Involving Employees in the Company’s Payroll

By QuickBooks Canada Team

4 min read

Payroll can be a big expense for a small business, which makes it a tempting offer to distribute the scheduling, time-tracking, and benefits tasks to employees themselves. Even for a small business payroll, issues can arise from expecting your drivers and customer service reps to learn payroll software on top of all the stuff they already have to know about and manage. There are also some serious privacy concerns, at least for federally regulated businesses. However, if you can make a distributed payroll system work, it can be a very rewarding choice, both for established small businesses looking to economize on HR and for newer companies that want to expand without investing in their own HR along the way.

Distributing Employee Salary and Tracking

If you’re looking to distribute responsibility for your small business payroll directly to the employees themselves, it’s important to know the limits to this approach. First, you’re probably still going to need an HR manager (or other solution) to check everything and make sure entries are accurate. Some of this, especially checking for accurate time recording, can be done by the employees’ immediate supervisor, but you should probably keep at least one management-level HR professional on the payroll to handle changes and updates, correct errors (if only so your new employees aren’t empowered to alter whatever they want in your payroll software), and to implement Canadian benefits and payroll laws, which are a bit much for front-line employees to master.

You may, however, wind up saving a lot of time and money by letting employees self-report their hours worked via mobile devices or desktop apps. In general, workers who feel their work is being checked will be honest about what time they clocked in, when they took their breaks, and how early they left on Friday. This limited approach also has the virtue of being relatively simple for them to do; for most payroll software applications, entering times is as simple as clicking from a drop-down menu.

What Else Can Be Done?

While some core HR functions, such as generating reports and monitoring compliance with Canadian labour law, have to be done on a company-wide level by professionals, your employees can do quite a bit more than report their own payroll. A good program also includes the option of requesting schedule changes (subject to a manager’s approval, of course) and benefits changes. Switching over to “tax-exempt” for a single pay cycle, when the Christmas bonuses come out for instance, shouldn’t be harder to do through a mobile app than composing a witty tweet. Another possibility is to let employees adjust their payroll deductions at will. This includes retirement deductions, union dues, and a few other items as well. Basically anything that a normal, centralized HR system prints on the pay stub is, in principle, something the employee can take charge of with very little effort.

A Caveat: Federal Law

One cause for concern is the effect this can have on workplace privacy. Canada’s federal government usually takes a hands-off approach to regulating the exchange of information within private businesses, and between companies and their employees, but your workers do have privacy rights, and they can potentially be compromised when payroll functions are distributed across dozens of individuals. Federally regulated businesses, in particular, are subject to national privacy laws. These can be very strict for banks, telecom companies, and a few other nation-level industries. If, for example, your company markets baby food across Canada, and you want your merchandisers to input their own hours spent stocking shelves, you might run afoul of laws about so-called Bring Your Own Device models, where personal and business information are both stored on an employee’s own phone or tablet. If you run a chain of credit unions, as a financial institution you’re even more exposed, as the law requires you to install privacy filters and encryption lockouts on the workers’ personal phones.

Distributed Employee Payroll: Probably Still Worth It (Probably)

Despite the potential shortcomings, distributing responsibility for your employee payroll to the employees themselves brings intangible benefits you may not notice right away, but that are certainly present. For one thing, it has been found time and again that employees work much better when they have good morale, and one way to lift morale is to make workers feel they have some measure of control over their work. This can be hard to do for line workers at a factory, who are expected to perform rote tasks at the speed of an assembly line, but by handing them the responsibility for their own scheduling and payroll deductions, you can do a bit more to help them feel empowered, as if the job lives for them and not the other way around. This is also true for distributed workforces, such as a team of drivers, who may have been drawn to the job in the first place by a sense of independence.

Restructuring your employee payroll system to encourage more worker participation is a great way to shave expenses off of your in-house HR budget and empower workers to take charge of their work. It isn’t for every company, and there are always laws to keep in mind, but a decent small business payroll program can do wonders for the whole company.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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