3 hourly payroll pitfalls (and how to avoid them) in 2024

(00:00):

We're going to talk all about hourly payroll pitfalls and what you can do, especially as we're now in October, we're looking forward to the year ahead, kind of starting to start on some of those 20, 25 plans. It's a perfect time to kind of think about things like payroll processes and what you can do now that can save you tons of time and headaches in the year to come. So that's what we're going to do today. And like was said, I've been at Workstream and I've been a podcast host for a little over two years now. I've spoken with hundreds of professionals, a lot of them in the restaurant space, a lot of them in HR recruiting as well as business owners. And so a lot of what I'm sharing today, it comes from those experts and all of the people that are doing this stuff day in and day out.

(01:04):

And then there's me kind of chatting with them, taking notes, logging things up in my brain so then I can share 'em with you just want to get that out of the way because it's not coming from, I'm not a genius, it's purely me just trying to collect all of the wisdom and insights from all of the other hardworking folks that I've spoken with. So additionally for today's webinar, we have an additional source of information that we're going to be talking all about, and that is a recent survey that we completed here at Workstream that's called the State of Hourly Payroll 2024. And really this came down to a few months ago, the team at Workstream, we were talking about the unique challenges that people face when they're trying to run payroll and all of the other tasks related to it specifically for hourly workers, most of which as you're all joining probably from restaurant industry, right?

(02:06):

There's primarily hourly workers and you're having to pay them. And that presents some unique challenges, a lot of existing payroll processes and platforms and whatnot. They're kind of built for the salaried workers, the corporate jobs, not really for this restaurant hourly worker segment of the working population. So we said, let's ask what are the biggest challenges that people are facing when it comes to payroll specifically for hourly workers? We surveyed 250 people that included a lot of business owners, a lot of HR leaders, and once again, I think a lot of them came directly from restaurant industry. So perfectly aligned with today's group I think. And I did want to call out, we've included a link to download this guide in the resources box. So I think you can click around. You should have that right in front of you somewhere on your screen right now.

(03:16):

Feel free to download that. Take a look once we're done with the webinar, pass it around to a colleague. Whatever you want to do, it's your resource to hopefully get some value out of. And it kind of reinforces a lot of what we're going to be talking about today because we're going to really kind of dive into some of the data that we received throughout this survey. So we're going to start by talking about how outdated payroll systems combined with manual processes are really failing hourly business owners or those that work for hourly businesses, which I'm guessing is most of you here. So hopefully that's applicable. We're going to recommend some tips to resolve common payroll challenges that a lot of you are facing and that our data says a lot of you are experiencing. We're going to talk about how you can both reduce the time that it takes you to run payroll, but without sacrificing accuracy because those two components, speed efficiency as well as accuracy, those are really important.

(04:27):

And we're going to talk about how you can kind of juggle those two things. And then we're going to talk about the benefits of integrating your payroll process into your overall platform that is maybe doing other things beyond payroll. A lot of people may be their payroll right now, it's kind of a separate thing and how there's a lot to be gained by bringing that kind of smushing those together with your HRIS and your hiring platform, that kind of thing. So anyway, that kind of gives you a preview of what today's webinar is going to be all about.

(05:07):

The first insight that learned from this survey of 250 people is that a lot of payroll problems aren't actually payroll problems. I know that sounds like a puzzle or a brain teaser or something, but here I'll show you kind of what I mean by that. So this is once again, based on that survey data. These are the most commonly identified time consuming things related to payroll. And so respondents could choose multiple of these that select all that apply kind of situation. And you'll see that about two thirds of those surveyed said that the most time consuming part of running payroll is reviewing time sheets and hours worked and making sure that that data is accurate, which is interesting and probably based on the survey results, a lot of you that are here right now are probably like, yeah, that's probably right because it seems like that's a very common problem.

(06:15):

Number two, about a third of respondents said that the most time consuming part or one of the most time consuming things was getting employee documentation completed, making sure all of the T's are crossed and i's dotted around employee documentation. And then a little bit less, still about a third, a little less was just staying on top of the regulations and the compliance, a lot of which are always evolving when it comes to hourly workers. So you go back to this concept of, well, none of these things are actually payroll itself and most time consuming part is not printing out checks and mailing them in the mail. Thank goodness. I think probably most of us are, that's not how we tackle payroll anymore, but it's the inputs that go into the payroll and making sure all of those things are squared away. That's actually what's taking up the most time.

(07:10):

And I thought that was pretty interesting. Here's one other question. The results that we saw, we also asked over the last six months, what would you say is the number one problem that you faced in running your payroll? And the most common problem as far as just frequency of having to deal with this the most? Number one was misclassifying employees. And then number two was workers not clocking in and out at the right time. So once again, the number one thing is not, oh, the direct deposit was inaccurate or there were issues with tax filings or whatever. It's not really those specific payroll things, it's other tasks that are important that feed into the process. Those are really what have been according to the data, is causing the most headaches when it comes to payroll. So I think that's pretty interesting, and we kind of interpreted that data as like, okay, so what can we do about these other tasks?

(08:16):

How can we draw some conclusions about, okay, these are obviously taking up a lot of time. How can they take up less time? We all are very busy, especially in restaurant industry. You're moving very, very quickly. How can we minimize some of this stuff? So I have some initial tips and these are recommendations that I got from other participants in the survey speaking with some work stream's customers. So I'll share some of these. These speak to some of these the most identified issues, definitely not all encompassing. Just wanted to make sure I wasn't just presenting you with data and saying, Hey, look, there are problems without touching on potential solutions. Some things that I've heard initially, and then we'll talk a little bit more about it. So when it comes to spending too much time reviewing time sheets, one of the recommendations that we came across is to use an actual time clock system, tool platform, whatever that automatically checks for errors.

(09:25):

And then cross references time clock with schedules. Because generally the schedule of when employees are supposed to work should more or less align with the time clock and when people are clocking in and out, it's at least a good point of reference. It's using that and it's also looking for any other anomalies to automatically flag errors right away so you're not having to play catch up when it comes time to run payroll next week or whatever it is. So that's one recommendation for that issue. Spending too much time on employee documentation, which if you remember was another top challenge identified. The recommendation here is digitizing your entire process of collecting that documentation. So hopefully most of you are not doing employee documentation with paper anymore. It's not even digital documents, that's not the future. I feel like that's the present. So in speaking with a lot of workstream customers, that's what a lot of people are already using.

(10:33):

So hopefully you're already digital. But the other important part is to bake that process into the onboarding, but before the first day of an employee's job. So you don't really want to be worrying about that day two, day three, oh, payroll's coming up, oh, we never got this document. If you kind of think in terms of how you can build out that process right from the get go, that person is set to start a week from now and they now are presented with the documents that they need to submit. It's digital, it's quick, and you can make sure that when they arrive on day one, no headaches, no stress, they're good to go. And once that first payroll run starts, it's not going to hold anything back. Next recommendation is in response to the challenge of just spending too much time around regulation and compliance issues.

(11:30):

So one recommendation here is to make sure that your payroll process is built specifically for hourly workers because like I said initially, a lot of this regulation, the compliance issues, it's always evolving. I know everyone probably here is aware of things are very in flux, especially in California and other states, they have their own regulations and their own changes and a payroll provider that's built for hourly workers, it's going to be geared toward these sort of issues and it's probably going to be a little bit more aware of them and staying abreast of all these changes versus one that's built just for big corporation salaried workers. That's not their bread and butter. So you're going to have to probably handle more of that awareness of the regulation and compliance stuff yourself. And lastly, the challenges around misclassifying employees. So there's a lot that can go into this problem, but one recommendation that we do have is to choose a system of record that's tightly integrated with your payroll process and that everything, all the data is safe and secure within that because a lot of times the misclassification of employees, it comes from inaccurate data or out of date data or moving data from point A to point B and something gets lost in translation.

(13:01):

So that's a recommendation there. So like I said, these are just a couple because I didn't just want to throw a bunch of problems out and here's what the data says and not suggest some solutions. But we've talked so far about in the survey results, some specific findings and some of the data and those graphs. I want to move on to an interesting, this is more of a thematic finding that we found in this survey and that is this. We kind of identified this tricky balance that was going on between control and efficiency. And I think when you kind of try to figure out that balance, that can apply across a business in many different ways, but specifically when it comes to the payroll process, there is this tricky balance control versus efficiency. Can you get both? Is that even possible? And here's what I mean by that.

(14:01):

So if you look at this graph, these are the results to the question, just how do you manage your payroll? How are you even approaching it? And the answer is on the left. I would say that's kind of more in the control bucket, maintaining control. So a third of respondents said they use in-house software, but they're tackling in-house about a quarter of people said in-house, but they're not using software, they're using manual methods. I think in the way the question was worded, that's even spreadsheets, maybe some old school methods managing it in house. And then you see on the right, I think this is where the balance tilts over to more efficiency. So these are two external options. One is using an external payroll service and then with about a 10th, about 10%, 11% saying that they use an accountant. So on the right you've got probably more efficient, more efficiency because it's not on your plate week in and week out to run that payroll, but you're giving up a little bit of that control on the left, you've got more control, you're managing, you are probably a little bit more aware of potential problems, but that comes with a cost of time.

(15:33):

So anyway, that was an interesting kind of breakdown and it was interesting to see getting all these or getting all of these different payroll methods pretty well represented throughout our survey results. So the question is, and this is an open-ended question, I don't know if there's, I'm not going to try to say that there's a right or a wrong, but everyone listening this can kind of answer this themselves, ease outsourcing payroll worth that. So here's one good thing that does come from outsourcing payroll, and this is kind of what I was saying before, we found that in a follow-up question. Those that do outsource their payroll, 70% of them were saying they were spending three hours or less on payroll per pay period and three hours or less, I'm not sure where everyone is benchmarked at. Maybe you have an idea if you're listening to this, but three hours or less is pretty good compared to some of the other options.

(16:35):

I can't remember what percentage. There's a decent percentage that are spending more than 10 hours payroll process. So anyway, definitely the data shows that outsourcing can save you some time. Like I was saying before, it also can work out decently well for a single location business or a new business. If you're a new business owner, maybe you just opened your first restaurant, whatever it is, and it's like you've got so many other things to worry about that payroll is like, okay, I know it needs to be very accurate. I know it needs to be reliable. I do not have the time or the mental energy to worry about that, outsource it. That can make sense in that scenario. And then it kind of goes without saying, but I'll say it anyway, you can send it off and you don't have to worry about it anymore.

(17:25):

It's one thing off your plate that you can kind of remove from your mind. Once again though, going back to the trade off, outsourcing does come with a little bit of your forfeiting, a little bit of that control and some of that awareness that you have of the process and potential errors. So here are the bad, this is kind of where I'm going with that. It's harder to catch potential issues with time sheets once you send those time sheets off to your outsourced payroll service accountant, whatever it is, if they're not accurate, there's a lot higher of a likelihood that they're not going to catch that. Maybe you would be able to catch that a little bit quicker because more aware of your process, the payroll is also disconnected from your other HR processes. It's a little bit, it's kind of in a silo out by itself.

(18:10):

You're having to move more data around every time you do that. There's risk of errors, there's risk of CSV file being named the wrong thing and that gets sent over other headaches like that. So anyway, it goes back and forth. And I think the question coming out of this overall theme of efficiency versus control is what kind of strikes the best balance? What did the data say as far as like, okay, this is how much time people are spending and versus this is the method that they're using, which where's kind of the happy medium there and where's that balance? And so we kind of drew some conclusions from that data and the conclusion was that the future option, the thing that does draw the best balance between control and efficiency, it really comes through integrating your payroll process across your other tools and platforms that you're using for a lot of your current HR tasks.

(19:22):

And here's kind of the data that backs that up. So among our survey respondents about three quarters, about 74%, they said that they want a hiring, an onboarding and a time tracking platform that also includes their payroll platform. They're looking for that all-in-one solution. So three quarters, that was pretty substantial. And then tied to that kind of adjacent is that about two thirds would prefer a platform that's built specifically for the hourly workforce. Going back to, like I said earlier, some of those unique challenges that you're facing when you employ hourly workers, two thirds I think kind of understand, yeah, there's going to be some benefits to having a platform that's built with some of these unique challenges in mind. So anyway, we looked at this, especially the 73.6% that are looking for that all in one solution and combined that with what we are seeing on the amount of time people are spending, it was like, okay, there is definitely a desire for this all, all-in-one solution. And from what we're seeing, people that can keep this in-house, maintain that control, but the all-in-one solution provides some of that efficiency so they're not losing out on the efficiency while they're able to main control. It kind of strikes the balance between the two.

(20:57):

Here's one other interesting thing that I think is important and it's worth calling out. So about two thirds of people that responded to the survey really emphasized the importance of customer support, which probably makes sense. I honestly kind of surprised it wasn't higher. But when you think about payroll specifically, you cannot have problems and you have employees that if they don't get paid accurately and on time, that can be a crisis in their lives quite literally. They won't be able to pay bills or rent or whatever it is. So having really good customer support is really important. And we have a quote here from a crumble franchisee Christian bank head just talking about it's really important that your payroll is more of a partner. They're there, they're thinking in long-term. They're not just trying to move things down the road, but they're really kind of that partner relationship willing to offer that support.

(22:04):

So I think that's a great quote and something else that's worth calling out. In addition to the respondents identifying the need for an all-in-one payroll solution that connects with some of the other stuff you're already doing with HR and onboarding whatnot, getting that support is also very, very important. So a little bit more supporting that idea of that all-in-one payroll solution. This was from one of the respondents Marco, he's a Bojangles franchisee down in Georgia I believe, and he was just weighing in on, he was able to move from different platforms, different passwords, different usernames, everything's going different places. When he was able to streamline things and kind of bring out all that together, it freed up some time that he was able to now concentrate on actually running his restaurants, less time doing admin work, more time speaking with customers, more time helping employees.

(23:11):

And so that was really important to him. So anyway, as we went through parsing this data, that was definitely a clear trend is the value and importance of all in one. A lot of people are like, yeah, I can see the benefit there. Maybe that's something that they're considering, but maybe they're not quite ready to make the jump. And a big thing is really the migration process itself because depending on how big your business is, my payroll migration is the definition of just a massive headache. I think for a lot of people, they think, oh, maybe it's going to take months. I risk errors, I risk missing a payroll run. There's all of these potential things. And so I think even though a lot of people identify the potential and the benefit of streamlining their payroll process, bringing it within the other tasks that they're doing, they see that benefit, but there's still just a lot of hesitation because of this fear, uncertainty, and doubt.

(24:21):

So specifically when it comes to migration, I think it's worth calling out, and this is based on some of the things that we've heard, some of the feedback, there's some of these perceptions about migration experiences that are just causing a lot of concern. And one is that migration means lots of downloading CSVs, sorting through files, uploading this, taking this, moving it over there when in reality a lot of the best payroll providers handle the migration kind of for you. That's part of the service. They obviously want you to use their service, and so they're not going to make you do all this heavy lifting. Then once again, that's the good ones. There are some that will require it to all be on you, but hopefully the good ones don't. Next perception is that after migrating employees will have to worry about two W twos, and this is another one that depending on who the payroll provider is, they kind of eliminate that issue and you don't have to worry about employees getting confused. Two W twos, why am I getting both of these at the end of the year?

(25:28):

That's something that can be resolved by good payroll provider. And next is that next perception is that migrating can take months to complete. It can be an entire quarter worth of a project when in reality for a lot of businesses it can take just two weeks, just a couple of weeks. And then last perception is that migrating payroll providers just maybe isn't worth the hassle. I feel like that's a lot of the overall data, especially when you're like, yeah, a lot of people think I'm spending too much time. I'd love to bring this in-house, I'd love to bring this within all the other platform. They get all the pieces, but then it's like, but is that even worth the hassle? And I think the reality of that is that while migration does definitely carry some upfront costs, once you get it squared away, you get the system up and running, you're now potentially saving hours of time every single payroll run.

(26:29):

And then there can also be some cost savings as well. So it's definitely one of those, yeah, maybe you tear the bandaid off and there's a little bit of stress or whatever initially, but you're able to make up for that with potentially years of cost and savings. So anyway, those are kind of some of the things that we heard as far as what is holding people back from simplifying and streamlining their payroll process, like I said, and the data bears out. I do think that our conclusion with running this survey was that there is just a lot of room for improvement and a lot of businesses that employ hourly workers specifically are getting left behind by the fact that so many of these payroll providers, they're just not built for them. And I don't want to put words in anyone's mouth, but it just seems like they just don't quite care about hourly businesses, about restaurants quite the same way.

(27:23):

And so anyway, that's the results of our survey. Like I said, feel free to download it and the PDF goes in a lot more depth with some of this stuff and I'd love to hear some of your feedback or questions as you kind of go through that. I forgot to mention this at the beginning. We do have a competition and you can win an Amazon gift card. I should have teased that at the beginning, but oh, well, we're to that part of the presentation and then after that we're going to do some q and a from you. So first I'll kind of tee up the way that this works, this competition, win an Amazon gift card. It's going to be easy and hopefully rewarding. So on the next slide that I'm going to show, we have a mockup of a hiring poster. So spoiler alert, workstream does offer a payroll service.

(28:18):

And then in addition to that, we really made a name for ourselves with our hiring process and our hiring tools. One of those is a really sleek QR code text message based application process, which maybe you're familiar with, maybe not. But ultimately on the next slide you're going to see a mockup of a hiring poster and you're going to scan the QR code, and I will pull that up right now. So get your phones ready or however you scan a QR code. You can see this is the mockup that I was talking about, and if you scan the QR code or you can also text the phone number on your screen, then it will basically show you what the process is like for somebody that uses workstream to apply for a job. You can go to this example job listing, go through that process, and if you do that, then you'll receive the first 10 people, I guess I should say, will receive a $20 Amazon gift card and you'll get a little bit of a better idea of what that process would look like if you happen to use workstream for your hiring and for your screening process.

(29:34):

So I'll leave this on the screen for another minute or two, maybe not another minute or two, but maybe at least 30 seconds while you work on that and hopefully when your Amazon gift card, I'll talk just a little bit more about workstream, and I've kind of touched on this already, that it's kind of our perspective that a lot of hourly businesses that are driven by hourly workers, restaurants are a big part of that are just not quite getting the best experience out of their software that they could. There's a lot of unique challenges that come from the hourly workforce. Things like they're not at a desk, they maybe can receive tips, their paid changes depending on the number of hours worked per week. There's things like lunch breaks, overtime pay that you have to account for and there's definitely higher turnover. Anyway, all of these unique challenges that impact restaurants and other businesses that employ hourly workers much more than kind of the traditional salaried corporate job or whatever it is.

(30:55):

So workstream is all about trying to change that and deliver a better experience, one that's custom tailored for those that do employ hourly workers that hopefully anticipates the needs of those businesses and delivers to make things just a little bit easier, a little bit more streamlined, going back to the quote from Marco so that you can spend more time focusing on the guests and the things that matter. With that being said, I'm about to move on from this slide, so hopefully you've had the chance to get that Amazon gift card if you're interested in it, but going to move on. This shows an idea of how the workstream platform is built. We incorporate hiring, HR and employee records, that sort of thing, employee engagement, making sure employees are happy and they have any questions or concerns resolved so they stick around longer, increasing retention, there's time and scheduling the two important components we talked about from the survey results and then that payroll process. Our ultimate goal is by getting all of this functionality in one place, there's less time jumping between different tabs, forgetting passwords, resetting passwords, moving CSVs back and forth between systems and it's just all available to you. You jump in, you jump out, you can move on to more important things. So that's really the overall goal of work stream. It's kind of what we're singularly focused on. That being said, I think we have some time for a few questions.

Moderator  (32:40):

Alright, thank you for that, Daniel. It's interesting to see both the data and some of the key themes you've pulled out from there. So that was great. Yes. Turning to questions from the audience now it looks like we have a couple that have come in here. So the first one, this is from someone who says that they're looking to open new locations within the next year or two and they ask what challenges could I expect to face with payroll when I add more locations?

(33:13):

Yeah, yeah. So great question. It goes right back to some of the survey results that we saw, which is that maybe someone with one location, someone that's new, they're a little bit more likely to just say like, Hey, someone else needs to take care of payroll. Maybe they're going to ship that off somewhere, but that comes at the expense of control. It can also come with actual monetary expense too. So I'd say that's one thing is as you're growing adding more locations, that can become kind of a compounding expense. Both of those things. I'd say there's also additional complexity when it comes to there can be different factors in different cities, different counties, maybe you're opening a different location in even a different state. Any of those scenarios, there can be different calculations that need to take place in order to calculate withholding taxes, all that stuff and pay that accurately. So that goes back to what I was saying, where it's really important to have a payroll solution that takes all of that into account and understands all of those different factors so that you're not running into big time headaches as you are adding new locations.

Moderator  (34:42):

Alright, someone else wants to know what was one of the most surprising insights you learned from this survey?

(34:52):

Yeah, I would say when it comes to surprising personally, I think the number of respondents that said they were still doing payroll using manual spreadsheets, and I think I said this earlier, the old school, I think of the old school way to run that. What was the number off the top of my head, I can't remember. I just had this up, but in my opinion I was like, any number higher than 1% was kind of surprising to me and it was a significant number of people that were still doing it that way. And so yeah, I'd say that was definitely the most surprising.

Moderator  (35:33):

Alright, it looks like we've got time for one more here. So someone wants to know what types of payroll systems did the survey respondents report using and then how satisfied were they with those systems?

(35:52):

So we didn't specifically connect to the dots between payroll systems and satisfaction, but what we did connect the dots between is what payroll system you're using and how much time that you're spending. And so we kind of were able to connect the dots between that. And I think I talked about this before, we definitely did see that for some of the people that were using outsourced payroll solutions, they were spending a little bit less time than some of the people that were keeping things in-house. So I'd say that maybe that's a level of satisfaction. The one thing that we unfortunately didn't, weren't able to connect the dots between, alright, time, well are there errors taking place? Maybe you're spending less time but you're going back and forth via email with your payroll person and that's causing additional headaches. That was one piece that we didn't quite get to. I'd say that definitely when it comes came to the balance between what seemed to be a smooth process and less time. It was people that were using internal, they were keeping their payroll internal, but they were using some sort of software solution that did seem to strike the best balance between time, fewer errors, all of those things.

Moderator (37:14):

Great. Alright, well I think that will just about do it for our program today. Is there anything else that you want to add here, Daniel, before I send us off?

(37:27):

No, I guess I'll just kind of, I said this before, but definitely please take a look at the state of hourly payroll guide that we're sharing out, and if you have any additional questions or findings, you're like, oh, this definitely aligns with my experience, or maybe it doesn't, that's totally fine too. We're continuing to hopefully gather additional data and anecdotes around this topic because it's just really important to work stream. So take a look at that and then feel free to contact us and weigh in with your own thoughts or your own results.