Payroll is one of the core functional responsibilities of the Human Resources (HR) department. It’s a process that has the biggest impact on employees’ satisfaction and the company’s compliance with legal and financial regulations. An end-to-end HR payroll operations process covers each step of the process, beginning when an employee is hired and continuing up to the moment he is paid his final paycheck. All the steps, from onboarding to tax filing, are included and made to run smoothly and accurately. In this blog, we will give you an overview of the steps of the end-to-end HR payroll operations process.
The HR Payroll Processes
Employee Onboarding
Why It’s Important
A payroll cycle starts from the day a new employee joins the organisation. Good onboarding practices are necessary for HR payroll as they help to capture and enter the right information at the very start of the employee’s relationship with the organisation. It lays the basis for all future payroll activities.
Key Steps in Onboarding:
Collecting Personal Information: Get the basic information you need from your new employee: name, address, Social Security number, and bank account details for direct deposit.
Tax Forms: Make sure that the employee completes all required tax forms (e.g., W-4 in the US) to calculate tax withholding.
Deduct Payroll Benefits: If you provide benefits such as health insurance or retirement, enter the deductions here.
Employee Classification: Are you a full-time, part-time, or contract employee? This determines your pay and benefits eligibility.
Time and Attendance Tracking
Why It’s Important
It is important to track the number of hours employees spend working so that payroll can be calculated. In some workplaces, employees are paid an hourly wage, while in others, they are paid a salary that is usually more. A mix of hourly and salaried employees can also be found in workplaces. The management of time tracking is absolutely essential to HR payroll processes.
Key Steps in Time and Attendance Tracking:
Set Up A Time Tracking System: Use a time-tracking software or system to enter employee start times, end times, breaks, and overtime.
Checking Attendance Records: Review attendance records periodically to make sure that employees with shifting work hours or remote work locations have accurate records.
Process paid time off (PTO): Process paid time off (PTO) requests and track sick days, vacation days, and paid holidays, ensuring they are accounted for in the payroll.
Payroll Calculation
Why It’s Important
Payroll calculation is the main process in HR payroll operations, as it includes the calculation of gross pay, deductions, and net pay for every employee based on the hours worked, salary, and additional compensation.
Key Steps in Payroll Calculation:
Calculate Gross Pay: Add up your total pay before deductions, such as your base pay plus overtime, bonuses, commissions, and so forth.
Deductions: Deduct taxes, Social Security, Medicare, health insurance premiums, retirement contributions, and any other voluntary or mandatory deductions.
Net Pay Deduct: Calculate the amount of final pay the staff will receive after all deductions have been made.
Payroll Disbursement
Why It’s Important
As a feature of HR payroll, salaries need to be paid in a timely and accurate manner, both to keep employees happy and to maintain their trust, as well as to ensure the timely payment of wages as required by law.
Key Steps in Payroll Disbursement:
Select Payroll Disbursement Method: Decide how employees will receive payment via direct deposit, paper check, or payroll card.
Process Payroll: See that all payments are made according to the company’s payroll schedule—that the money is transferred or checks are cut, as appropriate.
Pay Stubs: Distribute pay advice slips (pay stubs) to each employee, showing the gross pay, deductions, and net pay for the pay period.
Record Keeping and Reporting
Why It’s Important
Maintaining an accurate payroll record is essential for complying with mandated reporting requirements in HR payroll processes, for financial auditing purposes, and for resolving any payroll discrepancies that may arise. Good record-keeping practices help to organise and maintain payroll information for easy access.
Key Steps in Record Keeping and Reporting:
Store Payroll Data: Maintain records of every payroll transaction, such as employee earnings, deductions, taxes withheld, and disbursements.
Generate Reports: Produce regular payroll reports that you can use for internal review, compliance audits, and regulatory requirements.
Maintain Confidentiality: All payroll records must be kept confidential to staff and be password protected. They can only be seen by authorised personnel.
Compliance and Tax Filing
Why It’s Important
Payroll compliance is a procedure that requires strict adherence to all required laws and regulations, such as tax laws, labor laws, and wage laws. Making sure the payroll is properly filed with the government and that payroll taxes are paid on time to avoid penalties and legal problems is an important part of HR payroll compliance.
Key Steps in Compliance and Tax Filing:
Payroll Taxes: Calculate federal, state, and local taxes, withholdings, and deductions from employees’ paychecks, such as income tax, Social Security, Medicare, and unemployment taxes, correctly.
File Payroll Tax Returns: File Form 941 in the US (or similar quarterly payroll tax returns) with the taxing authorities by the due date.
Pay Payroll Taxes: Pay payroll taxes when due so that penalties and interest don’t accrue.
Keep Up With the Regulations: Review the payroll regulations on a regular basis in order to be compliant.
Handling Payroll Inquiries and Disputes
Why It’s Important
Payroll might be running smoothly, but questions and issues will inevitably arise. How we resolve these problems and the employee’s perceptions of the HR payroll process can determine whether they continue to trust us.
Key Steps in Handling Payroll Inquiries and Disputes:
Solve Payroll Problems: Give them clear ways to discuss payroll concerns or problems.
Investigate and Rectify Problems: Thoroughly investigate any payroll error or controversy and resolve it immediately.
Document Resolutions: Record the payroll inquiry and follow up when it is resolved for future reference.
Offboarding and Final Payroll
Why It’s Important
As part of HR payroll process, when an employee separates from your organisation, either voluntarily or involuntarily, you need to make sure you close them out of payroll and offboard them properly. This involves paying them all their earned compensation and benefits and making sure you comply with any legal rules for final pay.
Key Steps in Offboarding and Final Payroll:
Calculate Final Pay: Calculate the total of the employee’s final pay, including vacation pay, bonuses, other pay, and compensation owed.
Make Final Deductions: Use up any remaining deductions, such as for benefits, taxes, and other loans, before sending the final paycheck.
Provide Final Documentation: Issue the final paycheck and other documentation (e.g., benefit summary or a notice of termination).
Conduct an Exit Interview: Conduct an exit interview to obtain feedback from the employee, as well as to confirm that all company property has been returned.
Conclusion
The end-to-end HR payroll operations process is a vital function that ensures employees are paid fairly and on time while they are meeting all the legal and financial regulations. Understanding and completing all the payroll phases, from onboarding new hires to paying off their last paycheck, is an essential part of running a well-functioning business.
Employee onboarding is the first step in the payroll process. It involves collecting employee information such as 9-digit SSN numbers, bank account routing and account numbers, emergency contacts, and beneficiaries. Employees also need to complete I-9 forms and W-4 tax forms and provide direct deposit authorisations.
The second step is tracking time and attendance. This includes gathering and storing employee hours and shifts. You can record time and attendance manually or use automated timekeeping systems.
The third step is calculating payroll. This involves summing up the hours worked, pay rates, and deductions. After you’ve calculated the payroll, you’ll need to disburse it to employees’ bank accounts or issue checks. Keep in mind that taxes, such as the Federal Insurance Contributions Act (FICA) and Medicare, must be deducted from the payroll.
In the fifth step, you’ll have to keep records and report payroll to federal and state authorities. You should always keep copies of pay stubs and W-2s for employees.
The sixth step, compliance and tax filing, is another important part of the process. Employers need to file quarterly and annual returns to the Internal Revenue Service (IRS) and the Social Security Administration, and they need to file state income taxes on behalf of their employees.
The seventh step involves handling payroll inquiries. Employees might have questions about their paychecks or benefits, so it’s important to have a plan in place to answer their questions.
Finally, offboarding is the last step in the HR payroll operations process. This involves paying off employees’ final paychecks when they leave the company.