Incorporate a payment processing and payroll execution partner to help streamline business functions with HR and finance teams.

Executing payroll properly is a crucial part of any business. As the primary mechanism by which employees receive their wages and salaries, a rigorously executed payroll process can help keep your business free from labor disputes or statutory compliance issues.

The payroll process, which combines the responsibilities of both Human Resources (HR) and finance, consists of the steps needed to pay employees each period and involves tracking hours worked, deducting money for employee benefits, and remitting payroll taxes.

A successful payroll process depends on understanding the process and finding the most efficient and secure way to run it.

Some of the major benefits of using an automated software solution for the payroll process include reduced risk of costly compliance issues, greater employee satisfaction, automatic updates for any tax code or deduction changes, as well as time and money savings.

In this article, you will learn how investing in an automated payroll system can streamline the payroll process for HR and finance teams, making sure there aren’t any missing steps in the process.

Human Resources: Pre-Payroll Processes

Payroll execution is part of operating your business legally, according to state and federal laws. From tracking employee time to recordkeeping, the Fair Labor Standards Act (FLSA) has several directives that fit into your payroll execution and these regulations should be kept in mind when setting up your payroll procedure.

Choosing a payroll processing system

Start by deciding on a payroll processing system that suits your unique business needs. Options include processing payroll manually (best for a small business with few employees), choosing payroll software, or outsourcing the work to a payroll processing partner. The more complex your payroll calculations are, the more likely you will need payroll software or outsource it completely.

Payroll policy creation

Determine how your payroll policy will work. This includes basics such as methods of payments and payment dates, as well as attendance and leaves policy. Payroll deductions, withholdings, and the benefits you offer will impact the employee’s paycheck. Include tax payment dates in this policy.

Collect necessary employee information

Gather input from various departments to ensure accurate calculation of payroll. W-9 or I-9 forms will give you each employee’s personal information, social security number, and tax filing status. If additional deductions are added to your payroll, such as health insurance or retirement savings, you will need documentation to show the employee has approved them. If you plan to offer direct deposit, get employee consent and banking information.

Direct deposit payments

Set up direct deposit payments for payroll via your bank or payroll service provider. Direct deposit payments do more than simplify the payroll process. They reduce costs, minimize risks of fraud, and ensure employees are paid on time. Bookkeeping becomes much easier as lost or stolen checks are a thing of the past and there’s no waiting time for checks to clear. Employees appreciate knowing they can depend on their salaries appearing in their accounts on time.

Time track employees

Establish a system for tracking employee hours. Such a system allows for better record-keeping and accurate payrolls. The FLSA mandates accurate record-keeping for all employers, including overtime, hours worked, and youth employment standards. By law, these records must be kept for at least three years. Time cards and other records on which payroll calculations are based need to be kept for two years.

Employee timesheet collection

Paper timesheets require substantial effort on the part of HR personnel as the information needs to be inputted manually and then re-checked to make sure there are no errors. Then it’s a matter of entering those numbers into the payroll records. Digital timesheets eliminate all that. It’s simply a matter of importing them to payroll software, securing approval, and then running payroll.

Human Resources: Payroll Processes

Establishing local tax IDs and employer identification numbers (EIN) is the first step in processing payroll. The government uses these identifications to track your business's payroll taxes and ensure you are meeting requirements.

Before processing payroll, HR will get your employees to fill out various tax forms, W-4 and I-9 (for new employees) so they can account for allowances and other tax details.

HR should also have these documents on hand:

• Job application: Having this document on file ensures that all key payroll information is in one place.
• Deductions: The employee may participate in company benefits, such as health insurance, a health savings account, or a retirement savings plan. Proper payroll processing ensures that the correct amounts for these benefits are withheld each pay cycle.
• Wage garnishments: You may be required by law to garnish your employees' wages if they owe money, such as IRS payments or child support. Wage garnishments are court-ordered; ensure you have the proper documentation in your records.

Choose a schedule that works best for your business, either monthly, biweekly, or weekly. You'll also want to establish the preferred delivery method for each employee. Once you've set up a payroll schedule, you can begin processing your first payroll. To do this, you must calculate each employee's gross pay–the total number of hours an employee works in a given pay period multiplied by their hourly rate.

• Worker A has worked 50 hours for your weekly pay period.
• They earn $10 per hour.
• 40 hours x $10/hour = $400
• Gross pay = $400

The payroll process includes various statutory deductions, and payroll administrators must ensure that all statutory compliances are strictly followed during payroll execution. Gather information from your workers' tax, insurance, and benefit requirements to determine each employee's deduction. Tax rates vary by state and city, so administrators must be well-versed in state and local requirements. Subtract each employee's deduction from their gross pay. The amount left over is the employee's net pay or take-home pay.

Once HR has verified the data, it's time to feed it into the payroll system. Re-checking the information again in this step will eliminate errors. The payment process can only proceed when HR is satisfied that all the calculations are correct.

Finance: Post Payroll Processes

Every organization needs to maintain an accurate book of accounts. Feeding all salary data into the accounting or ERP system is, therefore, an important step in the post-payroll process.

Post-payroll, HR will also be required to prepare reports containing information such as department or location-wise employee costs. These reports are then sent to the finance department or the management team for further analysis.

Keep records of your payroll transactions for tax and compliance purposes. When someone disputes a paycheck or the IRS needs some sort of documentation, you must have your records ready.

Efficient Payroll Processing With NatPay

Processing payroll in a company involves a lot more than just calculating salaries. The process can be complex and daunting, which is why it makes good business sense to partner with an entity that completely understands the payroll process; and that offers end-to-end payroll solutions that can ease the burden of your company’s payroll processing function.

NatPay’s Direct Deposit Plus (DDP) service incorporates the latest advances in online technology so you can upload payroll files from any computer, anywhere. Simply upload your payroll files to your payroll account and you're ready to go. The feature is a simple, web-based interface with powerful features unmatched by other direct deposit providers.

With DDP, there’s no need for new software, you get multiple timing options, it’s flexible to facilitate, and has emergency processing. Employees also receive free payment alerts when their money is en route. They get 24/7 access to their online pay stubs to securely view their pay information from any device at any time.

Contact us for a demonstration and learn how NatPay can help your organization save time and money by streamlining your payroll execution process.