5 Tips for a Successful Payroll Management6 min read

If you’re a business owner and you have individuals you employ then you understand how crucial payroll management is. A lot goes into managing payroll, from handling salaries and bonuses to ensuring your employees are getting paid on time, all while making sure that you’re complying with laws and regulations such as Pay As You Earn (PAYE).

Due to budget constraints, small to medium enterprises (SMEs) have the extra challenge of managing payroll themselves, unlike large and more established companies that have a designated payroll department to help them with this.

In this post, we look at 5 tips to help you successfully manage payroll for your business.

1. Keep accurate employee records

This may seem obvious, but ensuring you have the correct personal information for every employee is paramount. If any of this information changes (e.g. promotion, salary increase after a pay review) or isn’t entered properly when the employee is onboarded, it could lead to legal issues. It’s up to you to keep track of your employees’ records for the duration of their employment with you.

Some details, like date of birth and National Insurance Number, are unlikely to change. But employees move, get married (and sometimes change their name as a result), update their beneficiaries, change banks, and take sick or disability leave. Some businesses track pension contributions too. All of this must be reconciled and kept up to date.

It also means that if employees do get sick, take time off for maternity leave or quit, you know who receives benefits and what entitlements they have. While this may seem tedious, maintaining and updating your employees’ personal records is one of your payroll team’s most important duties.

2. Stay compliant with payroll legislation

Another important aspect of payroll management is the General Data Protection Regulation (UK GDPR). The UK GDPR currently applies to all UK businesses who process personal data or businesses outside the UK that sell to individuals in the UK or monitor the behaviour of individuals in the UK.

Much of the GDPR concerns what data you can collect and retain from clients, along with your responsibilities in notifying them. However, the GDPR has implications for HR too. It regulates what data you can collect about your employees and sets out guidelines for how to notify them of this collection.

The GDPR also regulates how and where you can store private information. Most payroll software will take this into account and ensure that you are collecting and storing employee data in compliance with this and other privacy legislation.

In addition to GDPR, there are numerous regulations to keep an eye on. If you do your payroll in-house, your team must be aware of upcoming changes to these regulations and when they take effect. For example the recent changes to IR35. Not only will you need to adjust your payroll process in response, but you will often need to inform employees of any changes on their end.

3. Automate your payroll process

Manually managing your payroll can be hard and very time consuming as well as prone to errors. An affordable solution for SMEs is to automate their payroll process by purchasing payroll software. Luckily, there’s a wide variety of cost-effective solutions on the market, including pay-by-the-month cloud payroll software.

Factors to consider when choosing a payroll software for your business include your company’s size; the level of technical support you need; whether your staff are paid by the hour, salaried, or receive a commission; and which features are non-negotiable.

For example, you’ll want a system that’s customizable if you pay bonuses, commission, or overtime. On the other hand, if your payroll is predictable, you’ll want software that offers automated rules and scheduling.

Other features to consider include: the ability to auto-enroll employees into a pension scheme, integration with other systems such as accounting software, customizable reports, accessibility across multiple devices, employee self-service portal (delegates routine tasks to employees such as submitting their timesheets and expenses themselves), and auto-generated pay slips.

The best thing about these solutions is that they make it easy to update your payroll database so you don’t need to manually enter each individual’s wages and deductions. They will do the work for you by automatically calculating what should be deducted from each paycheck, saving you precious time.

4. Be transparent about payroll processes

Your employees value transparency. They want to know when they’ll be getting paid, when to submit timesheets, and what the company payroll policies entail. The great thing about implementing cloud-based payroll software is that most have a payroll calendar. Not only will this show employees when they will be paid and when timesheets are due, but it will also help your payroll department with planning payroll management tasks.

Some payroll software will even automatically create a calendar for you once your pay schedule is established. An effective payroll calendar will be transparent about the pay schedule, including holiday pay, reducing employee confusion about when and how much they will be paid at all times of the year.

If your business pays bonuses or other perks, be transparent about when they will occur (e.g., after a performance review), and how they will be paid out (e.g. added to the employee’s existing pay, lump sum by itself).

Lastly, employees should know who to reach out to if they have questions pertaining to payroll, such as company policies, timesheet submission, pensions, etc.

Never assume employees understand all aspects of the payroll process, so make sure to open the lines of communication, and be prepared for feedback from your employees about what’s working and what areas need improvement.

5. Review payroll policies regularly

No matter how confident you are in your current policies, it’s important to ensure they stay up to date. As legislation and software change, and as your business grows, older policies might need to be changed or replaced.

Have your payroll team document questions asked by employees. If you receive the same questions frequently, audit and update your payroll documentation and onboarding process.

Similarly, you should test your payroll software after any updates if you’re not using a cloud version. This is particularly important when your software integrates with other parts of your business, such as biometric or card-based access systems that monitor when employees are working.

Lastly, every business will eventually face the question of whether to outsource payroll to a dedicated firm. This may mean additional expenses but it will simplify a great deal of the process. Payroll and accounting firms will be experts in compliance, and they will know what software to use for a business of your type and size.

Even small businesses should consider outsourcing payroll management if they have complex situations, like employees in different countries.

Conclusion

Regardless of how many individuals you employ, managing your payroll properly is essential to your business. This boils down to maintaining accurate employee records, staying compliant with the latest legislation, automating the process using payroll software, being transparent with your employees, and regularly reviewing your payroll process.

If you need advice on any of these aspects of payroll management, you can request a free consultation right here.

Implementing these 5 tips will improve employee satisfaction and productivity while preparing your business for any changes or challenges that may arise.