Page 110 - Essentials of Payroll: Management and Accounting

Payr oll Best Practices
As just noted, this best practice should be reviewed with all key
department managers and senior management before being made public.
Also, any employees who are currently having deductions taken from
their paychecks for past purchases should be “grandfathered” into the

new rule, so that they are not forced to suddenly pay off the remaining
amounts due.

Cost:

Installation time:

Disallow Prepayments

Many employees do not have the monetary resources to see them
through until the next payday.Their solution is to request a pay advance,
which is deducted from their next paycheck. It is a humane gesture on
the part of the payroll manager to comply with such requests, but it
wreaks havoc with the efficiency of the payroll department.Whenever
such a request is made, the payroll staff must manually calculate the taxes
to take out of the payment, then manually cut a check and have it

signed.And, that’s not all:The staff must manually enter the pay advance
in the computer system so that the amount is properly deducted from
the next paycheck. For larger advances, it may be necessary to make
deductions over several paychecks, which requires even more work.
Furthermore, if an employee quits work before earning back the
amount of the advance, the company has just incurred a loss. Clearly,
paycheck prepayments do not help the efficiency of the payroll depart-

ment. This is a particularly significant problem in organizations where
the average pay level is near the minimum wage,since the recipients may
not have enough money to meet their needs from pay day to pay day.
The best practice that solves this problem seems simple, but can be
quite difficult to implement.You must establish a rule that no paycheck

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