Payroll Review Checklist: 6 Necessary Items to Verify Payroll Accuracy
Published January 21, 2023.
Is running payroll an easy and quick thing to do? Not at all—it can often be time-consuming and confusing, with a high probability of making many errors that typically go unnoticed. However, maintaining an accurate payroll is of the utmost importance because employees need to be paid, and you'll want to avoid penalties.
To help you develop a streamlined payroll process, here are 6 items to consider to verify payroll accuracy.
1. Check Important Employee Details
The first thing you can do is determine and double-check employee details. Here's a list of information you should be assessing:
- Date of birth
- Bank details
2. Classify Employees Correctly
The next aspect of verifying payroll accuracy is ensuring all employees are classified correctly. The best strategy is to have a proper record of all employees, as well as taxes, overtime wages, and potential minimum wage laws. Unfortunately, if this is done incorrectly, the company could owe back wages and taxes and face penalties. Simply put, all employee details need to be in the payroll system at all times.
3. Track Time and Attendance
While it would be wise to track the time of all employees, it's especially critical to monitor staff members who earn hourly wages and might be eligible for overtime. This aspect of verifying payroll accuracy focuses on tracking how much time employees have worked. To confirm that the information is accurate, be sure to review the time before running payroll.
4. Comply with Payroll Laws and Regulations
Unfortunately, there's no one-size-fits-all approach to payroll management, primarily due to the fact that different states and cities will have their own sets of rules and regulations. Therefore, you'll need to properly calculate wages and overtime and withhold the correct amount of times. The payroll team must timely deposit the corresponding tax liabilities with the relevant federal, state, and local tax agencies and file payroll tax returns to the appropriate federal, state, and local jurisdictions.
Here are some of the federal legislation rules in the US employers should know:
- Federal Labor Standards Act (FLSA): This rule puts together standards for minimum wage, overtime pay, youth employment, and recordkeeping.
- Federal Insurance Contributions Act (FICA): This is a federal payroll tax to fund Medicare and Social Security Programs.
- Federal Unemployment Tax Act (FUTA): This is a bill that establishes a payroll tax on any business with employees, and the revenue is used to fund state unemployment programs.
- Equal Pay Act (EPA): This law prohibits wage discrimination based on gender. In other words, men and women are given equal pay for the same work.
- Davis-Bacon Act: This law requires federal contractors and subcontractors to pay local wages on federally funded public works projects.
» Want to reduce payroll tax? See 5 legitimate ways to do so
5. Examine Payroll Transactions
Although this might seem like common sense, it's always better to be confident that you're withholding the right amount for your employees and paying the correct level of income taxes. Remember, laws can change, employees might move, and tax withholding options may be altered for different types of employees, as is often the case with remote employees.
6. Automate the Payroll Process
If you're refraining from automating the payroll process, be warned that manual data processing is generally error-prone and can be time-consuming, in addition to the errors potentially costing your company. However, this can be avoided by integrating payroll software into your corporate infrastructure. Since they automatically calculate payments and taxes, these programs are generally accurate.
Ensure Payroll Accuracy With Payroll Software
In the end, it would be a prudent move to at least consider using payroll software with the right features that can help your business avoid unnecessary errors and cause less stress to employees. Opting for a good automated payroll solution is an easy way to ensure you've covered all the items from the checklist above to verify payroll accuracy.
» Not sure which payroll software to choose? Read TBR's payroll software reviews to find the solution that best works for your business.