a little research, you can find the right payroll outsourcing partner to suit your needs.
6. Create a payroll process flowchart
Visualising the payroll process from start to finish can help make complicated and detailed processes far easier to understand. Creating a payroll process flowchart will provide a clear view of the operations that are undertaken with your payroll processes.
Your flowchart will likely involve:
- Employee Timekeeping
- Data Collection
- Pay Rate Calculation
- Deductions and Withholdings
- Gross Pay Calculation
- Net Pay Calculation
- Payment Distribution
- Payroll Reporting and Record-Keeping
Now we have outlined the six key steps to improve your payroll processes, let’s address some common questions you may have surrounding the topic of payroll. These will help you understand how the steps we’ve covered will directly impact the efficiency and accuracy of your chosen payroll system.
What is payroll processing and what does it involve?
Payroll processing is the complete management of employee pay. It includes everything from calculating pay based on an individual’s type of employment, salary and deductions, to making payment directly to each employee’s bank account.
As well as actually paying employees, payroll also involves generating payslips, reporting on wages, calculating deductions, and paying any relevant employment taxes to HMRC.
How long does payroll take to process?
The exact amount of time it takes to process payroll depends on the type of payment method used, the day payroll is processed, and a variety of other factors. As a rough guide, for businesses using automated systems, payroll processing only takes one to two business days. After submitting payroll, it then takes two to three days for the money to arrive in employees’ bank accounts. This means that it can typically take up to five days from the end of the pay period for payment to clear. How long it takes to process payroll is a key payroll metric to measure. Learn why it’s important to track in our guide to payroll KPIs.
Why are your payroll processes important?
Payroll processing is an essential part of running any business that employs workers, but it covers a broad and complicated set of legal requirements. Failure to pay employees on time or comply with your legal employer obligations can have serious consequences such as fines, penalties and formal inquiries.
It’s important to remember that payroll processes also include responding to employee queries, and ensuring that any questions are answered fully, and any mistakes are rectified promptly. Many HR departments use self-serve systems, allowing employees to access online payslips, check tax codes and query any wage discrepancies. Providing smooth, straightforward processes for these tasks helps to boost transparency and keep your employees happy and engaged.
By following payroll best practices, you can:
- Ensure that all employees are paid accurately and on time
- Accurately forecast business expenditure
- Reduce the risk of mistakes and legal consequences
- Boost staff retention by providing clear straightforward processes
- Protect your company’s reputation by avoiding pay-related incidents
Why do you need to ensure reliable payroll processes?
Making payroll errors can cost your business time and money, so it’s important to ensure that your processes are not only fast, but also reliable. Failing to pay employees the correct amount, paying them late, or not meeting your tax liabilities can have serious consequences, including financial penalties and even a formal enquiry by HMRC.
For your employees, timely, accurate payroll processes are essential to ensure that they can meet their own financial obligations. This is particularly important during the current cost-of-living crisis, where every penny counts.
Improving your payroll processes
The importance of an efficient, accurate payroll process can’t be overstated. From keeping your workforce happy to preventing your business from ending up in hot water with HMRC, there are lots of benefits to regularly auditing your payroll, and taking the time to address any problems that you unearth.
PeopleHR’s experts are on hand to support businesses throughout the entire payroll process. Our HR payroll software is a great way to save time and reduce the risk of errors, helping to ensure efficiency and compliance at all stages. For businesses looking to further streamline their payroll processes, our outsourcing payroll services offer a wide range of time- and cost-saving benefits.
