Payroll Payouts

Knowledge Base

  • How to Develop a Payroll Process that Works

    If you’re following payroll best practices, you know you need a documented payroll process. And you need to stick with it too. But knowing you should do something and actually doing it are two different things.

    How do you develop a payroll process? There are a few steps to make your payroll process run like a well-oiled machine. You should always start with an audit and begin development from there. Any payroll process you develop needs to be well-documented and shared with your team.

    Now that you know it’s something you need to do, let’s talk about how you can actually do it.

    Conduct a payroll audit

    When auditing your payroll process, ask some questions to help identify weak spots or holes in your current payroll procedure. Am I using up-to-date or outdated systems to manage payroll with maximum efficiency? What tasks can I automate that I’m currently handling with a manual process? Are all my workflows running effectively or is there a better way to manage them? Next, dig deeper into the pain points of your business beyond your day-to-day payroll tasks. What bigger picture items or issues can you improve? Does your company struggle with employee time theft? Could tools like biometric clocks that require employees to punch in with fingerprints help solve the issue?

    Do some critical thinking about the issues you and your team face. Write them down. Identify what is causing the bottleneck and brainstorm ways this to fix the issue. You don’t have to reinvent the wheel here. It can even be as simple as, “We report using spreadsheets and disparate data. This leads to manual errors and consumes a lot of time. Using automated systems will help solve both these issues.”

    Here are a few other examples of pain points you can identify in your audit:

    • Inconsistent pay codes across divisions or locations
    • Overtime calculations in shift differentials lack uniform recordings across departments
    • Leave accruals that do not follow company policy
    • Exceeding the budget due to unplanned overtime hours

    By identifying the holes, you can begin to solve the problems that keep you from a more productive payroll process.

    Create a payroll calendar

    After you’ve conducted your payroll audit, you can move to the next step: creating a payroll calendar. Before you can dive into developing your process, you need to know what happens when and who is involved.

    Your payroll calendar serves as a place where anyone can know at all times, what happens when. What payroll activities are happening this week? What’s coming down the pipeline this quarter? When are forms 1094-C and 1095-C due to the IRS and employees? This is especially important if you have part-time and full-time workers who may get paid on different timelines (weekly vs. bi-weekly vs. monthly) and you need to keep track of multiple pay schedules at a time.

    Map out your payroll process

    Developing a payroll process will help you stay informed of everything from pay periods to overtime schedules. Probably most important, it will keep you in control of your budget. With a payroll process in place, you can manage and report on payroll with accuracy in a fraction of the time. It will also help you respond to employees coming to you with complaints or errors after you distribute paychecks. As you develop your process, consider the following steps:

    • Establish your payroll timeline. Create a payroll processing schedule that allows room to both process payroll and correct any errors before employee paychecks are due.
    • Stay in control of your budget by developing an approval process with your managers for hours worked.
    • Conduct audits during the pay period to verify the data (especially important if your office allows managers to approve hours worked).
    • Review anything a manager may have overlooked that could result in overtimes hours exceeding the payroll budget.
    • Update any necessary employee changes that may affect payroll like a change in employee FLSA classification, change of address, etc.
    • Perform any pay adjustments required for the pay period. This could include bonuses, commissions, and raises, or any alterations to deductions and health benefits.
    • Import timekeeping data and calculate pay. Ideally, this should be within your automated payroll system. Don’t forget to include vacation and overtime hours in your calculations.
    • Review payroll reports including the preliminary payroll report and the trend line of payroll expense by department.
    • Backup your data. With payroll software, your data should back up automatically, just archive it for your records.
    • Deposit taxes and verify transmission to the IRS.
    • Keep time cards accessible to review with employees questioning their pay for the period.

    Establish payroll policies

    No process can be successful without some guidelines to keep things running the way they should. It is important to have clear, standardized rules for your payroll process. A lot of this will depend on your organization and your team. No matter what your payroll process consists of, you need to have clear rules and policies that everyone follows.

    Stick with your process

    Once you take the time to develop a payroll process, stick with it. No plan, no diet, no fitness regimen, no goals can ever work if you don’t stick to the plan. Document every step of your process and who may be involved. Make note of any approvals needed and who has authority. You will also need to inform managers within your office of the payroll process and any changes in policy (or give them a friendly reminder of the policies in place). Encouraging managers to stick with the process will help you and your team in the long run.

    Integrate HR & Payroll

    HR and payroll are closely connected—why not integrate their systems to minimize errors and maximize communication and efficiency? Integrate systems where you can and make things easier for you and your team. With an integrated Human Resources management system, you can have time and attendance, payroll, ACA compliance management, and core HR all in one place.

  • 8 Practices for a Productive Payroll Process

    Efficient payroll management is a cornerstone of smooth business operations. When payroll is done right, it builds trust with employees, maintains compliance, and reduces costly errors. Here are eight practical strategies to streamline your payroll process and make it more productive.

    1. Automate Your Payroll System

    Why It Matters:

    Manual payroll processing is time-consuming, prone to human error, and leaves your business vulnerable to compliance issues. Automating payroll not only ensures accurate calculations but also reduces the administrative burden, allowing you to focus on other critical business tasks. Automated systems are also better equipped to handle complexities such as tax regulations and benefit deductions seamlessly.

    How to Do It:

    • Use cloud-based payroll software for easy access and integration with other business tools.
    • Set up automated tax calculations and direct deposits.
    • Regularly update the software to align with new regulations.

    2. Implement Time Tracking Tools

    Why It Matters:

    Accurate time tracking is essential for ensuring employees are paid correctly for their work hours, including overtime. Misreported hours can lead to payroll discrepancies, employee dissatisfaction, and even potential legal issues. Digital time tracking systems provide precise data, improving payroll accuracy and compliance.

    How to Do It:

    • Invest in digital time tracking systems to record employee hours accurately.
    • Integrate time tracking with your payroll system to avoid manual entry errors.
    • Provide employees access to their time records for transparency.

    3. Regularly Audit Your Payroll Process

    Why It Matters:

    Payroll audits are critical for identifying inefficiencies, compliance gaps, and potential fraud. Regular audits not only safeguard your company from penalties but also enhance financial accuracy, keeping both employees and regulatory authorities satisfied. Audits also help uncover any recurring errors, allowing you to fine-tune your processes.

    How to Do It:

    • Conduct quarterly audits of payroll records and processes.
    • Use payroll reports to cross-check employee pay, tax withholdings, and benefits.
    • Address discrepancies immediately to avoid compounding errors.

    4. Establish Clear Payroll Policies

    Why It Matters:

    Clear payroll policies minimize confusion, align employee expectations, and provide a framework for consistent payroll processing. Without clear policies, payroll errors, miscommunication, and dissatisfaction can arise, undermining trust within the organization. A well-documented policy ensures compliance and fosters employee confidence.

    How to Do It:

    • Create a payroll handbook outlining payment schedules, deductions, and overtime rules.
    • Communicate policies clearly during employee onboarding.
    • Update policies as regulations or company needs change.

    5. Stay Updated on Compliance Regulations

    Why It Matters:

    Payroll compliance is a legal necessity. Failure to adhere to federal and state laws can result in fines, audits, and reputational damage. Staying updated ensures your payroll process meets all requirements, including minimum wage laws, overtime regulations, and tax obligations. Being proactive helps prevent costly errors.

    How to Do It:

    • Subscribe to updates from the IRS and state labor departments.
    • Train your payroll team on relevant laws, including overtime and tax regulations.
    • Use payroll software that automatically adjusts for compliance requirements.

    6. Optimize Employee Self-Service Portals

    Why It Matters:

    Self-service portals enhance transparency and empower employees to manage their payroll information, such as tax withholdings and personal details. This reduces administrative workload, speeds up issue resolution, and boosts employee satisfaction. A well-designed portal also enhances trust in your payroll process.

    How to Do It:

    • Provide a portal where employees can update personal information, view pay stubs, and manage tax withholdings.
    • Ensure the portal is user-friendly and secure.
    • Offer training to help employees navigate the portal effectively.

    7. Create a Payroll Calendar

    Why It Matters:

    A payroll calendar streamlines planning, ensures deadlines are met, and reduces the risk of errors caused by last-minute processing. It helps your team stay organized, ensuring payroll tax filings and W-2 distributions are completed on time. This minimizes compliance risks and ensures employee trust in your system.

    How to Do It:

    • Plan out payroll cycles, tax filing deadlines, and W-2 distribution dates at the start of the year.
    • Share the calendar with your payroll team and relevant departments.
    • Use reminders to stay ahead of critical dates.

    8. Communicate Proactively with Employees

    Why It Matters:

    Proactive communication builds trust, resolves payroll-related concerns quickly, and prevents misunderstandings. Employees value transparency, especially when it comes to sensitive issues like pay and deductions. Open communication reduces frustration and creates a collaborative work environment.

    How to Do It:

    • Notify employees of upcoming changes to payroll processes or tax laws.
    • Respond quickly to payroll inquiries to address concerns.
    • Hold regular meetings to review payroll-related updates and answer questions.

    Final Thoughts:

    A productive payroll process is built on automation, transparency, and compliance. By adopting these eight practices, businesses can streamline operations, reduce errors, and enhance employee satisfaction. Implementing these strategies not only saves time and money but also fosters a trustworthy and efficient workplace environment.

  • The Most Common Payroll Errors and How to Avoid Them

    Payroll management mistakes can feel like a ticking time bomb for employees and business owners alike. If you’re secretly googling how to fix payroll issues without alerting your boss, you’ve come to the right place. This guide not only lays out the most common payroll errors but also equips you with strategies to address them discreetly and effectively.

    1. Misclassifying Employees

    What Happens:

    Mixing up contractors and employees can result in back taxes, legal penalties, and a lot of sleepless nights.

    Example:

    A marketing assistant was wrongly classified as a contractor. When the IRS investigated, the employer faced a $20,000 penalty, and the assistant’s taxes became a mess. A quick anonymous consultation with an HR expert could have avoided this costly mistake.

    How to Avoid:

    • Familiarize yourself with federal and state laws differentiating contractors from employees.
    • Use classification tools to double-check your status or consult anonymously with an HR advisor.
    • Keep an updated checklist of your job duties and contract terms for quick verification.

    2. Failing to Keep Accurate Records

    What Happens:

    Missing hours or incomplete documentation? These errors can cause paycheck disputes and compliance headaches.

    Example:

    An employee discovered their overtime hours had not been logged correctly for months. By the time it was resolved, they had lost hundreds of dollars. Had the company used real-time tracking software, the oversight wouldn’t have occurred.

    How to Avoid:

    • Invest in payroll software that offers real-time tracking and self-service portals for employees.
    • Keep copies of pay stubs, timesheets, and tax forms—for at least three years—just in case.
    • Conduct low-key audits of your own pay history to ensure everything lines up.

    3. Missing Payroll Deadlines

    What Happens:

    Late payments can lead to bounced checks, trust issues, and potential fines.

    Example:

    A small business owner forgot to process payroll during a vacation, leaving employees unpaid for a week. This led to a mass walkout and permanent damage to the company’s reputation.

    How to Avoid:

    • Automate your payroll dates and set up SMS or email reminders.
    • Consider using payroll apps that let employees receive funds early.
    • Make sure your direct deposit info is always up to date.

    4. Incorrect Tax Withholding

    What Happens:

    Under-withholding taxes might feel like a temporary win, but it can lead to massive year-end bills or IRS penalties.

    Example:

    A newly married employee didn’t update their W-4, leading to under-withholding. They owed $3,000 at tax time and had to take out a loan to cover the shortfall.

    How to Avoid:

    • Use free online tax withholding calculators to verify your deductions.
    • Update your W-4 form every time your financial situation changes.
    • Ask payroll providers about anonymous withholding reviews if you suspect errors.

    5. Overtime Miscalculations

    What Happens:

    Not getting paid for those extra hours? It’s a common mistake that could land your employer in hot water.

    Example:

    A restaurant worker regularly put in extra hours, but their manager miscalculated overtime pay. The worker eventually sued and won, costing the business thousands in legal fees.

    How to Avoid:

    • Track your hours independently using apps or spreadsheets.
    • Cross-reference your paycheck with overtime laws applicable in your state.
    • Push for automated systems in your workplace that calculate overtime accurately.

    6. Ignoring Wage Garnishments

    What Happens:

    Mistakes in garnishments can lead to compliance issues and additional stress for employees.

    Example:

    A software engineer’s wages were garnished for a debt they had already paid off, due to a clerical error. Resolving the issue took months and caused immense stress.

    How to Avoid:

    • Verify garnishment deductions against court orders or agency instructions.
    • Request transparency and regular updates about any garnishments on your paycheck.
    • Suggest switching to payroll systems that handle garnishments automatically and confidentially.

    7. Lack of Backup Systems

    What Happens:

    System crashes, data breaches, or lost records can mean missed paychecks and chaos.

    Example:

    A retail chain’s payroll software crashed, delaying paychecks for over a week. Many employees couldn’t pay rent on time, leading to high turnover.

    How to Avoid:

    • Advocate for secure cloud-based payroll solutions at your workplace.
    • Regularly download and save your pay stubs and W-2 forms in secure locations.
    • Encourage your employer to implement disaster recovery plans for payroll systems.

    Final Thoughts:

    Payroll errors don’t just impact businesses; they disrupt employees’ lives. From missed paychecks to incorrect tax withholdings, these issues can spiral out of control if not addressed promptly. By staying informed and using modern tools, you can avoid these pitfalls and ensure smooth payroll operations.

  • Your Ultimate Guide to Choosing the Best Payroll Provider

    In the market for a new payroll provider? Ready to move to the cloud?

    You’ve got some research ahead of you. You’ll want to choose the best payroll service for your company: one that fits your needs and your company culture. You want a payroll provider you can trust with confidential information and rely on for support. You want a payroll service that can streamline your efforts and deliver results.

    Consider the benefits of a payroll system:

    • Save time. Automated services do so much of the work for you. They keep you up-to-date with continuous processing and insightful reports. Additionally, employee self-service features allow employees to do a lot of the onboarding and upkeep that an employer or payroll manager may have otherwise had to do.
    • Save money. Most payroll software systems cost less than hiring a full-time bookkeeper.
    • Reduce errors. Payroll software service reduces the opportunity for people to make manual errors. Payroll can get complicated. Be confident the automated service processes correct information and minimizes risk for things like tax noncompliance.
    • Access it anywhere. Cloud-based payroll means you can access payroll information anytime, anywhere—not just at your desk.

    What’s the next step in selecting a payroll provider? Time to start a payroll checklist.

    Make a Payroll Checklist.

    Before you go on your search for the perfect payroll provider, identify what’s on your company’s payroll checklist for software. Map out your organization’s needs first. That way, when you speak with payroll providers you know what questions to ask and which answers to look for. Then bring an open mind for options that you may not have thought of but could benefit your business. Understand your company first before you try to understand a payroll provider.

    Learn more about which providers may be best by hearing from others. 

    After you’ve put together your own payroll checklist, start your search.

    • Get recommendations from friends and colleagues in your field.
    • Read about different payroll providers on software review sites like G2 Crowd.
    • Hear what LinkedIn professionals working with similar company size and type have to say about their experiences.
    • Make a list of payroll providers that seem to meet your payroll checklist.

    Understand which services you need and what providers offer

    Of course, when you’re looking for a payroll provider, you want to know which services the providers offer. Consider your last payroll audit to identify where some of your top challenges lie. If you’ve already put together your list of payroll needs and wants, you can compare the two lists. See if a particular payroll provider can be the right fit. But first, you need to understand the services many providers may offer and what they mean.

    → Ready to save time on payroll and deliver the perfect paycheck every time? Get the guide.

    Here are some offered services to consider looking for when selecting a payroll provider.

    • Continuous payroll processing: Automatically run payroll and calculate how much each employee earned for the pay period. Access this payroll data at any time.
    • Real-time calculations: Know exactly what each employee is doing and how much they’re getting paid for it.
    • Versatile pay rules engine: Determine pay for regular and overtime hours. Should support various scenarios including shift differentials, order of importance, location, etc.
    • Paychecks & direct deposit: Many payroll providers will print paychecks. A great provider will offer direct deposit services to deposit paychecks right into employee bank accounts. This saves the hassle of printing, stuffing, and furnishing checks—it saves paper too.
    • 401(k) plan administration: Setup and track employee retirement plans.
    • Adjustment management: Manage bonuses, reimbursements, commissions, tips, and other garnishments.
    • Tax filing services: These services should include withholding employee taxes and issuing W-2 and 1099 forms to employees. Service may also include filing quarterly payroll tax reports and paying appropriate state and federal taxes.
    • Alerts: Know when an employee is approaching overtime hours or benefits eligibility. Receive notification of any flagged issues in the system.
    • New hire reports: Some states require employers to report information on new employees. Many payroll services take care of this report for you.
    • Automated tax table updates: Ensure the accuracy of employee withholdings.
    • Analysis reports: Get insight and visibility into your organization with dashboards, reports, and support tools.
    • PTO requests: Keep track of paid time off and allow for employers to approve or deny employee requests for days off.
    • Web-based system: Get all these services online anywhere, anytime. Payroll isn’t limited to the office anymore.

    Know which questions to ask when selecting a payroll provider.

    Now you know what to look for and have an idea of which providers may be the best fit for your organization. The next step is to interview your payroll provider prospects. Be sure you’re getting everything you need from the payroll provider you choose.

    Are any other HR services included? (Core HR, Time & Attendance, Benefits Administration, Scheduling, etc)

    Ask the payroll provider about the other services included in the software or program. Is it a stand alone payroll service or does it include human resources functions as well? You’ll want to know exactly what you’re paying for in a system. This is where you will want to identify what is best for your organization—siloed systems or an integrated platform.

    With best-of-breed systems, you have the ability to pick and choose which system you want to use for each service—time & attendance, payroll, core HR, etc. However, this does mean dealing with multiple vendors and keeping up with integrations among different systems (if available).

    With an integrated system, you can manage everything for your workforce in one system rather than switching between services and syncing those systems. Because everything is part of the same system, you pay one vendor, get support from a central provider, and keep everything for your employees in one place.

    Which payroll taxes do you include in your service?

    As a payroll manager, taxes are a huge part of your job. You need to know what the payroll system includes before signing up. Not only that, but your company can suffer major penalties if taxes aren’t properly handled.

    See how much the payroll provider will take care and what’s left to you. Does the payroll provider generate required tax forms for your business and its employees and contractors ( i.e., W-2s and 1099s)? Will the provider manage compliance for state and federal taxes? What is available for ACA reporting with forms 1094-C and 1095-C?

    Make a list of the tax services you need. Find out which of those tax services come with the system and if any customization options or add-ons are available.

    What is your pricing structure?

    You want to know exactly how you the vendor will be you and how often. Many cloud-based payroll services offer monthly subscriptions for a flat fee. Additional fees for extra levels or services may incur. Many vendors also use a price-per-employee structure.

    What kinds of insights are available through reports and dashboards?

    Having visibility into your employees and your business is vital to decision-making. Does a payroll provider offer service with real-time visibility for up-to-the-minute data on employees? Having data in your hands enables you to make decisions and keep unnecessary spending from hurting your bottom line.
    You may want your own reports or need to provide a report for a manager. Dashboards rich with information can help you accomplish that. Also, look for dashboards and reports you can easily tailor to fit your business needs and preferences.

    Can I access your payroll services on any device?

    Being chained to your desktop is no way to track payroll. Be more effective when you can access your payroll anytime, anyplace. Cloud-based payroll providers should have platforms that are easily accessible on any device. Look for a provider who offers mobile services without sacrificing a satisfying customer experience.

    Is your payroll system customizable?

    Your business may have some unique needs or wants. You will want a payroll provider who can be flexible and help meet those needs. Look for payroll software that is extensible with its API. That way, you can customize your platform for any special needs or requirements.

    Is there a self-service option for employees?

    Delegate HR and payroll tasks to employees with a self-service feature of your system. This allows employees to access their profiles, pay statements, schedules, PTO, and more—all on their own (without bugging you). They can also complete tax forms and update any changes in contact info. This makes onboarding and upkeep a lot simpler for you.

    For example, with electronic onboarding, a new hire can complete all of his or her paperwork right in the employee portal before they ever arrive on the first day of work.

    Is your payroll system complicated or easy to use?

    You don’t want to pay for software only to spend countless hours trying to understand how to operate it. Ask the payroll provider for a demo so you can see how intuitive the system and its navigation features are. How do you set up the system? Will someone from your company walk me through it?

    The setup process can be the hardest part of a new system. Does the payroll provider offer onboarding services to help you get started with the system? Do they offer tutorials to help you learn how to use the system? How do they keep customers educated on system updates?

    Look for a provider who will help you get onboarded with the payroll system and be there for you whenever you get stuck.

    What kind of customer support do you offer?

    This is a big one. If you’re relying on a service to do so much for your company, you want to rely on their customer support to help take of your needs. In G2 Crowd’s Fall 2015 Payroll Grid Report, of all products reviewed, every one had at least one or more reviews dealing specifically with customer support. Support is important to users.

    Many companies will offer big promises. They claim their customer service sets them apart, so get into some specifics here. Determine what level of support your company will need to help you choose the best service option for you.

    It’s important to know things like if you call, will you speak to a robot or an actual human being? Will you speak to the same person every time or to the “next available person”? Do they offer support during business hours only or 24 hours a day? Can you get online support through a chat service or via email?

    Find out if a support service is included in the system or if they provide different levels of customer support for additional costs. Some payroll systems may provide free email support while phone support comes with a fee. Other payroll vendors offer a 30-day trial period of free support before your paid service begins.

    Read reviews from users to learn about their customer service experience. Check out how payroll providers rank on G2 Crowd’s Highest Rated Satisfaction in Payroll. 

    How secure is your service? Where is your data center and what kind of security do you have?

    Handling payroll requires handling a lot of confidential information. From social security numbers to salaries and tax information, you need to be confident that this info is safe and secure. Ask about the provider’s encryption standards, SSL certificates, and authentication steps.

    You may also want to ask the payroll provider how they plan to protect your company’s data stored that is on their servers from everything from theft to a natural disaster.

    Can your system scale to my business needs?

    If you’ve got a growing business, you want a payroll provider that can grow with you. You don’t want to find yourself looking for yet another payroll provider in a few years. Find out how the system can grow with you and if there are options to change your plans as you grow.

    Which industries do you specialize in?

    It never hurts for your payroll provider to have a niche in your industry. Many cater to a certain size of business, but some even specialize in certain fields. For example, non-profit organizations have special tax regulations that a provider should be familiar with. With this, the payroll provider can bring that much more experience to the table for handling your payroll.

    Choosing the right payroll provider can seem like a daunting task. Use this guide to help you ask the right questions and find the right answers for your organization.

  • How to Choose the Best Payroll Software

    If you’re striving for payroll efficiency, manual processes should be a thing of the past. Manual payroll is prone to errors, time-consuming, and incapable of keeping up with the fast-paced demands of modern business. The good news? Streamlining your payroll process is now easier than ever with the right payroll software.

    Choosing payroll software tailored to your organization is essential. Whether you’re selecting software for the first time or upgrading to meet evolving needs, certain considerations should guide your decision-making. Below is a detailed checklist to help you evaluate your options and choose payroll software that meets your unique requirements.

    Determine What Payroll Software Best Fits Your Business

    Every business is different. Factors like industry, company size, and employee classifications significantly impact payroll software requirements. To help you make an informed choice, we’ve outlined key areas to consider:

    Company Size

    Small businesses and large corporations often have very different payroll needs. Ensure the software you choose is scalable and appropriate for your workforce:

    • Can the software handle the complexity of a large organization?
    • Will a small business avoid paying for unnecessary features?
    • Does the solution align with your budget and operational goals?

    Choosing software that specializes in your business size prevents overpaying for unused functionality or dealing with limitations as your company scales.

    Payment Structure

    Your pay structure dictates how employees are compensated. When evaluating payroll software, consider:

    • The ratio of salaried to hourly employees in your organization.
    • Support for commission-based roles and pay rules for overtime calculations.
    • Automation for calculating different pay structures, including bonuses and incentives.

    Look for systems with robust pay rules engines to ensure accurate calculations for regular, overtime, and special payments.

    Payment Delivery

    Delivery methods are just as important as payment calculations. Does the software support your preferred options? These could include:

    • Direct deposit for seamless payments.
    • Printed checks for traditional payroll processing.
    • Payroll cards for employees without bank accounts.

    Ensure the solution aligns with how your employees prefer to receive their compensation.

    Multiple Locations

    If your business operates across multiple locations or employs remote workers, you need software that can accommodate these scenarios:

    • Does the software support tracking for field employees and remote check-ins?
    • Can it manage payroll for employees in multiple states or countries?
    • Are time-tracking and attendance features integrated for remote teams?

    Location-specific functionality ensures payroll managers can track and manage time effectively, no matter where employees work.

    Features to Add to Your Payroll Software Checklist

    Customization Options

    Every organization has unique requirements. Customizable software allows you to tailor dashboards, reports, and workflows to suit your specific needs:

    • Are customizable dashboards available for real-time tracking?
    • Can managers access tailored reports to monitor payroll trends?

    This flexibility lets you optimize the software to your business processes.

    Scalability for Growth

    As your business grows, your payroll needs will expand. Ensure your payroll system is built to scale:

    • Does the software accommodate additional employees or departments?
    • Can it handle more complex payroll scenarios as you expand globally?

    Scalable software saves time and money by growing with your organization.

    Cloud-Based Accessibility

    The shift to cloud-based solutions has made payroll software more accessible and flexible:

    • Can you access payroll data securely from any device?
    • Does the software include a mobile platform for managing payroll on the go?

    Cloud-based services ensure that payroll operations continue seamlessly, even in remote or hybrid work setups.

    Suite or Standalone Solutions

    Consider whether you need payroll software as part of an integrated suite or a standalone tool:

    • Suite Solutions: Combine payroll with HR services, performance management, and time tracking in one platform.
    • Standalone Software: Focuses solely on payroll, often offering integration options for other systems.

    For companies with specialized reporting needs, software with open API capabilities allows easy integration with existing tools.

    Employee Self-Service

    Imagine employees managing their own pay and benefits inquiries without overburdening HR:

    • Does the software offer self-service portals?
    • Can employees access pay stubs, PTO balances, and tax forms independently?

    Self-service features save time and encourage employee empowerment.

    Alerts and Notifications

    Proactive alerts can streamline payroll by notifying you of flagged accounts, errors, or compliance issues:

    • Does the software include notifications for overtime thresholds or benefits eligibility?
    • Are ACA compliance modules available for timely updates?

    Alerts help maintain accuracy and compliance, reducing the risk of penalties.

    Tax Management

    Tax compliance is critical for any payroll system:

    • Does the software include built-in tax data for federal, state, and local levels?
    • Are automated tax table updates provided to ensure accuracy?

    Systems with automated tax capabilities ensure employee withholdings are correct and simplify reporting.

    Lifecycle Management

    Streamlining payroll and HR functions boosts productivity. Look for software that includes:

    • Comprehensive HR services to manage employee lifecycle tasks.
    • Tools for hiring, onboarding, and retirement processes.

    Integrated systems provide end-to-end management that aligns HR and payroll functions seamlessly.

    Additional Modules

    Some businesses require specific features beyond standard payroll functionalities. Look for software that offers:

    • Add-ons for ACA compliance, performance tracking, or other specialized needs.
    • Modular options to pay for only what your business requires.

    These upgrades ensure your payroll software is perfectly aligned with your operations.

    Final Thoughts

    The right payroll software is critical for productivity, compliance, and overall success. By using this payroll checklist, you can identify the software features and capabilities that best match your organization’s unique needs. From scalability and customization to tax management and self-service options, choosing the right software allows you to streamline operations and focus on growing your business.

  • How to Avoid Payroll Fraud and Secure Employee Data

    Payroll fraud is a serious issue that can disrupt operations, harm employee trust, and result in financial losses. From unauthorized changes in payroll records to data breaches, the risks are significant. However, by implementing the right strategies and leveraging modern technology, businesses can safeguard their payroll systems and protect sensitive employee information.

    Understanding Payroll Fraud

    Payroll fraud occurs when individuals manipulate payroll systems for personal gain. It can manifest in various forms, including falsified hours, ghost employees, or unauthorized salary changes. Small and medium-sized businesses are particularly vulnerable due to limited resources and oversight.

    Key Statistics:

    • Payroll fraud affects approximately 27% of all businesses, with the average scheme lasting over 30 months before detection.
    • The Association of Certified Fraud Examiners (ACFE) reports that payroll fraud accounts for 8.5% of occupational fraud cases worldwide.

    The Cost of Securing Payroll Systems

    The cost to secure payroll systems has grown significantly in recent years. Do you remember when companies relied on proprietary email solutions and struggled to enhance email security and storage capacity? Managing these systems alongside payroll processes became increasingly untenable due to the resources and expertise required.

    Today, cloud-based solutions have transformed this landscape, offering less expensive options for data storage while integrating advanced security applications. Most payroll service providers now leverage cloud technology to reduce costs and improve efficiency. However, this shift has introduced new challenges around data privacy and security that businesses must address.

    Leveraging Payroll Technology

    Modern payroll software includes fraud prevention features such as automated alerts for unusual activity and audit trails. These systems can flag irregularities and reduce reliance on manual processes. Advanced technologies like AI and machine learning enhance the ability to detect anomalies in payroll data and prevent fraud before it escalates.

    Key Features to Look For:

    • Role-based access controls to limit user permissions.
    • Built-in compliance tools to ensure adherence to labor laws.
    • Real-time monitoring to detect anomalies in payroll data.

    Adapting to New Security Protocols

    With new processes and technology come new security requirements. Using third-party payroll providers means businesses must adapt to evolving protocols and learn new security frameworks. Every organization under consideration should provide a detailed security policy that includes:

    • Protection measures against unauthorized data access.
    • Encryption protocols for safeguarding sensitive information.
    • Strategies for securing networks, endpoints, and physical environments.
    • Evidence that their subcontractors adhere to stringent security standards.
    • Regular independent security assessments and credentialed audit reporting.

    The American Institute of Certified Public Accountants (AICPA) plays a significant role in certifying payroll service providers. The SOC 2, Type II certification, for example, confirms that a provider’s controls are audited over time to ensure consistent effectiveness. Similarly, certifications like ISO 27001:2013 ensure adherence to global standards for information security management, including the protection of payroll data.

    The Role of GDPR and Global Compliance

    The General Data Protection Regulation (GDPR) has redefined how organizations worldwide handle employee data. While primarily a European standard, its principles have influenced U.S. companies dealing with cross-border transactions. GDPR demands transparency in data processing, strict privacy safeguards, and clear consent for using personal information.

    Under GDPR, even using data for unintended purposes can constitute a breach, leading to severe fines. As global interactions increase, businesses must adopt GDPR principles, particularly when processing payroll data for employees in multiple regions.

    Emerging Security Challenges

    The evolving threat landscape means businesses must remain vigilant against techniques like phishing scams, which account for a significant percentage of data breaches. Leveraging third-party applications can improve efficiency, but only if these providers demonstrate robust security practices. Comprehensive security measures, combined with regular staff training to recognize social engineering tactics, are critical to preventing payroll fraud.

    The Future of Securing Payroll Data

    Innovations in payroll technology continue to enhance security. Biometric authentication, blockchain for tamper-proof payroll records, and AI-powered fraud detection systems are leading solutions for mitigating risks. Businesses should prioritize these technologies to stay ahead of potential threats.

    Conclusion

    Payroll fraud and data security require constant vigilance and adaptation to new threats and regulations. By leveraging cloud-based solutions, adhering to global compliance standards, and adopting advanced security technologies, businesses can safeguard their payroll systems effectively. Partnering with certified providers and fostering a culture of security awareness can prevent fraud and protect employee trust in the long term.

  • 7 Reasons You Should Outsource Payroll

    Why Outsourcing Payroll Makes Sense for Your Business

    Managing payroll in-house may seem straightforward, but it can quickly become a complex and time-consuming process as your business grows. From navigating ever-changing tax regulations to ensuring accurate employee payments, the demands of payroll can overwhelm even the most experienced teams. Outsourcing payroll offers an efficient solution that saves time, reduces errors, and allows your business to focus on strategic growth. Here are the key reasons why outsourcing payroll is a smart move for businesses of all sizes.

    Improved Accuracy and Compliance

    One of the most significant advantages of outsourcing payroll is the assurance of accuracy. Payroll service providers are experts in navigating federal, state, and local tax laws, which can change frequently. This expertise minimizes the risk of noncompliance, which can result in penalties, audits, or even legal action.

    By outsourcing payroll, you gain access to systems that ensure:

    • Precise tax calculations and timely filings.
    • Automatic updates to accommodate new tax regulations.
    • Detailed compliance tracking to satisfy audit requirements.

    Inaccurate payroll management not only affects employees’ trust but also exposes your business to financial liabilities. A professional payroll provider ensures error-free calculations and reduces compliance risks, giving you peace of mind.

    Time Savings for Core Business Activities

    Processing payroll in-house involves multiple repetitive tasks, including calculating wages, managing deductions, and filing taxes. These tasks consume valuable time that could be spent on strategic initiatives like business development, employee training, or customer acquisition.

    Outsourcing payroll frees up internal resources by:

    • Automating time-consuming processes.
    • Eliminating manual data entry errors.
    • Handling complex calculations for bonuses, overtime, and benefits.

    This allows your HR and finance teams to focus on activities that drive business growth instead of administrative tasks.

    Access to Advanced Technology

    Modern payroll providers leverage advanced technology to deliver superior services. Cloud-based platforms allow you to manage payroll data securely from anywhere, providing flexibility and real-time insights. Many providers also offer additional features like integrated HR tools and employee self-service portals, which streamline operations further.

    Key technological benefits include:

    • Automated workflows that minimize manual intervention.
    • Predictive analytics for forecasting payroll costs.
    • Secure data storage with advanced encryption.

    These technological capabilities not only enhance efficiency but also future-proof your payroll management as your business evolves.

    Cost Efficiency

    While managing payroll in-house may appear cost-effective initially, hidden expenses can add up. These include software licenses, compliance training, penalties for errors, and the cost of dedicating internal staff to payroll tasks. Outsourcing payroll consolidates these expenses into a predictable monthly fee, often saving your business money in the long run.

    When you outsource payroll, you’re essentially paying for expertise and advanced tools that would otherwise require significant investment. This cost-effective approach allows you to allocate funds to areas with a higher return on investment, such as marketing or product development.

    Enhanced Data Security

    Payroll data is highly sensitive, containing employee Social Security numbers, bank account details, and salary information. In-house payroll systems can be vulnerable to breaches if not adequately secured. Payroll providers prioritize data security, employing cutting-edge technologies to protect your information.

    Top security measures include:

    • Multi-factor authentication to prevent unauthorized access.
    • Regular audits to identify and address vulnerabilities.
    • Compliance with international security standards like SOC 2 and ISO 27001.

    By outsourcing payroll, you reduce the risk of data breaches and ensure your employees’ sensitive information remains confidential.

    Flexibility and Scalability

    As your business grows, your payroll needs will evolve. Outsourcing payroll provides the flexibility to adapt to changes, whether you’re hiring more employees, expanding to new locations, or implementing complex compensation structures. Professional payroll providers offer scalable solutions that grow with your business, ensuring seamless operations regardless of size or complexity.

    Dedicated Expertise and Industry Knowledge

    Outsourcing payroll gives your business access to specialists who are up-to-date on the latest regulations, industry trends, and best practices. These professionals bring a wealth of knowledge that in-house teams might lack, especially in areas like compliance, multi-state payroll, or international employee payments. By leveraging their expertise, you reduce risks, ensure legal adherence, and gain a strategic advantage in payroll management.

    Final Thoughts

    Outsourcing payroll isn’t just about convenience; it’s about positioning your business for long-term success. By improving accuracy, saving time, leveraging advanced technology, and enhancing security, outsourcing allows you to focus on what matters most—growing your business. Whether you’re a small startup or a large corporation, outsourcing payroll can transform how you manage one of the most critical aspects of your operations.

  • How to Calculate Payroll: A Complete Step-by-Step Guide

    Starting a new business is full of challenges, even for the most experienced entrepreneurs. With so many moving parts, it’s common for some tasks to be set aside if they don’t seem immediately pressing. However, payroll is one area of operations that should never be overlooked.

    Understanding how to calculate payroll is essential for ensuring compliance with tax regulations, maintaining employee trust, and running a smooth operation. For many entrepreneurs, the payroll process might feel intimidating at first, but it doesn’t have to be. Below is a detailed guide to help you master payroll calculations and enhance your business operations.

    How to Calculate Payroll

    Much of the payroll process begins with calculating gross wages—whether hourly or salary—and then subtracting deductions and taxes from that amount to determine the final payment employees receive. While the specifics may vary, these general guidelines can help you streamline the process.

    Calculate Hourly Gross Wages

    Many businesses pay their staff hourly, making timekeeping an essential component of payroll management. Accurate tracking ensures correct compensation and identifies any changes like overtime or hazard pay. Here’s an example:

    • Regular Hours: An employee earning $15 per hour works 46 hours in one week.
      • 40 regular hours x $15/hour = $600
    • Overtime Hours: Overtime is typically calculated at 1.5 times the regular hourly rate.
      • 6 overtime hours x $22.50/hour = $135
    • Total Gross Pay: $600 + $135 = $735

    Calculate Salary Gross Wages

    For salaried employees, gross wage calculations depend on the annual salary and the employer’s chosen pay schedule. For example:

    • Annual Salary: $67,000
    • Pay Periods: If using a semimonthly schedule with 24 pay periods:
      • $67,000 / 24 = $2,791.67 gross pay per period

    This simplified calculation assumes no additional adjustments, such as bonuses or deductions.

    Account for Voluntary Deductions

    Many full-time employees receive benefits like health insurance or retirement contributions, which may be deducted from their gross pay. These deductions can be pre-tax or post-tax, depending on the benefit type.

    Examples of voluntary deductions include:

    • Health, dental, and vision insurance premiums.
    • 401(k) or other retirement plan contributions.
    • Flexible Spending Account (FSA) or Health Savings Account (HSA) contributions.

    Ensure these deductions are accurately applied according to the employee’s election before moving on to tax calculations.

    Subtract Necessary Taxes

    Taxes represent the most complex step in payroll calculations. Employers must withhold and remit a variety of federal, state, and local taxes, including:

    • Federal Income Tax: Calculated using IRS tax tables and dependent on the employee’s W-4 information.
    • FICA Taxes: Includes Social Security (6.2%) and Medicare (1.45%) contributions from both employees and employers.
    • State and Local Taxes: Varies by jurisdiction and may include income, disability, or unemployment taxes.

    For example, for an employee with $2,791.67 in gross pay:

    • Federal income tax withheld: $300 (estimated)
    • Social Security: $173 (6.2% of gross pay)
    • Medicare: $40.47 (1.45% of gross pay)
    • State tax: $100 (varies by location)
    • Net Pay: $2,791.67 – ($300 + $173 + $40.47 + $100) = $2,178.20

    Employers must also contribute their share of FICA taxes and unemployment insurance.

    Pay Your Employees

    After gross pay, deductions, and taxes are calculated, the next step is ensuring employees are paid accurately and on time. Whether using direct deposit, physical checks, or payroll cards, the method should be consistent and reliable. An efficient system minimizes delays and errors, maintaining employee trust and satisfaction.

    Automated payroll systems can streamline this step, ensuring timely payments and providing employees with easy access to their pay statements and tax documents.

    How Understanding Payroll Can Help Grow Your Business

    Efficient payroll management offers benefits beyond paying employees. By mastering payroll calculations, you can:

    • Optimize Staffing Decisions: Understand whether hourly or salary wages are more cost-effective for your business model.
    • Manage Budgets Effectively: Gain insight into how staffing costs affect your bottom line.
    • Avoid Costly Mistakes: Ensure compliance with tax laws and avoid penalties for errors or late payments.

    A clear understanding of payroll also helps you analyze the financial impact of new hires or role changes, ensuring every decision aligns with your business goals.

    Save Time and Reduce Stress with Payroll Solutions

    Managing payroll manually can be overwhelming, especially as your business grows. That’s why many businesses turn to payroll solutions that simplify the process and reduce the risk of errors. Whether you choose a simple payroll software or a comprehensive service provider, these solutions allow you to focus on core business activities while ensuring compliance and accuracy.

    Look for payroll solutions that offer:

    • Automated tax filing and reporting.
    • Direct deposit and employee self-service portals.
    • Real-time access to payroll data for informed decision-making.

    By outsourcing payroll tasks, you can save time, minimize stress, and ensure your employees are paid accurately and on time every pay period.

    Efficient payroll management is more than a necessity—it’s a key factor in your business’s success. By mastering payroll calculations and leveraging technology, you can create a seamless process that supports growth, compliance, and employee satisfaction.

  • ADP

    Just like Square Payroll and Gusto payroll, ADP is cloud-based—and similar to Square Pay, it also has an app. 

    Features

    Its core payroll functions of salaries, benefits, and payroll taxes are just as good as both Square Payroll and Gusto payroll.

    The basic plan gives you access to over 15 report types, as well as new-hire reporting. The interface allows for exporting to other applications such as QuickBooks, Xero, and Wave. 

    Unlike Square and Gusto, it has a wider variety of more complex payroll options. These are available with certain plans for larger and international companies in the ADP Vantage HCM software.

    Similar to Gusto, ADP also has a range of HR-related tools and services, such as an employee handbook wizard, up to 5 free background checks, HR forms, and more.

    Finally, as an additional benefit, ADP also has a nice time and attendance (clock in/out, hours worked) feature that syncs to payroll, as well as scheduling, performance, and productivity tools. 

    Best For: Larger businesses with more complex payroll

    If you have a larger business (100 employees or more), you may prefer ADP’s additional functions. ADP offers enhanced analytics that cover payroll, taxes, employee benefits, and garnishment payments.

    It also has a custom reporting option that may be useful for companies that want to do data analytics in Excel or export data to other software.

    The main drawback to ADP in its pricing structure…it’s expensive! My experience is that it’s more than double the cost of Gusto, and more than many of the other competing available options. I have also found that the web interface is not as user friendly as Gusto or Square.

    ADP Pricing

    ADP does not advertise prices on its website, as it charges a customized rate depending on your needs. But in my experience its much more expensive than both Gusto and Square.

    Square Payroll vs Gusto vs ADP: Which to Choose?

    When it comes to Square Payroll vs Gusto vs ADP and which to choose, the best solution will be the one that fits your business needs, size and finances. 

    (I know…thats a dumb wrap up)

    Well then, as mentioned above, I personally use Gusto for all my clients.

  • Does Your Payroll Violate the Davis-Bacon Act

    The Davis-Bacon Act (DBA) mandates that contractors and subcontractors pay prevailing wages to laborers and mechanics on federally funded construction projects exceeding $2,000. Non-compliance can lead to severe penalties, including contract termination and debarment from future federal contracts. Protecting your business starts with understanding these rules and avoiding common pitfalls.

    Understanding the Davis-Bacon Act

    Enacted in 1931, the DBA ensures fair compensation by requiring payment of locally prevailing wages, as determined by the U.S. Department of Labor (DOL). These rates are specified in wage determinations included in federal contracts. The Act applies to various construction activities, including alteration and repair of public buildings and works. Staying compliant ensures not only ethical practices but also long-term success in securing federal projects.

    Common Payroll Violations

    Violating the Davis-Bacon Act can be costly and damaging. Here are the most frequent mistakes contractors make:

    1. Incorrect Wage Classifications

    Misclassifying workers often results in underpayment. For example, if a laborer is incorrectly classified as an apprentice, they may be paid less than they are legally entitled to. Ensure each worker’s duties align with their job classification as outlined in the wage determination.

    2. Inadequate Fringe Benefits

    The DBA requires payment of both a base wage and fringe benefits. Failing to provide the correct fringe benefits or their cash equivalent constitutes a violation. For instance, if your project specifies health insurance as a fringe benefit, substituting it with a less valuable benefit could lead to penalties.

    3. Improper Overtime Payments

    Overtime must be paid at one and a half times the regular rate for hours worked beyond 40 in a week. Miscalculations in overtime pay often occur due to inconsistent time tracking. Use automated systems to reduce errors.

    4. Delayed Wage Payments

    The Act requires workers to be paid weekly. Delaying payments or changing the payment schedule without prior agreement violates DBA requirements. Prompt payments maintain trust and compliance.

    5. Incomplete Certified Payroll Reports

    Contractors are required to submit weekly certified payroll reports, such as Form WH-347, to the contracting agency. Incomplete or inaccurate reports are a common cause of non-compliance. Double-check all submissions to ensure accuracy.

    Ensuring Compliance

    To avoid penalties and maintain compliance with the Davis-Bacon Act, follow these best practices:

    Accurate Wage Determinations

    Regularly consult the DOL’s wage determinations for your project area. These rates can change, so staying up-to-date is essential for proper payroll management.

    Maintain Detailed Records

    Document everything, from timecards to pay stubs, and keep these records for at least three years. This documentation is crucial if you face an audit or compliance review.

    Train Your Staff

    Ensure your payroll and HR teams are well-versed in DBA requirements. Training sessions can prevent common errors and ensure everyone understands the importance of compliance.

    Use Certified Payroll Software

    Payroll software designed for certified projects can automate many compliance tasks. These tools can help with wage calculations, fringe benefit tracking, and certified payroll reporting, reducing the risk of human error.

    Recent Updates and Resources

    Keeping up with changes in regulations is vital. In August 2023, the DOL released a final rule updating DBA regulations. These updates affected prevailing wage determinations and compliance procedures. Contractors must familiarize themselves with these changes to remain compliant.

    The DOL also offers virtual seminars on prevailing wage laws. These sessions are an excellent resource for contractors who want to ensure their payroll systems align with federal standards. Regularly attending these seminars can keep you informed about evolving regulations.

    Practical Tips to Avoid Mistakes

    Improve Time Tracking Systems

    Accurate time tracking is critical for calculating wages and overtime. Invest in modern systems like biometric time clocks or mobile tracking apps. These tools can eliminate discrepancies and ensure all hours worked are accurately recorded.

    Communicate with Employees

    Transparency with your team goes a long way. Clearly explain wage classifications, fringe benefits, and overtime policies. This communication not only builds trust but also helps identify potential errors before they escalate.

    Conduct Regular Internal Audits

    Periodic reviews of your payroll process can uncover hidden issues. Compare payroll data with certified reports to identify discrepancies. Addressing these errors early can prevent larger compliance issues later.

    Conclusion

    Adhering to the Davis-Bacon Act is essential for contractors engaged in federally funded construction projects. By understanding common violations and implementing best practices, you can ensure compliance, avoid penalties, and protect your business’s reputation. Staying informed about updates and using the right tools can make compliance manageable, allowing you to focus on delivering quality work.

Payroll Payouts