Payroll processing is an arduous task of calculating the total remuneration of each employee. 

It may sound easy with this one-line explanation, but it involves:

  • Developing company pay policy for explaining benefits and leave, etc.
  • Defining payslip components such as basic pay, HRA, DA, LTA, etc.
  • Collecting time-sheet data and other payroll inputs like overtime, travel expenses, etc.
  • Collecting information from different departments, e.g., If there is any due pending that needs to be recovered from the employees.
  • Calculating payable salary after statutory and non-statutory deductions
  • Making employee salary
  • Depositing TDS, PF, and other dues to relevant authorities

Each of the above steps can have multiple steps further. 

For example, to collect the payroll input, you may contact different departments and ask them to submit relevant employee data such as travel expenses, overtime, meal dues, etc. Then, you need to sort it out at your end and make it error-free by cross-checking. 

Not just the above process, updating the latest information such as registering new employees and adding them to the payroll system, one-time payments, deductions, payment details, arrears, salary changes, etc., are additional tasks to calculate the payroll correctly. 

So, you can understand, if you have an in-house payroll team who relies on manual payroll methods, the process can be lengthy and time consuming. And, you cannot be sure of error-free payroll also. 

In this blog, you will get a concise checklist to streamline the payroll process that will help you avoid payroll errors and save money and time. 

Checklist to Streamline Payroll Process

The three stages of the payroll process are – Pre-payroll, payroll, and post-payroll. 

Pre-payroll checklist

For payroll setup

Payroll setup is a crucial phase of the payroll process to streamline your future payroll flow. The setup process can vary as per your company location. If you are hiring in India and have to set up payroll for your Indian employees, you must be aware of Indian labor laws and compliances. Therefore, the payroll setup document list may change as per the country. 

You will need the following documents to set up payroll if you are a U.S.-based company. 

  • Employer Identification Number
  • State and local tax number
  • Employee tax information ( Form W-4 for full-time employees)
  • Federal and state withholding accounts
  • Collect new employees’ information
    • Full Name 
    • Address
    • Employee category (full-time or contractor)
    • Social security number
    • Employee tax withholding information from Form W-4
    • Salary and benefits details
    • Bank details
    • Form I-9 to check eligibility to work in the U.S.

For the existing payroll system

If you want to streamline the existing payroll system

  • Review payroll policy and update

Payroll policies such as pay policy, benefits policy, attendance policy, etc., collectively impact payroll calculation. A clear and concise payroll policy approved by higher management is the first step to keeping payroll processes in flow. 

But, it is not a one-time task, any change in a country’s labor law or company’s internal policy influences payroll policy, so you may need to keep updating it every few months or years. 

  • Choose an automated payroll system

To streamline the payroll process, you must choose an automated payroll system. Automated systems help to integrate data, and process error-free payroll without delay. 

As per a study, 49% of U.S. workers will start looking for a new job if they face delayed paychecks more than twice. 

Delays and miscalculations increase employee turnover and unhappy employees and lead to errors in tax withholding and fines by the government. 

If you are using an automated system, you may not need to follow all the steps of this checklist as it will be cut down by payroll software. 

  • Automate employee enrollment 

You can automate employees’ enrollment in payroll for error-free data, especially when you have a large number of employees. The manual process has multiple steps, leading to more time consumption and errors. Furthermore, you can enable automatic status updates such as promotion, interdepartmental shifts, etc. 

  • Streamline employee data collection from different departments

Collecting information such as salary revision data, attendance sheets, etc., from different departments consumes a lot of time. It also includes a lot of back and forth conversations that can be chopped by using automatic integration features in payroll systems such as employee self-service portal, leave management, and time-sheet management.

You need to have the data below to process payroll for existing employees.

  • Salary and deduction updates
  • Benefits updates
  • Attendance entries
  • Missed punches
  • Vacation and sick leave
  • Adjustments to time
  • Payroll adjustments such as overtime, commission, bonus, correction, reimbursement, advance, and final payments for terminated employees
  • Validate the collected data

Once you collect the data, integrate it and validate it as per the payroll policy. You need to ensure that you do not miss out on any detail required to process payroll.

Payroll Checklist

  • Payroll Schedule

If you have to run payroll weekly or biweekly, it will surely consume more time and cost. Paying monthly on a fixed date is an excellent way to streamline the payroll. It may not be possible in the case of contractors and freelancers, but still, you can choose a fixed date for the same. 

  • Segregate payroll calculation as per employment type 

You would need to calculate the payroll separately based on the employees’ employment type as a tax deduction will vary for full-time compared to contractors. 

  • Payroll calculation

After validating data and segregating employees, you need to calculate the net payable amount for your employees after adjusting reimbursements, benefits, overtime, and tax deductions. 

  • Payment method

Choosing the most preferable and easy way to transfer salary is essential to keep your employees happy. Cash and paychecks methods of payment sometimes annoy your employees. Online bank transfer is quick and is the safest method to transfer salary. 

Post-payroll checklist

  • Statutory compliance

Whatever statutory deductions like TDS, ESI, or any other tax you deducted, you need to submit it to your respective government departments as per the regulations. 

  • Payroll accounting

You can either use an ERP system or maintain account books to keep a record of all payroll transactions. 

  • Distribute payslips: 

In some countries, it is mandatory to provide payslips to employees. Even if it is not compulsory, it is an excellent practice. Payslips must include information such as name, address, employee id, bank account number, salary paid, deductions, etc. You can also use payroll management software with an employee self-service portal, so that employees can get salary slips by themselves.