Minimize payroll deductions

In a larger organization, it can take a considerable amount of time for the payroll staff to enter updates to employee deductions in the payroll system. This tends to be a larger problem when a business offers its employees a broad range of benefits, each one requiring a separate deduction for the employee share of the expense.

The updating problem is especially severe whenever the cost of a benefit changes, since this means that the payroll staff must update the amount of the related benefit deduction for all employees. In addition, deductions may have been entered incorrectly, requiring periodic updates for any errors found.

There are several ways to reduce the number of pay deductions. One option is to offer a single benefits package to all employees, with a single deduction associated with it. Another possibility is to have the company pay the full amount of some benefits, so there is no deduction at all; this works well if the deduction is currently for a trivial amount. Or, consider completely eliminating some existing benefits in exchange for paying the full amount of other benefits (which is doubly effective from the perspective of eliminating deductions). Finally, consider instituting a policy that limits the number of benefits changes that employees are permitted to make per year. Any of these options will reduce the number of pay deductions.

Related Courses

Human Resources Guidebook 
Optimal Accounting for Payroll
Payroll Management