A Guide to Creating Written Payroll Procedures

By Merle Capello CPP
August 15, 2016

Payroll processing may be tedious and repetitious, but it is also crucial to the success of any organization.

Why? Because everyone wants to be paid, and no one wants an incorrect paycheck. Even if an error occurs, the team and the company both want to ensure that it isn’t repeated. One way to ensure that errors don’t occur or occur very rarely is to have and follow written procedures.

Why is this so important? Just like with any successful business, it’s crucial to remember what works – and what doesn’t. I’ve listed below some reasons for documenting your process and procedures.


Your company needs to ensure compliance with Federal, state and local tax, occupational health and consumer laws. Knowing what you do and how you do it helps you to verify your adherence to the myriad of laws that affect payroll.


Clarity and availability of your procedure documents prove your team has nothing to hide and that you do the right thing in all cases.

Sarbanes-Oxley adherence

Whether or not you are publicly traded, your procedure documents are a road map to your work as well as your compliance with the law.


Having set written procedures and guidelines allow you to ensure that all team members learn the correct way to handle each scenario of your payroll. Cross-training is important to ensure that all team members can handle multiple payroll responsibilities in case of illness, injury, weather-related absence or office closings.

Knowledge transfer

When a new employee is hired or an employee is going on leave or leaving the company, it’s important that consistency is maintained. The written document ensures this.


Each team member should handle the same task the same way. For example, processing a new hire into the payroll system should always consist of a certain flow and a certain pattern of steps. Each associate will process the same way if taught the same process.

Outsourced functions

Do you outsource your benefits, pension, or payroll tax administration? Include your links to and from these organizations in order to clarify your workflow.

Pain points

Review to see where problems, errors, and delays arise. Take steps to document and create solutions. Identify areas for improvement.

Process improvement

Creating workflows and reviewing steps allow you to step back and look at the process while not actually performing it. This may give you an idea for streamlining the step. You may also find that you question a particular part of a process and can possibly find a shorter way to complete the task.

Reducing the complexity of the process

Putting the documentation “on paper” makes it easier to use and preserve, as well as providing a physical location for your documentation that can be given to your team as well as to management upon request. Also, the very act of writing procedures allows you to simplify and clarify your thoughts and what you do.

Enabling emergency operations

Unfortunately, we never know when something major will happen that will keep many employees from getting to the office. Having documentation allows substitutes or managers to help with disaster recovery. Disaster may mean anything from a flood to an emergency shutdown of a facility to a blizzard, so it is important to be prepared. Payroll usually can’t be put off.

How do you create these documents?

Gather a team of your payroll associates and supervisors. Have a meeting or series of meetings to layout your processes. The group effort will bring out more nuance and detail than using just one person’s thoughts.

  • Begin by making a survey of all your team’s responsibilities. Time collection, funding requests, report generation, employee/customer service requests, and employment verifications – this is a sample list of responsibilities that may fall under payroll’s umbrella.
  • Gather up relevant illustrations – payroll schedules, company information (crucial if you pay under multiple FEIN’s), copies of forms, sample registers (redact where necessary), new hire packages, enrollment forms. Use these as a map to begin the process of capturing all the steps to completion.
  • Brainstorm with the team and begin making outlines. If you like, assign each process or procedure to a person or group. However, don’t let go of them altogether. Keep a firm meeting schedule with the team until the tasks are completed.
  • Once you have begun, make sure that the team tests the written processes. Do they actually work the way they are written? Is a step missing? Does something need to be deleted? This is a good exercise in procedure.
  • Identify the look you want for your manual. A uniform look is best, utilizing the company logo, fonts, etc.
  • Is your payroll outsourced, or SAAS? Use your system’s documentation for additional material. Screenshots, tables and other materials will help clarify the meaning of a specific task.
  • Decide the best way to save and distribute your manual – paper, shared drive, email, etc. You may want to keep a hard copy just in case.
  • Develop a mechanism for change control. This may entail putting one person in charge of keeping the manual updated, as well as developing version numbers and dating. This will allow all team members to know that they have the latest version available.
  • This is an important deliverable for your team. If no one is able to create these documents, try to identify an outside resource – a knowledgeable consultant or simply an experienced writer. That resource can assist you from beginning to end.

No matter which option you choose, get started today!


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