Accounting Best Practices, Fifth Edition

Chapter 17. Payroll Best Practices^[1]

^[1] Selected best practices in this chapter were adapted with permission from Steven M. Bragg, Payroll Best Practices (Wiley, 2005).

The payroll function involves a large clerical workload occurring shortly before and at the end of each pay period. For example, the typical payroll department collects time cards, calculates the amount due, checks with supervisors regarding questionable time cards, subtracts deductions of various kinds, cuts the checks, issues them, and reconciles any differences when employees bring in their paychecks with questions. After this frenetic time period, there is little for the department to do—until the end of the next pay period arrives. This highly predictable surge and drop in the payroll staff’s workload can be a difficult one for a controller to manage because it requires either large amounts of overtime by the payroll staff during the heaviest work periods or else a redistribution of the accounting department staff to assist in the effort from time to time. It is best to avoid the problems associated with periodic strains on the staffing of the accounting department by examining each step of the payroll process and streamlining it to reduce the overall workload. This chapter contains a number of best practices that assist in doing so.

Another problem with the payroll function is that it is very error-prone. For example, it is easy to miss a pay raise, a vacation accrual, or a deduction. Every time this happens, ...