Step-by-Step Payroll Documentation Compliance Guide for HR Professionals

September 24, 20158:20 am2507 views

Documenting entire flow of the payroll process for each period, month and calendar quarter of the year is important for smooth functioning of HR operations. How to create an effective payroll compliance guide that actually gets implemented and used by HR professionals, to ease payroll management for large workforce.

While with the advent of technology, the payroll processing and management challenges have been addressed to a large extent with the help of software that automate the workings with appropriate calculation of leaves to save on time and costs incurred for hiring trained professionals.

Here’s a step-by-step guide culled from in-depth study about the industry to address challenges faced by HR managers when it comes to payroll management:

  • List all the activities performed by payroll employees and every form they fill in to smooth payroll operations. Each computer screen should be analysed and outputs should be reviewed for generating reports. It is also important to analyse and understand who gets the reports and why do they need these reports? Sometimes reports are automatically sent across to managers who don’t need irrelevant information for their business.
  • Word it right and write cogently. Your payroll document should encompass and cover all touch points critical to effective payroll management. The payroll compliance document should be well worded, concise, easy to read, easy to search and edit. When drafting payroll compliance document, it’s better to assume that your reader knows nothing and hence use simple short sentences that are easy to understand. Use flow chart and other graphics where necessary, to describe the process easily with screen shots.

See: Why do companies outsource payroll functions?

  • Do not forget to use hyperlinks. As a quality control measure, the payroll compliance document should be reviewed by your peers, employers and employees at work for any changes. The document made should contain a departmental and managerial review.
  • Your documentation is of no good, if the payroll compliance standards aren’t current and updated. Continuous updates are the key for well-documented payroll implementation guide with complete inclusion of the latest industry norms and standards.
  • Calculate reimbursements or payments made to third-parties for non-qualified moving expenses—meal expenses employees incurred while travelling; expenses related to house-hunting trips; and out-of-pocket expenses, including carpet cleaning, drapery installation, cable-TV and Internet hook-ups and drivers license and vehicle registration fees.
  • Break out taxable executive benefits and get input from the appropriate departments (e.g., Executive Compensation Committee) to track taxable payments to executives. Tax and post adjustments, as necessary should be included in the payroll compliance guide.
  • Create a worksheet to reconcile your state tax liability to state taxable wages. Also reconcile state taxes withheld to state taxes deposited. Plan holiday pay schedules by reminding managers of the deadlines for submitting time sheets.
  • Employers should offer room for wage garnishments. Payroll component can be accurately calculated with conscientious recordkeeping. This simplifies the wage garnishing process and saves the employer from the possibility of delinquency notices.
  • HR Professionals and Employers should identify and report fringe benefits offered to employees correctly. Some of the common fringe benefits such as health saving plans, cafeteria options, company-provided car, dependent care, education assistance, free parking, group-time life insurance, incentive stock options, outplacement, meals and lodging expenses etc, may or may not be taxable above certain thresholds. Herein the payroll compliance measures come to aid to derive at appropriate payroll management practices.

Plus a clean record of the company with tax agencies helps build organisation goodwill in the industry. This reputation is thereafter carried forward to community, vendors, employees and creditors – much like a credit score.

It is required by employers, human resource professionals and tax auditors to stay abreast of the payroll benefits, enrolment and compliance industry norms to ensure appropriate benefits are provided to all employees with equanimity. Now you can also outsource payroll to legal advisors and agencies to avoid costly penalties and inconveniences.

Also read: 2015 sees sharp declines in outsourcing payroll functions

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