This is the final installment of our 4-part series on payroll management essentials. In our previous post, we touched on the key considerations on reporting tax-related items on payroll management. This final part sums everything up on how an automated payroll management software solution can help tie it all together.
While on the surface, automating payroll management may not seem like a primary area for cost savings, but by looking at 5 key elements, you can take the payroll management process and drive value, while reducing costs. At the same time, there is a component of mitigating risk, which is tied to regulatory compliance.
- Integrating Time Collection to Payroll: The workforce runs on the schedule and how they record their time, tips and wage rates. Most companies have a strong ability to manage and set their schedules, but where the challenge arises is when integrating their time schedules into payroll. You want to ensure you have a payroll management software solution that has the ability not only to collect the time worked by the employee, but have that information integrated and passed over to the payroll system. It’s important to not only have a payroll management software solution that provides this connection, but also ensures that the payroll management system provides the proper intelligence to run the payroll properly.
The Savings: When you connect the payroll management software to your time system, you are effectively eliminating the administrative overhead that revolves around the transfer of data. In many cases, manually entry not only takes a great deal of time, but you run the risk of errors and potential noncompliance. Failure to report time with earnings can result in fines or penalties that you want to avoid in your operations.
- Payroll intelligence in Deductions: Payroll management can be a complex process. There are various elements that are tied to the payroll, which can vary from one employee to the next. Risks arise when you have to manually calculate wages against hours worked, the necessary deductions required for taxes, benefits and additional wages (such as 401K). Any wages, tip credits, taxes, benefits deductions and overtime need to be calculated properly, in order to maintain regulatory compliance. Look for a payroll management software solution that provides that level of integration, and gives you the ability to connect time and labor with payroll management. Without having a system that connects the employee rates to the payroll, you run the risk of errors or failed entry of wages. This not only poses a risk to employees’ getting paid but can also run into compliance risks with failure to accurately record taxes or benefits. You want a payroll management system that provides you with the intelligent business rules to automatically run payroll against the current employee rates.
The Savings: The biggest challenge becomes being able to accurately track the employee wage rates, taxes, and credits that need to be accounted for. Minimum wage changes, or properly calculating tip credits, overtime, and how this is taxed can be a complex process, and noncompliance to this can result in costs associated with time to process or failure to record wages properly, which can result in penalties you cannot afford.
- Visibility into Benefits and Available Credits: Part of streamlining costs is assessing the potential credits available to businesses and taking advantage of benefits that can help reduce costs. Understanding the eligibility of elements such as employee meal credits can allow you to get money back on certain activities. Additionally, having a Medical and Commuter Benefits Management System that is integrated into your payroll management helps you to provide an assortment of benefits options to your employees that allows you to reduce your overall costs when paying for medical and commuter benefits. You want to look for a payroll management software solution that has these options as a service for you to take advantage of and many it easy for you to process them and apply them to your business.
The Savings: Employee meals are significant credits that can be easily integrated into your system, and helps to offset any costs within your operations. In addition, an employee can save over 30% on commuting through the use of a commuter card, and employers can save 7.65% on payroll tax. The biggest challenge in implementing them is simply knowing when and how you can apply them. By having a payroll management software solution that makes these advantages more visible to your operations, you can take the administrative burden off of research and processes, and have the solution help you to save costs.
- Reporting on your Payroll to uncover Improvement Opportunities: The first thing companies think of when they see a need to increase their profit margins in the face of workforce change is to look for cost cutting measures. The key is to try and find ways to cut costs while not impacting the level of service provided. Reports help dramatically with this; they provide a snapshot into your workforce, and help you make better decisions that can make an impact without risk. Payroll Software reporting tools will give you visibility into your workforce and how they are getting paid. Overtime is a great example of this. Looking at reports, and where overtime is being charged from one employee to the next gives you a snapshot into how your workforce is distributed during pay periods.
The Savings: By having visibility into payroll, such as overtime, you can see which group of employees are incurring more overtime than others, and properly distribute work schedules based on minimizing overtime. This way, the staffing distribution remains even, but you are paying less overall for that time period.
- Minimize the Risk of Non-Compliance: Too often overlooked is regulatory compliance. The hospitality industry is one of the top most-scrutinized and cited industries when it comes to wage, tax and ACA violations. In 2018, the Department of Labor announced a record $304 million in recovered wages for workers, all as a result of failure to accurately record this information. Of particular note is ACA; more and more companies are cited each year, and many do not realize the implication. As an example, the fines for failing to offer ACA Benefits to full time employees (FTE) is $2320 per FTE, and failure to report ACA compliance can average $1000 per FTE.
The Savings: You want to look for a solution that takes into account the necessary wage, labor, and ACA compliance components when running the payroll. It’s not a matter of simply running the payroll; you want to make sure the solution knows the proper wage rates for your workers by state, how tips are collected, how overtime is calculated, and eligibility rules for ACA compliance. Having an intelligent system that can run this report in the background for you means that you will maintain compliance and mitigate the potential risks of noncompliance. And when margins are already tight, you want to insure yourself against any potential penalties that may arise from noncompliance. https://www.dol.gov/newsroom/releases/whd/whd20181009
Payroll Management Software Solutions help to Create Time and Reduce Risk
In all of the points on this series on Payroll Management Essentials, the common theme is really around helping business to do two things. One is time savings; as a business you don’t want payroll management to be a large part of your day. You want to have time to operate your business, and implementing a payroll software solution will give you the time you need. Most companies are able to free up 30-50% of their time in processing payroll through the use of a payroll management software solution. The second theme is around mitigating risk. While there are many benefits that your can reap through effective payroll management, perhaps the biggest benefit is risk avoidance. There are many regulations and compliance considerations that can pose risks to the health of your business. Payroll software solutions are designed to build intelligence, visibility and control into the payroll management system, and help to mitigate risk in this sense.
There are many facets to effective payroll management, and there are many ways to go about it. However, as companies position their operations for growth, implementing a payroll management software solution provides a strong foundation to create visibility and control and let you focus on what matters most – running your business.