Managed Payroll Services
What Is It and How Does It Help a Business
At the core of any successful organization are people. How a company interacts, motivates, evaluates, and compensates employees are all integral in achieving desired employee performance and subsequently organizational goals. So, it is extremely important for organizations to build systems to manage these activities.
Payroll Management
Payroll management is the process of tracking and administering the wages and salaries of employees in accordance with relevant regulations. The process of payroll management involves tracking employee data like hourly wages, hours worked, projects involved in, time off, benefits, and others depending on the complexity and sophistication of a payroll system. This data is then processed to calculate the total compensation of individual employees during each payment period. After the figure is determined the amount is transferred from the organization to the employee. Finally, reports must be generated for internal decision-making purposes and external compliance purposes. As such there are four primary stages in payroll management:
1. Tracking and recording relevant employee data
2. Compiling data into period records, weekly, biweekly, monthly, etc.
3. Administering payments to employees according to records
4. Generating necessary reports for internal and external purposes
Benefits of Payroll Management
Proper payroll management can have multiple benefits for an organization. From an internal perspective, a well executed payroll can help an organization better understand its workforce by tracking the right metrics and analyzing the proper data. In turn, this helps with decisions such as hiring and firing, monetary compensation, schedules, and employee controls. From an external perspective, a proper payroll means always having accurate numbers to comply with the government and other regulators.
The most important benefits of a properly executed payroll is that employees are happy. Employees that are compensated on-time, through their preferred channels like direct deposit, with clear rationale as to the amount of their compensation are typically motivated employees. A proper payroll takes into account the characteristics of a company’s workforce and becomes a tool to reward and improve employee performance.
Risks of Payroll Management
Although the process of payroll is relatively straightforward, there can be significant downside for companies with poorly implemented payroll systems. Payroll management is made difficult by the vast amount of data that must be recorded, sorted, and maintained under the context of ever-shifting employee regulations and laws. In addition to ensuring employees are paid accurately and on time, a company must also configure the data for its tax reports, (T4’s and T4 summaries) and record of employment (ROE). In Ontario, the issue is exacerbated since businesses must keep track of both provincial and federal legislation.
An internally managed payroll system is one option; however, this creates additional risks for a company. Poorly executed payroll management makes a company prone to mistakes in its decision making and external compliance but maintaining a sophisticated payroll process can drain resources and distract from an organization’s value-adding activities. The worst part is that there are very little signals to indicate whether an organization is over or under spending on their payroll management. For example, a company will usually only find out it is underspending on payroll if it gets multiple employee complaints or a fine from a regulatory body. In the case of overspending, a company would rarely recognize that it is wasting resources without tracking the right metrics and having the proper controls in place, meaning resources like time, money and personnel are constantly redirected from core activities to administration of payroll.
Problems with Keeping Payroll Management In-House
The challenge becomes that while payroll is an essential process within a business operation, it is incredibly hard to efficiently perform this process in-house, especially as a company grows. The following are the three major downsides to keeping payroll management in-house:
I. Timely: even for a seasoned accountant, the process of setting up and maintaining payroll records manually would take a considerable amount of time detracting from other responsibilities and tasks.
II. Costly: individuals capable of maintaining accurate payroll records are trained professionals who come with a high price tag, and whose value to the company is wasted on administrative tasks like payroll.
III. Risky: the expectation by regulatory bodies is that reports are error-free, but with manual bookkeeping some human error is to be expected. While an accurate report does not contribute to the success of a company, one that has minor mistakes could cost the company a hefty sum in fines.
The Alternative
A payroll service solution is the answer for businesses that spend too many resources dealing with payroll and bookkeeping in-house. Payroll services providers prepare and process employee compensation, ensure they adhere to provincial and federal requirements and provide related bookkeeping services that require accounting knowledge. Companies that successfully implement payroll services can reinvest their focus away from administrative tasks and dedicate it to core business activities.
Benefits of Alternative
Payroll services are powerful because they solve all the issues created by in-house bookkeeping in addition to providing other benefits. Some benefits payroll services might provide include the following:
1. Time Savings
With payroll services, all payroll management tasks can be completed for your company in hours instead of days or weeks. A traditional payroll management system requires time-consuming data entry and compilation that demands hours of employee time. By outsourcing payroll services, a company can ensure employees are spending time on tasks that add value to your company while receiving payroll reports sooner than ever.
2. Custom Solutions
Payroll services are highly customizable to an organization’s specific needs. Payroll service providers like Clear Insight use a thorough company evaluation process including consultations and analysis to help determine the solution correct for the context. Experience performing such evaluations gives providers insight into organizational payroll inefficiencies that organizations may not even be aware of.
3. Expert Advice
Payroll service providers employ individuals with an abundance of experience and knowledge in both payroll administration and growing businesses. These experts not only provide an exceptional service applying their experience in accounting and entrepreneurial environments, but also help educate clients on payroll and related processes.
4. Cost Savings
The custom solutions offered by providers comes with a fixed price and a-la carte services. Unlike traditional payroll management where a company can easily go over budget on payroll, for example if employees must work overtime, the fixed monthly price of managed payroll services ensures a company will not incur unexpected expenses. Furthermore, the cost of cloud-based solutions compared to in-house or an accounting firm can help with an organization’s bottom line targets.
5. Anxiety-Free Compliance
An amazing benefit of managed payroll services is that they save companies the hassle of complying with the government and other regulators. Payroll services ensure clients never have to worry about whether external reports meet regulatory standards. Not only do payroll services save companies the time and money of generating compliance reports, they ensure everything is satisfactory and nobody is surprised by a fine.
6. Continuous Monitoring
Keep track of all payroll related files and documents in one place and keep them securely stored for the future. Cloud-based solutions enable managers and employees to access and update information online or by calling their service provider.
7. Modern Payments
Payroll services enable organizations to pay their employees with the latest forms of payment methods. Administering payments has never been easier to perform and track with managed payroll services. These solutions can revolutionize the efficiency with which organizations pay employees.
8. Better Planning
Managed payroll services provide insights that are easily missed in a traditional system. The tracking function and insight of expert advisors can help companies gain insights into their operations and finances. The data provided by payroll services can help a company make better decisions based on analytics.
The benefits of a payroll service are obvious, and every company should take the time to develop a payroll system that services their unique needs. To learn how we can help with this process visit our services page or book a free consultation.
