How to Streamline Your Payroll Process

Labor costs can make up to 70% of your total costs. That’s — a lot. Tucked into that huge expense is payroll.

Unfortunately, payroll costs are far more than just the hourly rate you’re paying your employees. Hidden in those costs are benefits, taxes, fees, and the cost you might pay someone to run your payroll. 

If you think doing payroll yourself is the key to reducing those costs, you’re forgetting how much time it takes and what that time is worth.

Payroll doesn’t need to be a headache. It doesn’t need to cost you time. It simply needs to be streamlined.

Why do you need to streamline your payroll process?

It’s the complexity and associated hidden costs that makes payroll expensive.

Remove the complexity, and you’ll save time and locate the hidden costs that were lurking safely in the confusion. 

Your accounting firm might be tucking fees into all things payroll so that every time a new employee fills out forms, you get charged. Or, if you’re handling your own payroll, you might not be aware of the forms, procedures, and other complicated tax requirements of the IRS — only to be visited with penalties down the road.

Labor costs can also break the bank in ways you might not expect or even be aware of if your payroll process is complicated. Overtime costs could be reduced if your payroll process is under control. 

Complexity leaves room for error and sneaky costs. A streamlined process reduces all of it.

How to streamline your payroll process.

How do you take a clunker process and turn it into a fast machine? 

One of the repeated approaches used to streamline your payroll process is through automation, but there are other ways, too.

Integrate benefits and payroll into one system.

Employee benefits can be complicated to manage. Some companies use different providers to handle their benefits and their payroll. That means entering employee data into multiple locations which takes time and runs the risk of introducing errors.

If possible, integrate your employee benefits directly into your payroll system. Even better, see if you can’t connect your worker’s compensation vendor to your payroll to save yourself time on required annual reports.

Use automated workflows when possible.

Get rid of as much manual data entry as you can. A manual approach is prone to error and simply takes too much time — especially with a process where there’s repetition.

Re-evaluate your workflows for how you handle:

  • Bonuses
  • Pay errors
  • Missing pay
  • Overtime
  • Time off requests

Make a flowchart. Look for unnecessary repetition and bureaucracy. Look for areas where the stored data is in conflict with how you handle payroll, or difficult to access by those needing it to run your payroll. Combining your employee scheduling software with your timesheet software is a great way to reduce errors. Digital timesheets integrated with the employee schedule will automatically pull in things like time off requests and overtime. 

Create checklists and a control system to reduce errors.

While it would be great if there were never errors in your payroll, they do happen. 

Whether or not automation is possible to part or all of your payroll, consider creating and using checklists. Checklists are famously used by the aviation industry to cut down on mistakes made out of rushed habit. Stick to the checklist, and nothing is missed.

At the very least, creating a checklist forces you to break down the process of what you’re doing and what you need to accomplish. It might reveal processes you can cut and those you might need to add.

Part of your checklist should be a regular audit of payroll to be sure of accuracy and legal compliance. It can save you a lot of trouble (and penalty fees) in the future. Speak to your accountant. Find out if this is something they do. Ask your employees to regularly verify their pay stubs and to alert you if something is amiss. 

Additionally, try to build in checks and balances if you’re able. Have one person perform part of the payroll duties, and another be the one to finalize and confirm everything is a go. This should catch errors early, using two sets of eyes, before payroll is committed and paid.

That might feel like more hassle and less streamlining, but if you make a habit of it and the system runs smoothly (and it’s part of your checklist), you’ll save yourself so much trouble down the road when you have to fix an old mistake.

Involve your employees.

Helpful processes for streamlining payroll doesn’t need to be all on you. 

Your employees have a vested interest in payroll being done right. Find ways to automate employee involvement in payroll. This might include:

Employee onboarding. 

Use a system that allows new hires to fill out necessary forms (e.g. W-4, direct deposit) right away, on their own. Keep it from being a drawn-out process the first week of their job. 

Employee hours. 

One of the headaches (and complications) when it comes time to do payroll is dealing with employee hour issues. There may be time off, incompletely marked time, or other discrepancies. Use an app or other system to let employees report their hours, and make requests regarding their shifts.

Employee scheduling. 

Overtime is a huge cost for employers. Getting your scheduling right is crucial to reducing payroll expenses. Without a streamlined process, it’s hard to get a good understanding of where the overtime is coming from.

Workforce optimization is the key to reducing unnecessary overtime. Using the right tools and team input, you can balance what your customers need with the right amount of scheduled staff.

Connect time tracking to your payroll system. 

Do you track employee time in one system, and then have to export it and bring it into your payroll system? Consider integrating your time tracking and payroll into one system. This is going to reduce errors, data loss, and confusion. It will be easier to make changes and fits in well with an automated approach where employees have some skin in the game when it comes to reporting their hours.

To get started, our free time clock app lets you export employee timesheets and process payroll quickly with integrations to your favorite payroll provider.

Use automated payments.

Paying employees using direct deposit saves time and the cost of cutting paper checks. 

Paper checks are susceptible to fraud. They can be lost. Ditch the paper checks and save time, worry, and the environment.

If you’re paying your employees frequently, consider consolidating payroll to once or twice a month, if possible. That will reduce payroll costs and the time it takes to run payroll. 

However, you need to determine what payroll schedule works best for your employees and your situation. Avoid making a decision solely on what you think is best for your bottom line. Your employees have valuable input in this. And that leads us to the final point…

Don’t forget your employees in the equation.

In the midst of making these kinds of changes, don’t hurt your employees.

In fact, figuring out how to streamline your payroll doesn’t mean you can’t still find ways to delight your employees with payroll in creative ways. Everything from making it easier for them to build a savings account to helping them understand taxes are all ways everyone can benefit from an improved process.

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