In a perfect world of payroll administration, your small business would have its own timekeeping system already procured and working flawlessly, with employees who always punched in and out correctly for each shift. This system would feed directly into your payroll system, which would only require you to review hours, pull them into your system, double check that all looked well, and then post payroll and send deposits. Maximum time spent: 30 minutes.
If you have ever processed payroll, you know how perfectly unrealistic the above scenario is. From processing child support payments and responding to wage verification requests, to chasing down missed punches, answering questions, and correcting overpayments when time is misreported, there is far more time spent behind the scenes than simply pushing a button to process payroll.
How long does it take to process payroll?
To provide a more realistic overview, our experts have weighed in on what payroll experts do (and how long each task takes) when processing payroll. Keep in mind the following time estimates are based on how long it takes an experienced, certified payroll processor to do each task, not an inexperienced employee who would need much more time to thoroughly read through the paperwork and understand each task, know the laws, and be familiar with your software:
- Process child support, garnishments, and/or levies: 10-15 minutes for the initial set up of each child support or garnishment, including setting up deductions in the system and with your vendor, providing the employee with copies, and then filing and saving paperwork
- File and maintain employee files and records: 5-10 minutes per employee, depending on system
- Respond to employment and wage verification requests: 10-15 minutes per verification
- Process certified payroll: 1-2 hours for actual processing and certified report generation
- Calculate bonuses: 3-5 minutes per employee for calculation of and entering in net bonuses
- Reject direct deposits (employee enters incorrect information): 10-15 minutes per instance
- Correct overpayments (termed employee is not reported and continues to get paid, or hours are misreported): 30-60 minutes per instance
- Report new hire: 30 minutes per new hire, per state
- Process detailed and customized payroll management reports: 1-2 hours per creation and modification of each customized report, longer to create a new report writer and find appropriate information to be translated
For the following time estimates, we assume this is for a company of 50 employees with payroll software that produces good data and creates eFiles:
- Answer employee questions about paychecks: 2 hours per week
- File and pay FICA, FUTA, SUTA: 12 hours per quarter
- File and deposit state withholding tax returns: 1 hour per month, per state
- Prepare, file, and mail W-2s and W-3s: 10 hours per year
- Properly track and destroy outdated files: 10-15 minutes per week
- Set up vacation, PTO (Paid Time Off), or sick leave plan: 1-2 hours for setup, application of the plan, and verification of correct employee setup (this is after the company has decided what type of plan they want to offer)
Other complexities to processing payroll
Each state has payroll laws that require workers to be paid within specific timeframes for different scenarios, such as the end of a pay period or an employee termination. And for companies with employees who live in one state and work in another (for example, someone living in Jersey City but working in New York City), you will need to be familiar with reciprocity agreements that define how taxes must be withheld. Any errors will be met with fines and penalties.
Overwhelmed with processing payroll?
If this sounds overwhelming, you’re not alone. In a survey of small business owners who calculated payroll themselves, “49% said the process was frustrating, 47% said it was complicated, 44% said it was confusing, and 33% said they were uncomfortable with the process.” The survey goes on to say that diverse labor laws across states and cities further complicated the process, meaning companies in multiple locations are much more of an administrative nightmare.
Benefits of outsourcing payroll
Outsourcing your payroll and other HR administration tasks to Stratus HR not only relieves you of administrative burdens to give you peace of mind, but also provides your employees with 24/7 access to their payroll and personal data. And if your employees are unsure how to navigate the tech to answer their own questions, they can always contact their Stratus certified rep(s) for help.
To learn more about payroll administration tasks or how Stratus HR could assume your liability for payroll taxes, reporting, and audits, book a free consultation today.