You may think your payroll process is running smoothly. You get the time records in on time, reconcile hours and wages, and give out paychecks on the designated pay day. But how can you tell if your core payroll processes need improvement? There are some situations that are, if not definite red flags, cause for concern and further investigation. They include payroll regulatory or compliance issues caught by auditors, inability to quickly produce documents for a government agency request and regularly fielding employee or management complaints about payroll.
Regulatory or Compliance Issues
When the Internal Revenue Service auditors show up and find compliance issues with payroll, whether it’s misclassifying workers and not paying payroll taxes, missing or incorrect I-9 forms, or not issuing 1099 forms, payroll compliance issues are a problem. If they surface with the agency, you may have hefty fines. Payroll processes should be investigated and improvements made to come into compliance before someone finds an issue. Start with help from an HR Pro or an employment lawyer and consider outsourcing to a professional payroll service to control your payroll as soon as possible.
Inability to Quickly Produce Payroll Documents
An efficient, accurate payroll process has “a place for everything and everything in its place,” especially when it comes to documents that are the target of IRS audits. Reports about 1099 forms issued and supporting documentation, accurate and alphabetized employee I-9 forms, and complete current and previous years income tax withholding records are some of the most important payroll documents employers must be able to quickly produce when the IRS is knocking at the door. Designate locking file cabinets that are large enough to accommodate the number of files, make sure different files are clearly and uniformly marked and have a written procedure for each type of payroll document that includes who handles them, what information they must contain, and how they are maintained.
Employee or Management Complaints About Payroll
The best defense against employee or management complaints is listening. Listen to the complaints, investigate them and determine if there’s a need for action. If an employee complains about getting timesheets in by 2pm the Friday before payroll, ask why it’s a problem. Does the employee understand the timekeeping policy? Is the timesheet or timecard understood or too complicated to easily verify? Then discuss the issue within your payroll team and with the employee and his or her manager to find the root of the problem and work on ways to address it.
If management is complaining about payroll, you may need to work further up the line to investigate and problem solve. Talk to the CFO or accounting manager, survey management company-wide about the current payroll process and look into costs and services of an outside payroll service. You may find that outsourcing payroll will solve administrative, compliance, and customer service problems that plague your payroll.
When you think of payroll as part of employee engagement and strategic planning, working to understand and address problems with your process makes sense. Many times, an outside payroll and human resources services provider can more effectively process payroll for lower cost than you can do it internally. You want your payroll to create positive motivation for everyone involved with it, not frustration and stress. The return on investment of paying attention to payroll problems is well worth it.
PAYDAY has seen the best of processes and the worst of processes and we can help evaluate your current processes and make suggestions for improvement. Contact us today for a free consultation.