Payroll Best Practices To Follow In 2021

Payroll Best Practices To Follow In 2021

Every organisation that has more than one staff member needs to have a comprehensive payroll management system to handle its financial activities effectively. The principal purpose of a payroll management system is to aid the user in making timely payments of employee salaries and benefits. It also aids in the computation of various deductions such as income tax, provident fund, gratuity, etc.

A payroll management system is also useful in maintaining employee financial reports and updating the payroll database to make sure that the current state of employee payments is always correctly reflected. This is what’s generally known as payroll management.

As this process is so dynamic and crucial, over the years professionals have developed certain best practices that can help young payroll managers perform their duties more efficiently. In this article, we will discuss a few of them in detail.

So, whether you are a fresher or an experienced professional looking for ways to improve your business’s HR functions, this article is for you.

Here are the payroll best practices that you should follow in 2021 

  1.     Invest In The Right Technology

Payroll management is one of the most exigent and crucial HR functions. Your employees want to be paid on time, consistently, and correctly while the organisation wants its payroll records to always be up to date. However, managing all these activities manually can easily become a daunting task if the number of employees is too high.

That’s why it is recommended that organisations should now quit manual payroll management and invest in the latest technologies that can help them automate their payroll management processes. Currently, the market is flooded with various advanced software, like Paycom LMS, etc that allow users to integrate payroll management processes with LMS.

This reduces the possibility of miscalculations and other similar errors. It also ensures consistency as the software will calculate the payouts, in the same manner, every month unless a change is manually fed into it.

  1.     Classify Your Workforce Accurately

Every organisation has different types of employees working for it. Some might be full-time employees while others might be working on contract. Depending on the nature and industry of your business, there may be different laws governing the salaries or taxes for different types of employees.

Thus, the first step towards establishing an effective payroll management process is classifying the employees accurately. This means you should ensure that every employee is enrolled under the right category on your payroll records. Plus, your HR team should be up to date with all the applicable norms for each category of employees.

Inability to do this can cause miscalculations or mistakes in tax filing which can have serious legal consequences.

  1.     Always Be Aware Of Your Deadlines

Whether your business is big or small, your HR managers have a lot of things to take care of. Thus, it is not always possible for them to remember all the important dues dates on the top of their heads. However, you cannot afford to miss delivering the paychecks or filing the tax returns on time.

As a result, setting up reminders and notifications for these crucial dates and deadlines is considered a great idea. Organisations can use any project management or calendar tool to do this. These tools will set a reminder for all your important dates and notify the concerned department periodically as the deadline approaches. This will ensure that your HR managers always stay informed about when the payment is due, even if they are drowned in work.

  1.     Don’t Wait For The Deadline

While it is crucial to set a reminder for all your payroll related deadlines, it does not mean that you need to wait till the deadline to finish the work. HR managers should try to complete all the documentation processes before time so that there is no rush at the last moment. Otherwise, they will have to complete the documentation in a hurry which most probably will lead to errors that could have been easily avoided.


Payroll management is a crucial aspect of running a business, irrespective of its size or nature. Thus, implement the above-mentioned best practices in your organisation and make your payroll processing smooth and error-free.

Also Read: Best Way to Save Money in Small Businesses


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