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Is your payroll process accurate, secure and compliant?

ARTICLE | April 26, 2024

Authored by RSM US LLP

If your business has paid employees, then you have a payroll process. And that process needs to be accurate, compliant, secure and properly documented. With many middle market companies still making the transition to cloud-based human capital and payroll technology, completing a payroll process review is important whenever changes to your business occur, including when implementing new software.

What is a payroll process review, and why is it important?

When you engage a trusted payroll advisor like RSM for your payroll process review, experienced, certified payroll consultants examine the entire sequence of events that coordinate each payroll cycle from start to finish and present a detailed improvement plan. Receiving this feedback can create the basis for a payroll continuity plan, mitigate compliance risk and incorporate segregation of duty protocols to ensure secure engagement practices. A process review will also raise your awareness of security requirements around personally identifiable information as well as compliant communication and data storage procedures.

“When our payroll manager left, it was really important to us to continue providing excellent service to employees. Without RSM’s support, it would have been a significant challenge for us to provide our employees with the uninterrupted service they expect.”

Vice president of finance, nonprofit retirement and health services organization

What to expect from a payroll process review

An external payroll team typically begins a payroll process review by reaching out to your core payroll team to collect knowledge on your processes: timing, employee engagement workflow, reporting, data maintenance and compliance issues.

Your consultant should identify areas of compliance risk or data security, document procedures and communicate key insights and recommendations to improve your process.

Recommendations can include opportunities for correction within your processes, potential technology-driven efficiencies or automation, and prioritizing urgent issues. The payroll process review is the initial step in achieving a more efficient, compliant, accurate, secure payroll process and better employee experience.

What are some of the common payroll pain points commonly uncovered? 

Some of the biggest challenges for a payroll department stem from overwhelming manual processes coupled with a lack of system utilization. Many companies have access to features and modules within their human capital management system they are not using, creating a need to compensate with manual processes or additional supporting staff. These issues can have a negative impact on both upstream and downstream processes and can be the catalyst for a slew of errors, compliance and tax issues, leading to a poor employee experience, failed audits and fines for unconscious mistakes. Plainly stated, neglecting to make the best use of available automation and core features can cost time and money.

Tip: When enabling employee self-service as a time-saving automation that also supports a positive employee experience, incorporate a proper workflow within your process to maintain awareness of employee input changes that can influence employer taxation accountability.

Other common oversights:

  • Failure to complete adequate pre- and post-auditing
  • Improper record keeping and lack of approval protocol
  • No credible payroll backup plan for business continuity
  • Lack of skills/knowledge around shifting federal, state and local payroll regulations
  • Absence of proper payroll checklist or process documentation

For many payroll processors, both new and seasoned, not knowing what they don’t know is a common theme. There are many ways to unknowingly fall out of compliance or get stuck in habits that no longer support a healthy payroll process. A payroll process review is critical in imparting information and helping clients achieve a comprehensive perspective amidst the sea of critical details.

Payroll process documentation is crucial but rarely executed properly

If you have an internal payroll processor, they need to have some form of process documentation. Process documentation is especially important for one-person departments. Lack of proper process documentation or staff, regardless of the company’s size, exposes the business to compliance risk, including fraud.

Aside from supporting payroll continuity, a proactive approach to proper documentation of your payroll process helps identify where gaps may exist. Payroll process documentation can be used as a training resource in case of staff turnover or a guide in case of emergency response.

It is also true that a regular documentation update protocol supports catching important payroll pivots caused by changes to the business, such as:

  • Change in payroll and time/attendance systems
  • Pay frequency change
  • Acquisition/merger/divestiture activity

Mitigate payroll risk by accessing support from a certified payroll provider

After your payroll process review, you will receive a report of recommendations for improvement you can complete on your own or opt to work with a consultant for proper and timely execution of all recommended actions. Among other services, RSM’s payroll providers can:

  • Streamline tasks for better efficiency
  • Establish compliance with payroll and tax activities
  • Document your payroll process for continuity
  • Troubleshoot and address payroll transaction issues
  • Develop pre/post-auditing checklists
  • Provide temporary payroll coverage when staff absences or unplanned departures occur

This article was written by Lorry Twisdale and originally appeared on 2024-04-26.
2022 RSM US LLP. All rights reserved.

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