According to a study by Sage no less than 35% of the time of an HR department is devoted to payroll alone. The 
tips in the paragraphs that follow not only maximize the payroll system efficiency but also prevent errors. So, whether you are an HR manager or a management student you will find them useful in your HR assignment.
Tip 1: Make the whole system a transparent one
An easy way to avoid accidental time theft, underpaid taxes, misclassifying employees, taxes that remain underpaid and other issues that are common to payrolls is to layout a pay policy in writing. Copies should be provided to all employees and should be posted prominently. The policy should enumerate:
- The classification of employees and the logic behind it. If you make mistakes while classifying employees in categories like non-exempt, exempt or contract you may land in trouble under laws that vary according to country and make yourself viable to audit or lawsuits.
- You should also specifically state the way that salaries, wages, raises and promotions are calculated, the payment procedure, the time when changes are made effective and the procedure followed by the company while dealing with mistakes in the payroll.
Tip 2: Prevent Manual Processes
If you are still stuck in calculating the payroll manually or in a spreadsheet then it is high time that you automate the process. According to estimates by the American Payroll Association the payroll systems that follow manual process lose from 1 to 8 percent of the total payroll. Increased automation results in more savings due to errors. Simple errors in maintaining occur all too often as they rely on human beings to calculate the relevant wages and transcribe wages and are also vulnerable to be manipulated by employees.
Tip 3: Make audits about your processes on a regular basis
Irrespective of whether you are making use of a system of manual time cards or one that is computerized the processes should be audited annually at least. Automated systems may also lead to errors due to the human element such as classification of the tax status of employees, or mistakes in increasing pay of an employee who was given a raise. Ensure that you correctly conduct all the processes and paperwork and double-check.
In the event that you use plug-in or add-ons to combine your payroll software with the system in place for checking the attendance and time system or even the accounting program be sure that the required data is properly relayed.
Tip 4: Avoid or Minimize Time Theft
Time theft refers to the time that employees intentionally make erroneous recording of their working hours, take unusually long breaks or spend their work time on activities are not related to work or use fraudulent means to check in while they are absent.
Biometric hardware that that uses fingerprints and the like to record time in office are a great way to prevent time theft.
Tip 5: Stay Updated
Tax and labor laws are subject to periodic revision and it is essential that you are abreast of all the latest changes. The software in use should be appropriately updated. Of particular interest should be the laws dealing with withholding taxes, unemployment taxes, withholding as child support and calculation of fringe benefit taxes.
Business payroll best practices are geared towards prevention of errors and frauds that are common in systems where the payroll is maintained manually. A third-party administrator or specialized software ensures better shape of the payroll. Irrespective of the process ensure that it is transparent and is audited at regular intervals.
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