Managing payroll can be one of the most time-consuming and error-prone challenges facing owners of shift-based businesses and their staff. In fact, one survey revealed that companies have an average payroll accuracy rate of 80.15%.
With labor regulations and litigations on the rise, payroll errors can also be costly to the business, not to mention the effect payroll mistakes have on staff morale and turnover.
So, how do you avoid payroll mistakes? Follow our five tips to reduce errors and improve accuracy.
1. Ensure correct employee data
Payroll mistakes are just that — mistakes. Sometimes they occur because you gathered incorrect employee information from the start during onboarding. Onboarding can be a lot for both managers and employees alike, and it’s common for some tasks to slip through the cracks.
Let’s be honest with each other — juggling multiple employees working different shifts and gathering the wrong information (or no information at all) is fairly easy to do. Luckily, there is a fix that is just as easy. Create task verification processes for both employees and managers to confirm that new staff have correctly entered the following details:
Name
Social security number
Bank account deposit number
Deductions for benefits
Tax information
This process is a great way to ensure that everyone involved in the onboarding process can get everything done without feeling overwhelmed.
If you have the budget, make the process of bringing on new hires even easier with employee self-onboarding software. Deputy HR software features allow your new employee to complete paperwork electronically before the start date. And thanks to e-signatures, you can ensure the employee has verified the information.
Plus, if you have younger employees (common in industries like fast food or retail) who may never have filled out this type of paperwork before, Deputy’s onboarding software will walk them through the process. Managers can teach new employees about their position instead of spending time on paperwork.
One reminder: Your employees might have life changes during their tenure, so it’s crucial to have a process for updating their information. Changes in an employee’s address, marital status, or tax deductions can create payroll discrepancies, so build this into your plan. Ensure all your employees’ information and documents are in one place that’s easy to access.
Learn how Standwalk improved payroll and morale while saving thousands of dollars.
2. Work with a compliance-first mindset
Because employees clock in and out, shift-based businesses face unique compliance concerns. For example, employees who clock out late may be owed overtime, and their timecards should also reflect both paid and unpaid breaks.
Common compliance issues that occur with payroll include:
Misclassifying employees
Missed breaks (see our break compliance guide to see what the rules are in your state)
Not paying for overtime
Time theft
Calculating and paying taxes incorrectly
Incorrect payment amounts
Not reporting all forms of employee compensation (tips, commissions, bonuses, etc.)
Missing reporting deadlines
Incorrect W-2s
Incorrectly categorizing paid leave
Not meeting minimum wage requirements
Luckily, compliance doesn’t have to be done alone. Various compliance tools can automatically record schedule amendments, calculate the required predictability pay, and capture employee consent to the change.
However, it’s best to check with a lawyer if you have any questions about the complexities of local, state, and federal mandates.
Recommended:Red Door Escape Room has saved hundreds of thousands of dollars by managing labor law compliance with Deputy.
3. Eliminate human error
Common payroll mistakes are just human errors that any business owner or shift manager can make. For example, maybe you gave an employee a bonus gift card and forgot to record it on payroll. That well-intentioned award can actually negatively impact your employee if not listed in their pay.
Manually processing payroll isn’t just time-consuming; it’s rife with opportunities for mistakes, especially when processing different teams with different shifts. Think about all those hours spent pulling information from various sources, like your spreadsheets, timesheets, and banking information. Manual payroll can lead to miscalculations, oversights, and even missing key data. Plus, that makes record-keeping and organization even harder.
Instead of doing all that, use a scheduling tool like Deputy, which easily integrates your favorite payroll software and offers its own time-tracking functionality. These tools significantly reduce the time spent managing employee schedules, timesheets, and payroll from hours to minutes per month.
See how Deputy cut the payroll process for Harper Logistics from two days to just minutes.
4. Empower your employees
Preventing payroll mistakes (and potential future litigations) can be as simple as giving your employees the tools and processes to take action regarding their schedule and payroll. Not only does this show trust in your shift staff, but they know their schedules and what they should be paid better than most people.
There are many ways to empower your employees through a platform like Deputy, but first and foremost, it’s all about collaboration between managers and staff. If your employees catch payroll discrepancies, have a formal process in place so they can report these issues. Use an easy communication tool or payroll discrepancy form where they can notify you or your managers of any timesheet or payroll errors.
Time and attendance tools also allow your employees to review and verify their hours worked when they clock in and out, providing a layer of protection for the business. Consider a system that allows staff to easily swap shifts and ensures that the right person gets paid for each shift.
Recommended: Owners at Da Vinci's Donuts can focus on what they love with Deputy.
5. Increase security
Manual payroll leaves your business vulnerable to payroll fraud, like identity theft and misappropriation of funds, which can lead to compliance and legal issues. Thieves can also steal employee tax and salary data if the business lacks proper safeguards.
Owners of shift-based businesses have to be especially wary about security. If you have multiple locations, numerous people will be working on the payroll. That number doesn’t even include the potential revolving door of staff coming in and out of your business. Part-time, full-time, seasonal, and temporary employees can all be employed at the same time, depending on the time of year.
Here’s how to protect your business’s sensitive data:
Regularly audit your payroll security: Technology is constantly changing, and that could leave gaps in your payroll security. Schedule regular audits to ensure your business is protected from potential hackers.
Use a high-quality payroll platform: Payroll providers have advanced security measures in place, such as two-factor authentication, data encryption, and security certifications, to ensure your data is properly stored and protected.
You also need to update your payroll system consistently. Waiting for a more convenient time can make the version you’re using more vulnerable. Hackers love to exploit old versions of software.
Set up fraud alerts: Most payroll providers have built-in security features that can alert your business of payroll fraud.
Teach your employees about security: Your employees could unintentionally cause a security breach by clicking the wrong link or exposing your system to the wrong person. Regularly remind employees about the best ways they can prevent their information from leaking during daily interactions with your software systems.
Limit who has access to your payroll system: To protect private information, you can offer different degrees of access to your system (role-based). For example, your HR team has full access, while employees have limited access. You also need to cut access for former employees immediately after their employment ends.
Recommended:The Arc saves hours on payroll and thousands on labor with Deputy.
Take the pain out of payroll
Stop making payroll such a distressing process for both you and your employees. Improve employee payroll at every level and role with Deputy’s time clock and payroll integrations.
Bonus: Struggling to keep staff? Find out more about the biggest shift worker complaints — and how to avoid them — by downloading The Definitive Workforce Management Toolkit.
