Many times, during my 20-plus year career in payroll I have been called to help fix a broken payroll. During my time I have discovered four main areas that can damage the integrity of a payroll.
These are the four pillars of a great payroll and when done wrong they are a payroll disaster waiting to happen. Payroll is more than just a biweekly event that magically happens every 14 days.
It needs to have integrity and honesty that builds unspoken confidence in how a company treats its employees. For employees, payroll is a representation of the value their employer places on their contribution. When employees are paid incorrectly, if dealt with quickly, it could pass as a minor annoyance or inconvenience. No one is thrilled but no harm done, right?
What if it happens more than once, and it’s not corrected quickly? Or worse – no one knows how to correct it and it lingers for weeks or even months. Errors like this chip away at the confidence your employees have in your team and the company as a whole. In order to repair your broken payroll, you have to take proactive steps to prevent further damage and ensure future success.
Staffing - Evaluate Your Team
The first step in fixing your payroll is to evaluate your team. Staffing issues have been one of the top reasons I’ve been called in by organizations for help. A manager who quit without notice to go marry her long-distance boyfriend in Germany; the specialist who was let go for embezzling funds; a company being bought by a foreign entity that has no idea how to pay the employees, the list goes on.
Before you let someone go or hire that new whiz kid straight out of college, make sure you are not a part of the staffing problem. Do you stand with your team when things go wrong? Do you speak up when someone constantly misses a deadline? Do you allow time for continued education and cross-training? Are you understaffed but trying to save a few dollars in your budget? Do you really know what your team does daily? Answering questions like these is key to uncovering the roots of your payroll issues.
Function - Examine the Function of Payroll
The next step is to look at the function of your payroll and see if the system is set up properly. The payroll functionality depends on how your system has been developed. Everything that goes into payroll has an explanation. Each of the earning codes needs to be taxed properly, on the appropriate schedule, and have the correct determination of its eligibility in the deferred compensation plan deductions.
Deductions can be before or after-tax, but what goes where and why? Then add in PTO plans, accruals, general ledger accounts, benefit vendor files, banking and tax deposits. If one element is set up wrong it can become a snowball effect of errors.
Review each piece until you are sure everything is as it should be. If you’re lacking the expertise, speak to a consultant, network, or follow payroll communities to find answers. It’s essential your people are trained so they can help sort out the issues. Nothing can be fixed overnight so create a list of concerns and tackle them one at a time.
Process - Investigate the Payroll Process
Where do your time files come from? Does your HR team follow the deadline for those one-time payment requests? How much notice do you get for a termination? Is that vendor file always late or wrong? Has your computer crashed because it is older than most in the company? Is payday just 2 days away and HR has still not entered the 4 new summer interns in the system? Have you had six meetings that day and no time to audit the payroll before the deadline? Do you have payrolls you hope and pray are never picked for an audit?
You must create a payroll process that is efficient and controlled but still supports the needs of employees, management, HR and Finance. The only way to fix an issue in your process is to understand every step in the path, where your information is coming from, and how your team pulls it all together.
Look up your company pay policy and document all the steps and procedures your team follows. Create a payroll manual that is a good representation of each step. Look at the schedules and timing of each event. Is the process in which you run payroll timely and smooth or rushed and painful? When was the last time you said no to a last-minute request? Do you have a logical approval process? Talk to your team to understand what they do to gain further insight on what changes need to be made.
Plan - Create a Plan
You can have a knowledgeable team, a perfectly set up system, and a clearly defined process, but no overarching plan in place. No one follows the rules, the schedule is often adjusted at the request of upper management and every day brings a new surprise, none of which is cake. Nothing is documented, vacation is requested in secret and the big bonus payroll is looming.
Planning is as simple or as complex as you allow it to be. How do you determine if a new hire will need to wait a week to be paid? What does the payroll calendar look like? When is the last day to change your W-4 before payroll is open?
Step back and look at the year. Did you create time at year-end to audit and review? Are you ready for an audit? Do you have scheduled team meetings or calls to discuss what is happening in the next few weeks? When members of your team take vacations, are the others cross-trained to support them while they are out on PTO? Could you still do the job if someone needed medical leave or gave their notice? Having a plan in place prevents payroll disasters when various circumstances arise and will help prevent future mistakes.
Fixing a broken payroll takes time and honesty. Don’t overwhelm yourself by trying to change everything at once. Create a list of issues then prioritize based on your company’s needs and engage your team in the plan and process. Allow them to be a part of the solution. Finally, support your team and don’t forget the cake.