Best Practices for Payroll Management

Payroll has been one of the most significant processes in any organization mainly due to:

• Extensive chances of fraud with several real-life situations that can be seen in several organizations on how weak payroll processes have led to compromising the control environments
• It deals with highly sensitive personal data
• Payroll costs are usually the most significant expenditures, especially in service industries.

We are happy to share with you some of the best practices of payroll management which an organization could implement resulting in both a stronger, more controlled payroll processing as well as increased efficiency, and limiting manual intervention:

1. Centralized payroll processing – Can result in non-duplication as well as higher standardization and improved policy compliance/ monitoring
2. Combine Travel and other reimbursements with the payroll functions there being several synergies in both these functions
3. Direct Credit to Bank Accounts rather than issuing manual checks (Cheques), including direct credits for full and final settlements
4. Establish performance measures and track them. Some minimal performance measures should include a. number of pay-periods where final credit of salaries was done within target date, number of errors noted, Cost of owning a payroll function, number of cases delays in receiving inputs etc.
5. Integrate time and attendance system, with the leave system, HR Management system and payroll. Automatic reconciliation between attendance and leave to ensure accurate days are considered for payroll processing as well as reducing inconsistencies between HR Data and Payroll data
6. Introduce payroll reconciliation at the end of the payroll processing. Payroll reconciliation should cover both head counts and value of gross/ net pay with reasons for variations month on month. Head count variation would be as a result of additions and terminations while value based reconciliations could be due to increments, bonuses, reimbursements, attendance shortfalls etc.
7. Ensure a maker-checker on all non-recurring payroll expenses such as reimbursements, retirement benefits, final settlements, advances etc.

We hope you found the above tips useful for your organization. We would be happy to receive your valuable feedback on the same.

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