One of the biggest stressors for an employee could be errors in their compensation, and while it may seem like an easy task, managing payroll gets increasingly difficult as the size of your business grows. The biggest hurdle in managing payroll is complying with the labour and tax laws applicable in your area of operations and these are subject to frequent changes. Non compliance can land your business heavy penalties and will break your employees’ trust in the organization, leading to increased costs of employee turnover. Therefore, managing payroll is one of the biggest challenges a business owner needs to overcome if they want to continue surviving in today’s highly competitive markets. Here are 9 tips for managing payroll effectively.

Payroll calendar

A payroll calendar is a resource delineating the beginning and end dates of pay periods in addition to pay dates. It helps your Human Resource department in managing and carrying out payroll tasks more efficiently as all the information is available to them. Creating payroll calendars is not a difficult task as numerous payroll software available today can accomplish the same automatically. You can make your calendars even more useful by colour coding and associating different colours to different events such as holidays or deadlines. An effective payroll calendar would highlight all the pay periods for the year and, in turn, reduce the confusion and arbitrariness that would have been present otherwise. It will also inform the employees about when they can expect their paychecks, thus reducing their stress as well. 

Payroll management training

Many HR professionals are highly trained in payroll management systems. While it may seem that their expertise is adequate enough, having your whole HR department acquainted with the process will have its own benefits. This will help in collaboration inside the department, reduce the workload of the payroll managers leading to a more cohesive team and also prevent conflicts that may arise due to double work. Your payroll system would get more efficient as the workload can be distributed among a larger number of employees and also reduce the pressure on the payroll staff. Communication between the HR department and the employees would become more fruitful as your HR will be able to handle their issues more competently. Therefore, organizing a payroll management training program for your HR department can prove to be a crucial step towards effective payroll management. 

Payroll process transparency 

Numerous conflicts can arise when your employees are unaware of how your payroll system works. This can lead to dissatisfaction, uncertainty and may make employees leave your organisation. Making your payroll system and policy completely transparent for your workforce will make sure that everyone is up to date and are certain about when their next paycheck will come. You can make your process wholly transparent by including important information such as your company’s procedure of handling payroll, employee classification, reporting responsibilities of the employees, availability of paid leaves, how promotions and wages are calculated, etc. Make sure you display the policy in a very visible and prominent manner and all your employees also receive a copy of the same. 

Ask for feedback

You may have taken all the necessary steps to make sure that the information on your payroll policies is available to your employees, but that doesn’t mean every employee will have understood it. Conducting employee surveys can help you gauge several things. First, it will tell you how clear your policies were and second, it will make sure that all your employees have their doubts cleared away, reducing the possibility of conflict and confusion. Communicating these doubts and having them cleared will not only give your employees a sense of reassurance about their compensation but will also help them trust the organization. You can also hold an all-staff meeting with your employees to directly interact with them. Employees would likely participate as the payroll process affects each and every individual in the workforce.

Outsourcing payroll process

If your business requires numerous other operations where your time and resources absolutely cannot be compromised, consider outsourcing the payroll tasks. This can take one of the biggest stressors of a business owner off their shoulders and give them time to focus on other important tasks. Payroll outsourcing comes in many shapes and forms. Providers of these services will allow you to monitor everything through payroll software and depending on different providers, give you varying degrees of control. These providers will calculate the due taxes and will also keep you up to date with the changing tax and labour laws to make sure you are in compliance with the law. In case you are unsure of what kind of service to go for, look for a provider that provides flexibility and change, in case, you would like to try out a different method.


Automate the payroll process

If you do not want to get in the hassle of outsourcing your payroll tasks and dealing with a provider, you can still make your in-house payroll management more effective and efficient through automation. Automated payroll has many benefits such as compliance with laws, automatic calculation of overtime compensation, leave application approval and many other tasks. It organizes all the relevant information before your HR department and payroll staff and makes it easier for them to dig up any data that they might need. Automation will also reduce the workload of your staff, reduce the probability of mistakes and also standardize the process, making it easy for even the new hires to follow. 


Be up to date with compliance laws and regulations

Tax regulations and labour laws can vary drastically from region to region. The reason you need to stay up to date with these laws is several fold:


The laws and regulations in your area of operations can change over time, increasing your chances of non-compliance. 

If you relocate your business to another area, even if it is an area that is fairly close to your original location of operations, there still could be a variance.

If an employee relocates to another area of your operations, then their information, etc will need to be adjusted accordingly.


Not being in compliance with the law will land you heavy penalties and fines and can also land you in legal trouble with the employees. It also damages the trust your employees may have in the organization and also the reputation of the business, making things tough for your business. 


Avoid dipping into the payroll tax funds

As a business owner, you must have some payroll tax funds which you use to fulfill your tax duties to the government. Oftentimes, when funds are running low for your business’ main operations, it can be tempting to extract some money from the payroll tax funds to replenish and renew your operations. This can prove to be a huge mistake as it can quickly become a habit and drain your entire funds, leaving you with not even a single penny to pay your dues. In order to avoid this mistake, you can open up a separate bank account specifically for storing your payroll tax funds. This can avoid its drainage that would otherwise occur and help keep in compliance with the laws.


Documenting the payroll process

Though it may seem an unnecessary step and expense, documentation of the payroll process can be handy in cases of emergency. It will help in auditing and analysis of your payroll system as each step will be recorded and highlighted, making it a more efficient process. It will also help your HR staff be more aware of the steps involved in payroll processing, clarify their individual roles and responsibilities, and will also help HR to take over the system manually in case of an emergency breakdown. Tax deductions will become clearer and you might also find other places where tax can be deducted. It can also help you locate the weak point in your process and rectify the mistake, making your whole organization a little more efficient. 


Investing in your payroll process and management can be one of the wisest decisions in the long run as numerous unforeseen issues can be avoided from the get-go. In 2021, almost every business in every industry has some form of automation regarding their payroll management and it has become an essential step for survival.