10 Bad Payroll Habits to Drop as Soon as Possible

By Katherine Muniz
August 25, 2016

In theory, managing your company payroll shouldn’t be that hard. But factor in unique complexities, unseen variables, and demanding business requirements, and suddenly you’re scrambling. Consider strengthening your payroll approach with these tips.

1. Using overpriced payroll services

According to Jeremy Marsan, the business analyst at Fit Small Business. “Most small businesses will be better off avoiding old school payroll services that are overpriced and cater to larger businesses. It’s 2016, there are plenty of alternatives that can provide user-friendly, feature-packed services that are lower priced than traditional options.”

One such option is FingerCheck360, our affordable online payroll solution that allows you to run payroll from the same software you’re using right now to track your company’s time. “If you haven’t looked at payroll providers in a while and are just using the same provider your business was using 10 years ago, it’s worth a look at what’s out there now,” says Marsan. “You’re likely to find great options that will cost you much less money than the same old payroll service.”

2. Putting blinders on regarding payroll

According to Amanda Kendall, Enrolled Agent and Owner of True Resolve Tax Professionals, LLC, one glaring oversight many business owners make is not overseeing their payroll (to an extent). “Business owners tend to hire a payroll company or employee and then fully trust that everything is being done properly,” Kendall says. “This can cause a lot of problems if deposits are not being made timely or at all and the owner does not catch it early on.” Try to implement a system of checks and balances instead of solely trusting and relying on one person to oversee your company’s entire payroll.

3. Making assumptions about paying employees

Being a seasoned payroll professional for the past 25 years, Director of Payroll  Compliance for FingerCheck, Merle M. Capello CPP knows all too well how making assumptions in payroll goes. “For example, an employee is on paid leave. Does that leave continue for the next period? Or has it ended?” reasons Capello. “The thing to avoid here is assuming that the current status continues without some proof. The employee may have moved to workers’ comp, or to long-term disability, or may have returned to full-time status. This should have you reviewing your paperwork/recordkeeping process. Making a schedule for receipt of timecards, new hire information, changes, etc. each period saves the back-and-forth that results from no scheduling!”

4. Paying without proper documentation

According to Capello, paying without proper documentation is a big no. “In other words, making a special payment from a verbal contact instead of with proper paperwork. John Smith is supposed to receive a bonus – is there a request, and has it gone through channels? Does no proper paperwork model exist? Create a system of documentation so that there is always a paper trail for anything you do.”

5. Not running audit programs

Capello also comments that not using an audit program is a big oversight. “Not running audit programs – e.g. hours totals – always verify that the hours and salaries that are being paid match what you expect them to be. Most payroll systems allow you to create reports, or deliver pre-processing reports needed to verify totals prior to final acceptance of a payroll.”

6. Passing a payroll without checking or verifying prior to current totals

“This is part two of verifying totals prior to allowing payroll to be finalized,” says Capello. “Always check reasonableness from cycle to cycle. For example, if your prior payroll gross was $50,000, and this one is $1 Million, you probably have a major issue. You do not want to let that go prior to checking and making the necessary changes. Always verify reasonableness at the very least prior to committing your payroll to final status.

7. Allowing the vendor to finalize without your input or not being hands-on with your payroll

In adding to what Amanda Kendall said earlier, Capello also comments that payroll is a team-managed process, and should remain that way. “Remember that you and your team are ultimately responsible for your payroll and any errors that are made. Your vendor is not responsible for those errors. Don’t stand back and wait for someone else to figure out what is wrong. Have procedures in place to verify and audit your payroll prior to releasing it.”

8. Manually entering payroll data

According to Brian Johnson of Mobius Works, finding a way to escape time-consuming manual data entry is key. “When our controller left earlier this year we found that payroll data entry was taking 4 hours a week for 15 employees. She was manually copying all the times from our timesheet system to our payroll processor. In addition manual entry allowed for errors to be introduced into the data.” His company, which develops software integrations, was able to tie their time entry system and their payroll system together. Integration isn’t even necessary for our all-in-one payroll software FingerCheck360 — everything is done from one program.

9. Splitting hairs over deductions

Making excessive payroll deductions is a slippery slope, so do so within reason and when it makes sense. Take, for instance, docking pay from a salaried employee for missing time off work. This can destroy an em­­ployee’s exempt status, making him or her eligible for overtime (see our article on this). Also, deducting time whenever an hourly employee steps away from their desk, chats by the water cooler, or takes a bathroom break may also be viewed with suspicion. If you see a problematic behavioral pattern, consider counseling your employee instead of docking pay.

10. Waiting until last minute to get timesheets processed

Procrastinating is a precarious trend that always lends itself easily to stress. If you use an automated time and attendance system, you won’t have to round up your company’s timesheets and key in the data manually. Instead, the time data will already be pre-entered and ready to process. If you use FingerCheck, you can request two- or three-level approval of timesheets. Once all departments’ time data have been approved, you can export your timesheets to your payroll provider or process it internally with ZERO export/import required by upgrading to FingerCheck360 payroll software. Implementing these tips can help make our payroll procedure more routine, consistent, timely, and accurate.

This article was largely contributed to by Director of Payroll Compliance Merle M. Capello, CPP.

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