Payroll Best Practices - Part I - Benefits of Automated Payroll Systems

For many businesses, particularly those who could benefit from small savings here and there, a payroll management system is of great value. Proper payroll management significantly benefits a business' success by playing a key role in financial balance, regulations and cost/risk mitigation. The problem is that many businesses are unaware of these advantages.

The most typical out come from risk inflation is an increase in spend. A recurring theme many researchers have found is that companies are overpaying and underpaying employees. Overpays are often undocumented and can result in loss of sums beneficial to business advancements. Underpaying is as harmful. Since employees are not getting paid enough, many legal risks can arise at a painful cost to the employer. In addition, manual payroll systems require a large amount of workers and time to complete required documentation.

Businesses must be willing to adjust to fluctuating staff and economic challenges. Effective payroll systems connect information throughout the entire company. Automating your payroll systems is the easiest way to cater to these needs. Computerized systems typically simplify information, quickly organize reports, automatically archive data, calculate deductions, easily track clock-in/outs and minimize manual efforts.

Simplified and quickly organized data is advantageous in many ways. With basic documentation, only key points are recorded and irrelevant ones. Automated systems integrate your payroll figures into an easy to read platform to ensure everything is accounted for, thus minimizing risks of invalid or missed numbers. Many automated systems back up your companies data and organize it into files. This is ideal if ever faced with insurance risks or employment issues as the records are easily attainable.

Tax and insurance deductions are important, especially to the employee. In order to please both the company and the worker, calculations must be exact. Computer operated solutions allow for quick calculations. Additionally, automated systems can mechanically track employee clock-ins and clock-outs preventing insurance and employee-related issues.

HR Software - Is Your HR and Payroll System Really 'Integrated?

If the time has come for your organisation to search for an HR and Payroll solution, and you are looking for a system that is fully integrated, make sure you fully understand what this really means. The word 'integrated' is very often confused with what should be termed as a 'single database' or a 'unitary database.'

The HR and Payroll software market is becoming more and more complex. It is therefore imperative for any organisation looking for a new HR and Payroll system to find out if what they are being offered is what they really want. For example if information must be immediately available throughout the whole product, subject to security constraints, an HR and Payroll software system with a single database is required. Be aware that sometimes 'integrated' is not always 'integrated!'

Some companies offer an 'integrated package' but this does not mean necessarily that it has a single database. What it usually means is that you then have to press a button to transfer the data to another system, it is not done automatically. The only way it will be done in real time is if you have a single database.

True integration involves the HR and Payroll department sharing a common database source, ensuring that there is a free flow of data between both sides of the system. The integrated system will give management greater control and much greater flexibility within their departments.

Real time data transfer means that it does not matter who enters the information and that it will be possible to view the data entered anywhere in the system. For example HR may enter a new member of staff, this can then be immediately picked up by the payroll department, and will be seen in real time. Only a true single database integrated system will be able to do this.

If you are in doubt that your chosen HR and Payroll system is operating off a single database, it is advisable to ask. If the supplier has a truly integrated solution with a single database then they should be able to demonstrate this to you. Make sure 'integrated' is what you are really going to get. It will pay off spending extra time checking that your new system is exactly what you need and that you are getting the best solution for your organisation.

Small Business Payroll - The Pros and Cons of an in-House Payroll Systems

In-House Payroll System Hardware Options

This week begins the first of a three part series on in-house payroll systems. During this series, the hardware components that comprise this type of system, pros and cons of this type of system, and software options will be examined.

An in-house computerized payroll system is located on company property, and equipment may be owned or leased from a vendor. Businesses have more control over this type of system, and can tailor the security system design to meet individual needs. System operation is performed onsite by company employees including programmers, systems analysts, data entry personnel operators, system administrators, etc., providing more control to the business.

Hardware options are determined by the size of a company, requirements, budget constraints, and the need for dedicated computer systems in certain departments.

Hardware Options:

• Mainframe Computers - largest and most powerful computers, used for the entire company. Each department links to the mainframe, sharing the resources (storage and processing) with other departments. In large companies, a separate mainframe may be dedicated to payroll processing, benefits and human resources functions
• Minicomputers - smaller and less costly option than mainframe computers. This can be a good option for small to medium sized businesses. Again, departments share the available resources.
• Microcomputers or personal computers (PCs) - flexible options from many vendors.

Microcomputer Networks Networks connect computers and applications. PCs are able to communicate with each other in a network, and employees can access applications from their computers. PCs share software programs, and have access to printers, modems, etc.

• Local Area Networks (LANs) - In a LAN, computers are physically connected to each other, data is transmitted at high speed short distances, and managed by a main computer or minicomputer.
• Wide Area Network (WANs) - In a WAN, data is transmitted over long distances using telephone lines and Internet.

Client/Server Technology Application programs are distributed by running on a personal computer. The data is on a server (mainframe, minicomputer or PC). Payroll, benefits and human resource applications are installed on PCs in the payroll and human resources departments.

Client/server applications may be comprised of a combination of these components: hardware, graphical user interface, file management system, network operating system, and communications protocol.

Data Processing Payroll and human resources data can be processed using two different methods, real-time processing and batch processing. Real-time processing allows the user to have immediate access to the data as updates are made. During batch processing, data is collected, coded in groups for processing, and returned when updates are complete. The user usually does not have access to the data while updates are made.

Outsourcing the Hosting of Your Payroll System - The Right Choice?

Whether you look at short-term economic trends or long term demographics, the payroll profession has rarely faced such a challenging environment.

Tightening economic conditions are putting pressure on organisations to maximise productivity. That's why businesses are now looking at creative ways to become more efficient and at the same time save money.

Outsourcing is an immotive subject, with arguments for and against. However outsourcing is becoming more and more accepted in most industries, whether it is the HR function, marketing and design or IT.

Due to increased demand and ever changing legislation, the outsourcing of Payroll and HR functions are ever-increasing. Paying your staff correctly and on time is vital to ensuring they remain productive and motivated. You can't afford to get it wrong!

Web-delivered software is becoming more and more popular and a clear choice if your organisation wants to outsource but keep control in-house. By using intuitive software, payroll departments can work with greater effectiveness and provide a better service to employees, both with minimal change to existing operating procedures.

Payroll software can bring significant time and cost efficiencies, allowing your business to focus its resources elsewhere. By using a fully integrated HR and Payroll software solution, the organisation can produce statistics and meaningful reports that can be used to improve the business.

Just recently, a new phenomenon known as a Hosted Bureau Service has entered the payroll industry. This solution gives companies the best of both worlds and is ideal for high-volume payroll processing. The Hosted Bureau Service enables companies to have full access to a payroll system without the costs of purchasing it. The supplier hosts the payroll system on a server and processes the payroll on behalf of the client. The client retains all the benefits of an in-house system, enabling them to still analyse data from their own office.

The Hosted Bureau Service is growing in popularity allowing Payroll departments to run reports and obtain real time data but with the added benefit of minimal set up and up front costs. Eradicating IT costs and internal IT support are good news for Managers who can inherit systems that they are not always familiar with.

Further savings can be made by outsourcing the processing of the payroll data to the supplier. Professional, qualified personnel, who are up-to-date with all the latest legislation, and who look after a number of clients, are able to offer this service at a reduced rate to the end user as well as providing fast turnaround times. Most payroll outsourcing organisations offer a personal working relationship with their clients, assigning a project manager who will provide guidance and reassurance every step of the way.

Other benefits from using such a service include disaster recovery and the knowledge that you will always have someone there attending to your payroll. This can provide peace of mind that this important business function is always covered even when in-house staff are absent due to sickness or annual leave.

Time Clocks And Your Payroll System

Time and attendance software is perhaps one of the least understood of the payroll family products. Sometimes known as award interpretation software it is the "glue" between your electronic time clock and your payroll and accounting software.

In a completely manual system, staff fill out time sheets. Payroll staff calculate payroll hours based on their knowledge of the award rules and they then key those payroll hours for each employee into a payroll system and job done.

In an automated system, employees clock in and out using a electronic time clock, that data is electronically usually via your network into award interpretation software which has been pre-configured with the award rules, the system automatically calculates the payroll hours and this can then be transferred into your payroll software and, again, job done but much more accurately and much faster

The misunderstanding in the general business community regarding this process is that electronic time clocks will be able to do the collection, interpretation and export to payroll steps which is exceptionally unlikely.

It is most likely that electronic time clock or bundy clock you own or purchase is unlikely to be able to perform any complex calculations. Some are reasonably clever and they may cope with simple rounding and overtime calculations but that's about their limit.

This is not surprising as the process of translating an employee's In and out clockings into the hours worked can get quite complex. It gets more complex when an electronic time clock is involved...take a look at these two examples and you will see why:

Example 1; The Time Sheet: Joe fills in a time sheet for the week. His shift starts at 7.30 am and finishes at 4:00pm. He gets 30 minutes for lunch. On Monday he worked back for 3 hours and wrote 7:00pm on the time sheet. Pretty simple calculations here. 8 hours normal time and 3 hours overtime.

Example 2: The Electronic Bundy Clock: Fred clocks in on the electronic bundy clock when he gets to work at 7:15 am. He clocks out at 7:07pm. The reports on the time clock calculate that he has been at work for 11 hours and 52 minutes. This is clearly not correct so there needs to be some manual intervention to "round" the in and out times to the start and the end of the shift. Lunch has to be deducted and the split of overtime categories must be taken into consideration.

This is a relatively simple example. A few electronic bundy clocks can cope with this however it gets quite a lot more complex. For example, these are some of the manual calculations done by payroll staff that will challenge the very best time clock.

Multiple rounding scenarios - Rounding to the shift start time when an employee clocks late or early while not rounding for timed lunch breaks and rounding to the nearest 15 minutes on clock out

Daily Balancing - Taking time from an overtime category and placing it into the normal time category if the normal hours are short of the nominal shift hours.

Payroll Balancing - As above but on a payroll period.

Automatic breaks - Auto deduct lunch breaks or not deduct taken breaks under a length

Leave entry - Become important when you want to export to payroll and save data entry time

Flextime Accrual - Bank time, flextime, rostered days off are all examples of the need to accrue special leave for time worked.

Again, these are common requirements when calculating payroll and they are, ostensibly, outside the capability of electronic bundy clocks.

The ultimate problem for most time clocks is they simply cannot interface with a payroll system and if they do,the information they send is likely to be an inaccurate calculation of payroll hours unless your awards or pay rules are very very simple.

Award interpretation software (time and attendance software)will almost certainly be required if you want to automated the accurate calculation of employee payroll hours and import that into your payroll system. If you are a small enterprise with less than 30 employees the required investment may not justify the time saving. However, if you have more than 30 employees the return on investment becomes more appealing.