Whether you’re a large company or a small business owner, manual payroll processing can be one of the biggest obstacles to running a business. Not only do you need to pay your employees fairly and promptly, but you have to comply with a complex set of tax laws, minimum wage laws, and other legal requirements along the way.
Payroll software can help you take the stress out of payday and simplify time tracking, record-keeping, and tax filing. Here’s how to use automation to streamline the payroll management process, reduce human error, and speed up the payroll cycle.
What Is the Payroll Management Process?
The payroll management process includes all of the steps involved in running payroll, from calculating employee wages to sending out paychecks. Historically, payroll was a manual process with physical paychecks, but as more and more businesses digitize and automate processes, it’s common to see digital payroll solutions instead.
Some companies have an in-house payroll system, while others choose to outsource payroll to a third-party payroll service provider. If you run payroll in-house, it’s usually overseen by your accounting team or human resources department.
Businesses are also responsible for withholding taxes from an employee’s paycheck and sending them to the IRS and other government agencies.
5 Steps to Efficient Payroll Administration
Efficient payroll administration can increase employee satisfaction by shortening the pay cycle and reducing the risk of compliance issues. Here are five steps to keep in mind as you streamline and automate the payroll management process.
1. Collect Employee Information
The payroll process starts with collecting employee information, including bank account or direct deposit details. Depending on their employment status, they may also need to fill out tax forms such as Form W-4 and provide their Social Security number.
Ideally, you’ll collect this from new hires during the employee onboarding process so you have it on file, but you may need to update it from time to time.
Make sure employees understand your payroll policies, such as your cutoff time for submitting timesheets if they want to get paid during the next payroll cycle.
2. Calculate Gross Pay
The next step is to calculate gross pay based on hours worked and other factors. Did the employee work overtime or use any of their paid time off? Multiply hours worked by their hourly rate to determine gross employee pay. Remember that the calculation will be different for salaried workers.
When you use an employee attendance tracker like Pulpstream, it’s easy to keep track of employee hours and monitor their accrued leave balance.
3. Subtract Payroll Deductions
Next, subtract payroll deductions to determine the employee’s net pay. This typically includes federal income tax withholding, as well as tax deductions for Social Security, Medicare, and the federal unemployment tax. Other deductions include:
- Voluntary deductions, such as health insurance premiums and retirement contributions
- Mandatory deductions, including child support, tax levies, and other wage garnishments
Along with federal payroll taxes, you may need to calculate additional state and local tax payments, such as paid family leave contributions.
4. Issue Payments and Pay Stubs
Once you’ve determined an employee’s net pay, you can pay them in the form of cash, check, or a direct deposit into their bank account. Of course, paper checks are on the decline, and many employees prefer the convenience of a direct deposit.
No matter how you issue payments, you’ll need to provide a payslip so employees can double-check their pay for accuracy and save it for their tax records. If you want to go paperless, you can provide a digital pay stub that employees can access online.
5. Maintain Payroll Records
The Fair Labor Standards Act (FLSA) requires employers to maintain payroll records for at least three years. In addition, you’ll need to provide end of year tax documents, such as W-2 forms, to your employees and 1099 forms to independent contractors.
Storing your payroll data securely in the cloud allows you to create payroll reports and run data analytics on metrics like overtime pay and shift differentials.
Benefits of Automated Payroll Management Software
Payroll management is an ongoing process that involves a lot of oversight and upkeep. Here’s how automating the payroll management process benefits your team.
Reduced Manual Errors
Instead of dealing with clunky spreadsheets and timesheets, automation can help you avoid mistakes and make more accurate payroll calculations. From gathering employee data in a central database to automatically generating payslips, automation eliminates time-consuming manual processes and reduces the need for manual data entry.
Faster Payroll Cycle
Payroll automation contributes to a faster payroll cycle by cutting down on the amount of manual effort that goes into each payroll run. Whether you have a weekly, bi-weekly, semi-monthly pay period, you can use payroll software to calculate employee wages faster and get money into employees’ bank accounts sooner.
Improved Compliance
As an employer, you’re obligated to comply with state and federal tax laws, labor laws, and record-keeping requirements. Payroll automation solutions help you keep track of accrued leave, family and medical leave, and other types of employee benefits.
Key Features of an Automated Payroll System
Payroll automation is just one type of human resources automation. Many payroll systems integrate with other HR tools, so you can build a comprehensive payroll management system. Here are just a few of the features you’ll need.
Time-Tracking
You can’t pay employees properly without tracking employee attendance. As more and more businesses do away with physical timesheets, it’s important to use a cloud-based time tracking system that integrates with your payroll management tools.
When you use a platform like Pulpstream, you can track attendance for remote, field, and in-person workers using a desktop, tablet, or smartphone app. Not only can you use this information to calculate wages, you can address attendance issues.
Leave of Absence Management
Wages and deductions aren’t the only items you’ll need to calculate. Employees are eligible for the Family and Medical Leave Act (FMLA) after they’ve performed 1,250 hours of work, and in some states, may accrue paid time off or sick leave.
Pulpstream’s leave management platform helps you track accrued leave balances, automatically approve or decline leave requests, and more. You can also use it to manage voluntary leave entitlements like personal leave and sabbaticals.
Employee Self-Service Portal
An employee self-service portal is a must if you want to go paperless and provide a digital employee experience. Employees can use it to view their pay stubs online, access end-of-year tax documents, and update their direct deposit details.
Pulpstream’s self-service portal allows you to collect tax forms and other documents with an automated onboarding process. Our cloud-based platform stores employee data securely and syncs it with other payroll management tools.
Streamline the Payroll Management Process with Pulpstream
Payroll management involves calculating employees’ wages, withholding income taxes and other deductions, and sending out paychecks or direct deposits. Whether you’re a large enterprise or a small business owner, you’ll need to comply with local, state, and federal tax laws and maintain payroll records for at least three years.
Pulpstream’s HR automation platform integrates with payroll processing tools like ADP and QuickBooks so you can create a seamless payroll management process without any code. From tracking employee attendance to storing employee data, Pulpstream helps you take charge of the payroll process and ensure HR compliance.
Get a demo today to see how Pulpstream can make a difference!
