Payroll is a key aspect of any business with employees. In order for employees and payroll taxes to be paid on time and accurately, the payroll department must be structured. To attain efficiency within the department, the employer should document the payroll procedures. Regardless of whether the payroll is large or small, written payroll procedures are critical to a successful payroll.
Create payroll procedure forms. The payroll department usually works closely with the human resources department to ensure proper paycheck and employee benefits processing. A number of forms are used in this process: time sheets/time cards, Form W-2, payroll schedules and/or calendars, vacation request forms, direct deposit authorisation forms and sick day monitoring sheets. You may purchase these forms at a stationery shop or have a printing company customised them.
Document the timekeeping procedures. The U.S. Department of Labor notes that you can use any timekeeping system you want provided it is correct and complete. Timekeeping procedures should include time sheet submission deadlines and the method used to calculate employees' time.
For instance, write down procedures for manually computing employee time cards, such as rounding up and down to nearest quarter hour. If you have a timekeeping system that automatically transports employee punches/swipes into the payroll software, document your procedures for making edits. This may include having supervisors e-mail you the changes before the deadline.
Write down payroll processing procedures. Tailor your payroll processing procedures so it matches your payroll system. A payroll system can be manual, in-house computerised or external (outsourced). State the entire payroll processing procedures for your particular system.
For instance, say you have an in-house computerised system, in which on-site payroll staff and payroll software is used to process the payroll. Document how to use the software. State how to enter employees' wages and how to process pay adjustments, direct deposits, payroll taxes, benefit days, garnishments, insurance benefits and overtime pay. Include steps for double-checking the payroll before printing paychecks and before closing the payroll.
If you have multiple pay frequencies (such as weekly and biweekly), document how to process each one. Payroll processing procedures should include all the processing steps, from the start of each payroll to its end.
Include after-processing procedures. For instance, say you have an accounting department or an outside tax company that handles the company's payroll tax affairs. State the necessary files and reports that should be forwarded and to which individual. State whom should receive paychecks/pay stubs for distribution and include other companies/individuals with whom you must interact. For instance, if the payroll department forwards retirement contribution funds to the pension plan provider immediately after each payroll processing, include the necessary steps.
Document record-keeping procedures. The employer must keep payroll records for a minimum of three years, according to the Department of Labor. State storage and filing procedures for payroll registers, W-2s, payroll tax reports, time cards and other payroll records.
Update your payroll procedures whenever a procedural change occurs.
Tips and warnings
- Update your payroll procedures whenever a procedural change occurs.