5 Tips for a Practically Perfect Payroll Process

Jeremy Springer
7 hours ago
3 min read

Getting payroll right isn’t flashy—but it is foundational. Reliable, compliant payroll protects cash flow, keeps employees’ trust, and reduces audit risk. Here are five practical improvements—rooted in current guidance from labor, tax, and payroll authorities—that you can implement with minimal technology and no jargon-required.

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1) Nail the basics of classification, overtime, and recordkeeping

Start with the fundamentals: confirm who is exempt vs. nonexempt and how overtime is calculated. Under the Fair Labor Standards Act (FLSA), most covered employees must be paid at least time-and-a-half for hours worked over 40 in a workweek; get this wrong and errors compound quickly.

Back that up with disciplined recordkeeping. The U.S. Department of Labor requires employers to keep core payroll records for at least three years and the worksheets that support wage calculations (e.g., timecards, schedules, deduction records) for two years. Building your process around those retention windows makes audits far less stressful.

If you need a practical checklist view, many payroll providers summarize those federal baselines and common state overlays—useful as a double-check when you design your file system.

What to do this week: Review your exemption determinations and overtime policy, then map your document retention schedule to the DOL timelines.

2) Standardize timekeeping—and audit rounding

Errors in time tracking are the #1 seed of payroll disputes. Write down one way to track hours (paper, punch clock, or digital—consistency matters more than tech) and audit it monthly. If you use rounding, ensure it’s lawful and neutral: accepted increments include 5, 6, or 15 minutes, and over time the practice must not disadvantage employees. Spot-check your records to confirm rounding goes both ways.

What to do this week: Add a quick monthly “time audit” to your calendar—pull a small sample of timecards, verify in/out patterns, rounding, and supervisor approvals.

3) Tighten onboarding packets and tax withholding

A clean start prevents messy corrections. Make sure every new hire packet includes a current Form W-4 and an up-to-date I-9, completed accurately and on time. Retain each I-9 for three years after hire or one year after termination, whichever is later. On the tax side, use the IRS employer guides (Publication 15 and 15-T) to confirm you’re using current withholding methods and rates for federal income tax, Social Security, and Medicare.

What to do this week: Compare your onboarding checklist against the USCIS I-9 handbook and IRS Pub. 15/15-T—update any outdated forms or instructions.

4) Strengthen internal controls and approvals

Payroll touches money, data, and compliance—so segregation of duties is non-negotiable. At minimum, separate (a) time entry, (b) payroll preparation, (c) approval, and (d) disbursement. No single person should control all four steps. Add simple compensating controls where headcount is small (e.g., owner review of variance reports, bank reconciliation by someone other than the preparer). Professional bodies and internal-control frameworks highlight red flags like “phantom employees,” unapproved adjustments, and unchecked manual checks—build your checklist to root these out.

What to do this week: Diagram your current workflow; circle any step where the same person both prepares and approves. Split those duties, even if it means a brief weekly owner sign-off.

5) Reconcile every payroll and prepare for year-end, all year

Treat reconciliation as part of running payroll, not a year-end scramble. After each cycle, compare gross-to-net reports against your GL, tax liabilities, and cash disbursements; investigate variances right away. That rhythm makes quarter-end filings smoother and protects you from penalty-triggering surprises. As the calendar turns, a standing year-end checklist (W-2/1099 prep, fringe benefit true-ups, address confirmations, and state/local filing dates) keeps you on time.

Remember your quarterly federal filing cadence, too: most employers file Form 941 at the end of the month following each quarter (April 30, July 31, October 31, January 31). Missing those dates can get expensive.

What to do this week: Add a “mini-recon” checklist to your payroll runbook: GL tie-out, tax liability match, and cash confirmation.

Bonus Tip: Publish a simple payroll calendar—and stick to it

Post a one-page calendar with pay dates, timecard cutoffs, approval deadlines, bank holidays, and filing dates. When everyone sees the same plan, you get fewer late timecards and last-minute edits. The SBA’s employer guidance and IRS publications are good anchors for the statutory dates you’ll include; layer in state agency deadlines as needed.

Bottom line: You don’t need fancy software to make payroll better. You need clear rules, clean inputs, simple controls, and steady habits—done the same way, every time.

Legal Disclaimer: This post contains general information and should not be relied upon as the only source of authority. Taxpayers should seek professional tax advice for more information. This information was current at time of posting; we are not responsible for updating this or any blog post/article for subsequent changes in the law or its interpretation.