How To Structure Payroll Teams and Processes

So, it’s time to think about your payroll teams and processes. Specifically, your business needs a solid structure and strategy. Good structures address and prevent problems, whether your company faces payroll issues for multi-state employers or outdated systems. But when it’s time to sit down and map out a strategic foundation, it gets a bit tricky.

That’s because there’s no surefire way to structure payroll teams and processes. Every business is different, and HR leaders must consider current and future needs. For example, your company may employ workers in one state or country today. But you know you’re planning on expanding into neighboring states or nations soon. 

Consequently, you want to know how to put payroll methods and teams in place that can scale with your future operations. Fortunately, there are some tried-and-true ways to think about the payroll process and team structures. Let’s explore them below.

Decide Whether To Handle Payroll Internally

The more your business expands, the more complex your payroll gets. Say you hire employees and operate facilities in several states. Of all the payroll issues for multi-state employers, deducting the correct amount of taxes is the most complicated. That’s because it’s not as cut and dried as you might think.

For example, you might have a group of employees work in one state and another group that works in a different state. However, not all of the staff members in these groups live in the same state as they work. Depending on state agreements and regulations, payroll deductions for taxes may not look the same for these employees.

Some businesses have enough expertise and HR staff to handle these complexities. Others don’t. The ones with the proper skill sets and staffing levels may prefer to perform payroll in-house. Companies that don’t will probably prefer to outsource payroll processes and functions. 

A critical part of your structure is determining whether to handle all payroll functions internally. This will also dictate how many employees you need on your payroll teams and where they’ll work. Keep in mind that you don’t necessarily have to outsource everything or maintain all processes in-house. You might find a mixed approach works best for your needs. 

Think About Centralization vs. Decentralization

This is about whether you want to have your payroll teams work from the same location or separate areas. A centralized group may work from a corporate office or headquarters. In contrast, decentralized teams might work from satellite locations or facilities separated by state lines.

You can structure in-house and outsourced teams either way. For example, a company may operate on a 100% remote work business model. The business may hire a remote payroll team that’s also decentralized. The remote business model drives the decentralization, whether the group consists of direct employees or a vendor’s team. 

Your company will want to consider centralization and decentralization in terms of scopes and locations. It will depend on how complicated your operations are today and might be in the future. You might want to structure your payroll teams according to location or business function. 

Another way to structure payroll teams is by contractors versus direct employees. You might break this down further if you hire temporary or seasonal staff. Here’s an example of a possible structure.

  • One dedicated group for freelancers.
  • One payroll team for full-time and part-time permanent staff.
  • One payroll team for seasonal employees.

Of course, you can scale this structure as the number of freelance teams, permanent staff, and seasonal employees increase.

Think Through Payroll Processes

In terms of payroll processes, there are a lot of things to think about. 

  • Timelines and schedules.
  • Budgets for expenses, including software and staff.
  • Employee classification laws.
  • Onboarding procedures and documents.
  • Data verifications and audits.

This list is not exhaustive, but it does reinforce the need to map out various processes and strategies. For instance, paying employees each week can be convenient for them. However, it requires more work for you and your staff.

However, this payroll schedule may be best for staff who work on commission. It can work as long as your company has the resources to automate the schedule and process. But you will want to ensure backend commission processes and formulas are accurate.

Another critical process is onboarding. When new hires or freelancers join the team, how will the company collect mandatory documents? Many payroll systems let you accomplish this electronically, making onboarding faster and more convenient. Believe it or not, though, some businesses still use manual onboarding processes.

Create Redundancy

In the United States, right-to-work and employment-at-will laws mean staff can leave with or without notice. While these laws also work in reverse, employees who quit without notice can leave employers hanging. This scenario means your payroll teams and departments may have to scramble or take over unfamiliar job functions.

You can avoid these scenarios by creating redundancy in your payroll team structures. Cross-training employees and having built-in backups ensures payroll will still efficiently run if someone quits. Or, if a critical team member calls in sick or is out for a personal emergency, another employee can step in. 

Businesses can create payroll team redundancy using various approaches and strategies. The following are some examples.

  • Internal mentoring programs
  • Vendors that are on standby or retainer
  • Promotion track or cross-training programs
  • Document and standardize procedures
  • Implement a backup system

You can also put several of these examples into place. For instance, you might implement a backup system and hire a vendor that handles minor functions and is also on retainer.

Final Thoughts

Structuring payroll teams and processes can bring things like payroll issues for multi-state employers to light. However, this is a good example of why companies should formalize payroll staff responsibilities and methods. Like with any other core business function, you can’t expect employees to wing it and succeed.

But you do need to think about how your structures will align with your business operations and requirements. Costs and internal resources will be critical factors. Yet, so will need for redundancy.  


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