Payroll is a crucial function for any business, but it can also be a source of stress and frustration when not managed properly. Mistakes in payroll can lead to unhappy employees, compliance issues, and even legal troubles.

By implementing a few payroll best practices, you can avoid these pitfalls and create a smooth, efficient process that benefits everyone in your organization. In this article, we'll dive into the top payroll best practices to adopt in 2024.

Please note that while this post focuses on US payroll processes, it's always best to consult your local payroll laws for specific guidance.

1— Classifying Your Workers Correctly

When hiring globally, you properly classify workers as either employees or contractors. Getting this wrong can lead to legal and financial troubles.

To determine the right classification, look at:

• How much control you have over the worker
• If the relationship is permanent or temporary
• How central the worker's role is to your business

Employees have less autonomy, a lasting relationship with your company, and do work that's at the core of your operations. Contractors ( 1099 employees) have more independence, often do projects, and their work isn't key to your business.

Classifying workers correctly ensures you follow tax, employment, and benefit laws in the US and the worker's country.

So when you hire your next team member, assess their role using the criteria above. Keep detailed records of worker classifications and your reasoning. But don't just set your criteria and forget it. Stay informed about changes in the laws as you grow your global team.

2— Automate Payroll Processes

Automation eliminates the need for manual data entry, calculations, and spreadsheets. Instead, payroll data inputs are automatically uploaded, validated, and processed in seconds. This ensures accuracy and compliance with local labor laws and tax regulations across countries. Cloud-based payroll automation platforms can also handle complex tasks like:

• Pay Calculations: Automated calculation of employee salaries, hourly wages, overtime, bonuses, and other compensation based on attendance data and pay rules.
• Tax Calculations and Filings: Accurate calculation of tax withholdings, deductions, and filings based on each country's labor laws and regulations.
• Time and Attendance Tracking: Automated tracking of employee work hours, overtime, leaves, and attendance integrated with the payroll system.
• Benefit Deductions: Automated calculation and deduction of employee benefits like health insurance, retirement contributions, etc.
• Payroll Processing: Automated generation of pay slips, direct deposit payments to employee bank accounts, and disbursement of salaries.

3— Set Notifications for Important Dates

Payroll involves numerous critical deadlines like pay dates, tax filing due dates, reporting deadlines, etc. Missing these can lead to penalties, fines, and dissatisfied employees.

To avoid missing these important dates, set up automated notifications or reminders well in advance. This can be done through calendar apps, project management tools, or directly within your payroll software.

Key dates to set notifications for include:

• Pay period start/end dates
• Payroll processing cutoffs
• Pay dates
• Tax payment due dates (federal, state, local)
• Quarterly/annual tax filing deadlines
• Any other compliance reporting requirements.

Notifications for these dates should be sent to all relevant payroll staff, approvers, and stakeholders involved in the payroll process to ensure tasks are completed on time.

4— Create Comprehensive Payroll Policies and Procedures

Payroll policies and procedures are guidelines that outline the processes, rules, and regulations for accurately calculating and distributing employee compensation, tax withholdings, deductions, and benefits. They ensure compliance, consistency, and transparency in payroll operations across the organization.

Payroll policies should cover different employment types (full-time, part-time, contractors) and their respective compensation structures to ensure fair and compliant treatment. Clear policies also help avoid misunderstandings and disputes among employees regarding pay, deductions, overtime, etc., boosting overall satisfaction.

5— Offer Flexible Payment Options for Global Employees

Offering flexible payment options is crucial for startups and agencies with a global workforce. Your employees are spread across different countries, with varying preferences for receiving their salaries.

Providing multiple payout methods like direct bank deposits, digital wallets, pay cards, and even on-demand wage access allows employees to choose the most convenient option for their location and lifestyle. It demonstrates your commitment to accommodating their diverse needs and preferences, fostering a positive work culture.

Partner with payroll platforms like Thera that offer easy scalability. As you expand globally, you can quickly add new payment methods, currencies, and payout schedules (weekly, bi-weekly, or on-demand) without disrupting existing processes.

6— Opt for a Centralized Payroll System

A centralized payroll system consolidates all payroll activities into a single hub or department, rather than having separate payroll systems for each region or location. This means that tasks such as calculating salaries, withholding taxes, making deductions, and processing payments are all handled by one central team or software platform, regardless of where your employees are located.

A centralized payroll system reduces errors, and saves you time and money in the long run. If you want to set up a centralized payroll system that works well for your global team, there are a few things you'll need to do.

Choose a payroll provider that can handle multiple countries. For instance, Thera can help you hire from 150 countries while staying compliant in each one of them.

You can check out our country specific hiring guide here.

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Make sure there's good communication between the main payroll team and the HR and finance folks in each location. You'll also want to stay on top of any changes to tax laws and regulations in the countries where your team members are based. Finally, don't forget to give everyone the training and support they need to get comfortable with the new system. It might take some extra effort upfront, but having a solid centralized payroll setup will make managing your global workforce a whole lot smoother in the long run.

Simplify Global Payroll with Thera

As your company expands globally, managing payroll for a diverse workforce can become increasingly complex. One powerful solution to simplify this process is Thera, an all-in-one payments platform designed specifically for fast-growing global teams.

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By leveraging Thera, you can:

1. Easily onboard global employees and contractors
2. Automatically stay compliant with local laws and regulations
3. Pay everyone on time with competitive exchange rates

Integrating Thera into your payroll workflow can help you save time, reduce costs, and minimize compliance risks. Schedule a personalized demo today and let us show you how Thera can handle the complexities of global payroll, while you focus on growing your business.

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