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Consistently paying employees may seem like a mundane and obvious task, but serious consequences await the company that makes an error here. Payroll is simply too important to leave to the vagaries of instinct or feelings. Detailed, specific records of the company’s payroll processes eliminate the guesswork and heighten employees’ trust in the organization at large. Here’s what every payroll leader should know about documentation. 

The Necessity of Payroll Documentation 

Payroll is a critical but easy-to-overlook part of a business’s operations. More than perhaps anything else, the payroll team keeps the business operating smoothly by counting and distributing salaries across the board. However, because payroll is such a routine task, it’s easily taken for granted. Employee vacancies, salary discrepancies, and more can cause major problems without adequate preparation.

Documentation facilitates that preparation. One could even say that failure to document is failure to prepare. Keeping detailed records for all payroll activities offers several benefits — first and foremost, it gives you a place to look when one of your vital payroll team members goes missing.

Some of the other benefits of payroll documentation include: 

  • Avoiding untimely interruptions when one or more team members can’t fulfill their roles
  • Simplifying training procedures for new hires in the payroll department — rather than manually teaching them a convoluted process, managers can refer the new hire to procedures that are already documented
  • Establishing a comprehensive understanding of the payroll process and its most involved parties, such as the HR team 

Of course, knowing that the company must document its payroll processes isn’t the same thing as knowing how to achieve that. Let’s review some of the tools available for payroll documentation. 

Payroll Documentation 101

Designating a trusted team member as the payroll process owner will be the first step. This person will be responsible for the company’s payroll process governance, which — in simple terms — means they’re the one responsible for structuring and managing payroll data, as well as making it accessible to other stakeholders. A secure, centralized repository, such as SharePoint or Microsoft Teams, can fulfill this purpose. 

Understanding the architecture of the company’s payroll system is necessary. Team members should conduct an overview of the company’s payroll processes, looking for inefficiencies, identifying possible areas of improvement, and providing suggestions for improvement as needed. Once finished, that overview can be assembled in the form of a flow chart, a checklist, or some other visual aid. This allows the company to: 

  • Create standardized payroll procedures for every department
  • Maintain compliance with regional and national payroll regulations 
  • Find patterns in payroll data that could indicate a potential risk and mitigate that risk
  • Create a series of metrics or key performance indicators for enhancing payment-processing systems

Using a tool for capturing these process flows will be extremely helpful going forward. Feel free to experiment with different diagramming and visual workflow tools to see which one suits the company’s operations best. Some teams prefer Microsoft Word for its hierarchical listing capabilities, whereas others settle on a collaboration platform like Lucidchart or Microsoft Visio. Prioritize team collaboration and data sharing to make it easier to document and analyze payroll systems in the future. 

Lastly, payroll process workflows should be regularly audited for consistency, accuracy, and compliance measures. Although smaller companies might not have the resources needed to audit their payroll systems as often as larger companies do, a semi-regular audit is necessary. It can keep discrepancies or areas of concern from creeping in unnoticed, which is worth the extra time or resources committed to the audit. 

Knowing What to Document With Payroll

It’s not necessary, and not even desirable, to document each aspect of the payroll system. That would take an extraordinary amount of time, and the effort could drag teams away from mission-critical tasks. Just as with anything else in business, prioritizing what to document is the first step to effective documentation. 

Ask the payroll team to provide a comprehensive process inventory. This will include step-by-step descriptions of the most frequent and infrequent payroll tasks, as well as additional info about tasks that are indirectly related to payroll (think employee onboarding). This process inventory will become the nucleus of the company’s overall payroll documentation. 

Categorize the various payroll tasks according to their importance for the company. Some tasks are critical, but many are not. Managers can understand the difference simply by asking themselves which tasks would be challenging or even impossible to perform without certain team members actively participating. Although they bear the weight of the company on their shoulders, those employees can become unwitting anchors weighing down operations if they’re ever unexpectedly absent.

Managers should avoid “hidden knowledge” that can make payroll an esoteric process for anyone involved. Payroll employees should be transparent with the information in their heads and be willing to share it openly. This makes the company less reliant on any one person as a possible failure point, and it can simplify the payroll department’s hiring process in the future. 

Some of the most important things to prioritize with payroll documentation include: 

  • Reconciliations made for payroll records — it’s easy to forget about corrections made after the fact, but forgetting to document reconciliations can lead to major problems
  • Employee earnings and deductions carried forward from one payment period to the next
  • Tax calculations and withholdings made for each payment period
  • Detailed instructions for integrating new employees into the company’s payroll system
  • Approved leaves of absence, including their duration and any payment modifications made during the interval
  • Timekeeping procedures for each employee, including how and when attendance data is to be captured and its relevance to payroll calculations

Enhancing Payroll With Resourcing Edge

Payroll might seem boring on paper, but the effects of a single mistake will be apparent to all employees. Even if it doesn’t land the business in trouble with regulators, a critical error could damage the company’s internal reputation and employees’ confidence in their ability to get paid. For that reason, working with a team like Resourcing Edge may be just the solution that businesses need. 

Remember, employees simply want to get paid on time. Make sure it happens with Resourcing Edge’s payroll and tax administration team at your side.

Jami Beckwith

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