A company can offer a large number of benefits to its employees, many of which require some sort of deduction from payroll. For example, a company can set up deductions for employee medical, dental, life, and supplemental life insurance, as well as flexible spending account deductions for medical insurance or child care payments, as well as 401(k) deductions and 401(k) loan deductions. If there are many employees and many deduction types, the payroll staff can be snowed under at payroll processing time by the volume of changes continually occurring in this area. Also, whenever there is a change in the underlying cost of insurance provided to the company, the company commonly passes along some portion of these costs to the employees, resulting in a massive updating of deductions for all employees who take that particular type of insurance. This not only takes time away from other, more value-added payroll tasks, but also is subject to error, so that adjustments must later be made to correct the errors, which requires even more staff time.
There are several ways to address this problem. One is to eliminate the employee-paid portion of some types of insurance. For example, if the cost to the company for monthly dental insurance is $20 per employee and the related deduction is only $2 per person, management can elect to pay for the entire cost, rather than burden the payroll staff with the tracking of this trivial sum. Another alternative is to eliminate certain types of benefits, such as supplemental life insurance or 401(k) loans, in order to eliminate the related deductions. Yet another alternative is to create a policy that limits employee changes to any benefit plans, so they can only make a small number of changes per year. This eliminates the continual changing of deduction amounts in favor of just a few large bursts of activity at pre-scheduled times during the year. A very good alternative is to create a benefit package for all employees that requires a single deduction of the same amount for everyone, or for a group (such as one deduction for single employees and another for employees with families); employees can then pick and choose the exact amount of each type of benefit they want within the boundaries of each benefit package, without altering the amount of the underlying deduction. This last alternative has the unique advantage of consolidating all deductions into a single item, which is much simpler to administer. Any of these approaches to the problem will reduce the number or timing of deduction changes, thereby reducing the workload of the payroll staff.Minimize Payroll Deductions