Documenting payroll policies and procedures

A well crafted policy can mean time savings later: CPA

Payroll professionals are primarily responsible for paying employees on time and accurately while keeping their organization legislatively compliant.

One of the best ways to guarantee success is to document policies and procedures, and then make sure payroll activities are carried out in a manner that aligns with both an organization’s culture and the 190 regulatory requirements that impact payroll.

A policy is a clear and simple rule to guide organizational decisions to achieve the desirable outcomes. For example, providing a greater overtime benefit than required under employment standards legislation is outlined in a company policy.

A procedure refers to the steps required, or the “how to” to carry out a policy. For example, how to administer overtime equally among the eligible employees is outlined in a procedure.

Getting started

While the notion of writing payroll policies and procedures strictly from payroll’s point of view may sound appealing, it’s advisable to include other stakeholders in the process.

Establish a taskforce and include representation from HR, finance and managers or supervisors responsible for submitting payroll information.

If the organization is covered by a collective agreement, include a union representative.

An external policy expert could also be included.


Start by developing an outline. This will arrange ideas into an organized sequence.

Some of the things that should be considered include:

•In which jurisdictions does the organization operate?

•What are the legislated minimum standards?

•What currently happens at the organization? Will this offer a greater benefit?

Using this information formulate the policy.

Once the policy has been established, procedures need to be addressed.

Remember there may be multiple procedures that apply to one policy.

Writing a draft

Once there is an outline, ask the most experienced writer or reviewer on the task force to write the first draft.

The first draft is important, as it will set the tone of the final product. For the draft:

•keep it simple and clear by selecting the words carefully

•use “must” if an action is mandatory and “recommended” if an action is only preferred

•use the present tense and active voice

Reviewing, editing and obtaining authorization

Once the payroll policy and procedures have been drafted, distribute the document to the task force for review and feedback.
Make any necessary modifications, ensuring everyone agrees on all the changes and revised wording, then submit the revised document for approval by management.


Once a final version of the policy and procedures has been agreed upon, the message needs to go out to employees.

To implement the policies and procedures effectively and achieve the expected outcomes, use a variety of communication methods such as:

•provide employees with a handbook (hard copy or online) that details the organization’s payroll policies and procedures

•require employees to sign an acknowledgement form if this is a change in policy or procedure

•post information notices on the organization’s bulletin boards

•ask to speak at departmental or team meetings and be ready to answer employees’ questions.

•provide training sessions

•be prepared to provide frequent reminders and followup meetings/sessions to ensure consistency


It is a best practice to evaluate an organization’s policies and procedures.

Measure any changes in behaviour through surveys, focus groups or other methods to ensure the organization is operating efficiently by meeting the organizational goals; remains in compliance with the legislation; and provides a fair environment where employees are treated equitably.

When writing policies and procedures remember to include:

•the date the policy and procedures were written or updated

•the names of the task force creating the policy and procedures

•the name and the position of the person approving the policy and procedures

•the effective date of the policy and procedures

Once well written policies are established, changes tend to be infrequent.

Usually changes will only occur if the related legislation is amended, or the organization goes through a change, such as a reorganization, merger or unionization.

Procedures, on the other hand, change and evolve more frequently because of new technology or shifts in the organizational culture and demographics of the workforce.

An organization’s policies and procedures should be reviewed on an annual basis to make sure they remain current and relevant — and changes should be communicated to employees.

This article is a summary of an education session to be presented by Canadian Payroll Association (CPA) payroll experts Karima Balfoul and Tina Beauchamp at CPA’s annual conference and trade show in Ottawa in July 2012.

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