If you've been an employer for any length of time, you know that payroll can be an enormous hassle. It's like a migraine that comes like clockwork every two weeks. Laws governing how employees are paid are complex, and mistakes in payroll can be very costly in litigation, fines and penalties, or loss of employee good will. Fortunately, you can take steps to simplify payroll and decrease the recurring pain.

Outsourcing Payroll

You can eliminate 90 percent of the headache and potential for error in payroll by outsourcing it to payroll experts. A number of companies can process your payroll; you simply give them your data and they handle all aspects of payroll, from deductions to mailing or depositing the checks. A Professional Employer Organization (PEO), such as Workforce Solutions, provides payroll processing in addition to all the services you would expect an internal Human Resources department to provide, but it is a separate entity from the organization to which it delivers these services. PEOs deliver expert and efficient employee-related administration, sharing the responsibility and risk of managing workers, including making sure they get paid correctly and on time.

Common Sense Approaches

If you are the do-it-yourself type, or outsourcing doesn't make sense for your particular business, you can reduce payroll complexity and potential for error with a common-sense approach to the task. A few simple steps and tried-and-proven tools will help enormously. Payroll has been around for a long time, and many companies offer products and solutions to simplify it. You'll probably discover other ways to mitigate the risks and hassles inherent in payroll processing, but here are some beginning steps:

• Invest in time tracking systems. If your business began with yourself as the sole employee, you may not have planned for ways to track employee time. In terms of payroll processing, however, no step is more fundamental. Times scribbled on pieces of paper will not do and could bring severe legal risk. You should invest the money necessary to create or purchase a consistent and reliable system for tracking employee time.

• Invest in payroll software. The tedious, repetitive tasks required to process your payroll is what computers were designed for. Purchase high-quality payroll software that is user-friendly and learn to use its features.

• The fewer people involved, the better. Every person involved in processing your payroll adds a layer of complexity and additional potential for error. If at all possible, place one person in charge of payroll and make sure she has the tools she needs to do the job consistently and correctly.

• Use direct deposit. Depositing employees' pay directly into their bank accounts saves you the cost and hassle of printing and delivering checks.

• Keep good records. This is a legal requirement in addition to a necessary step in simplifying payroll. Your payroll software should facilitate good electronic records, but you should keep paper copies of applicable reports and other records as well.

Plan for Common Errors

Not that you plan to make them, of course, but you should have policies in place to prevent common payroll errors and to quickly recover should they occur. And chances are, they will occur. The longer you are in business and the more employees you have, the higher your chances of error. The key is to take steps to minimize them. Here are some common payroll-related mistakes and what you can do to prevent them or limit their impact.

• Missing IRS deadlines. When you're withholding taxes from employees' pay, you are required to deliver that money to the IRS at least quarterly. The IRS is not amused if you miss a deadline; you will incur fines and penalties and possibly be subject to other legal action. Your payroll software likely includes a scheduling feature to alert you when a payment is due, but you should plan 2 or 3 additional layers of redundancy to ensure the correct amount goes out at the correct time. Your bank can help by setting up automatic payments.

• Clerical or data errors. Ranging from loss of records to inaccurate data entry, innocent mistakes by payroll workers can be costly and time consuming. You can lessen the frequency and pain of such mistakes by having a consistent and meticulous payroll records system, ensuring your employees are thoroughly trained in all aspects of its use, and strictly enforcing policies designed to ensure accuracy.

• Systemic errors. Your time tracking software can make mistakes; punch clocks can be inaccurate or smudge time/date stamps; electronic time records can be lost or corrupted. Though any type of electronic or mechanical equipment can be incorrect or fail altogether, the chances of such problems are greater if you seek to cut costs too aggressively by always buying the cheapest solutions. Remember the maxim: you get what you pay for. In the case of payroll-related equipment, you may get a lot more than you bargained for if you try to do it on the cheap.

• Incorrect withholding. If you offer benefits to your employees, you might withhold insurance premiums, 401(k) contributions, and other amounts from employee pay in addition to the taxes required by law. If there are garnishments or other legal liens on employee pay, payroll processing becomes proportionally more complex. This is where high-quality payroll software is indispensable. If you calculate withholding manually, you will make mistakes in this area, and those mistakes can be costly.

With the large and growing number of regulations dealing with how employees are paid, the savvy business owner will explore all possible options. In such a high-stakes game, it makes good business sense to stack the odds in your favor by learning as much as you can about payroll processing and its potential pitfalls. You will probably learn that outsourcing your payroll to a PEO like Workforce Solutions is the least costly and most secure way to ensure that payroll complexity doesn't impede the growth of your business.