7 Important Healthcare Industry Payroll Tips

Updated on December 20, 2023

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Making sure that staff are paid fairly and on time is essential in any industry. This requires good payroll management skills. 

Such skills are particularly important in the healthcare industry where unpredictable work schedules can make keeping on top of each employee’s pay more challenging. Payroll errors are common in this industry and can have a negative impact on the retention of staff. Therefore you need to do your best to ensure the utmost accuracy.

Just what are a few tips to help make the payroll process easier? This post lists a few key tips. 

Make sure workers are correctly classified

How a worker is classified can drastically impact how they are paid and how much they are taxed. The majority of workers in the healthcare industry are classified as full-time employees. However, many hospitals and clinics also rely on independent contractors, temporary staff and part-time employees.

Some workplaces prefer to take on workers as independent contractors as it means they don’t have to offer benefits like overtime pay or handle workers’ taxes. However, a lot of workers in healthcare will refuse to work for a company that classifies them this way unless it is an agency. Classifying workers as independent contractors also comes with its caveats. Unless you otherwise state so in a contract, independent contractors are allowed to pick and choose their own hours and take off as much time off as they want.

When classifying workers, you should also consider their tax classification. It’s important to consider all forms of taxable employee compensation such as social security tax, medicare tax and federal/state unemployment tax. This ensures that workers receive the correct tax rates. 

Digitally track employee hours

When it comes to calculating work hours for payroll, there are many different methods. One popular modern option is to digitally track employee hours by introducing a digital time clock. This can be a device on a wall at your work premises that workers clock in and clock out of when they begin/end their shift, or it could be an app which allows workers to clock in/clock out from any location.

Hours are then automatically recorded digitally on a system from which pay can be automatically calculated too. This makes calculating employee pay a lot more straightforward. 

Of course, this method is not foolproof – employees can still forget to clock in or clock out, and last minute schedule changes may affect how overtime is calculated. Therefore, you still need to double-check each employee’s pay to make sure there are no clear errors.

Don’t overlook overtime

Under the Fair Labor Standards Act (FLSA), all employees in the US who work over 40 hours must receive overtime pay – which should be at least 1.5 times their regular pay.

It is common in the healthcare industry for workers to work overtime and employers need to keep track of this. Using a digital timeclock system, much of this can be automated, however it could be important to occasionally double-check this manually.

Increasing the amount of overtime pay you offer can motivate more of your staff to work overtime. This can be essential to covering shifts where there may be staffing shortages. For example, you could set the overtime rate to 2 or 3 times the regular hourly rate – depending on when they work overtime and how much extra overtime they take on. 

Consider the benefits of a salary

A salary is so much easier to keep track of than hourly pay – an employee is paid the same amount each month regardless of how many hours they work. It makes sense to offer employees salary pay who work the same shifts every week. However, as many healthcare professionals will already know, these types of set shifts don’t always work out in a hospital or emergency clinic – and therefore employees may not appreciate being paid the same amount each month if they are working different workloads each month.

It’s worth discussing the option of a salary with employees as it may be more attractive to some workers. It’s worth noting that while salary workers are not covered by overtime pay laws, you can still find ways to reward employees who work extra hours such as offering bonuses.

Budget ahead for payday

It’s important that you have enough funds to cover the pay of all of your employees. While you may not be able to accurately predict how much you will spend on your employee’s payroll each week or each month, you should be able to come up with a rough estimate of how much it will cost based on how many employees you currently have on your rota. Set aside funds in advance so that you can be sure payments won’t bounce.

Your payroll should really be the cost you prioritise above everything else. Even during periods of expansion or renovation, make sure that you don’t dip into funds set aside for employees. 

Automate what you can

Much of the payroll process can be automated to save time and reduce errors. In fact, much of the overall HR process can be automated – starting with scheduling employees. Efficient shift scheduling can reduce the need for shift alterations and reduce payroll errors, so consider moving to an automated shift scheduling system. From here, consider automating the process of clocking employees hours (as already discussed earlier) and then finally the process of paying employees (employee pay can be automatically triggered to leave your account on a certain day and time). 

Consider outsourcing your payroll

An alternative solution to automation is outsourcing. This involves paying a HR or accounting company to handle the entire payroll process for you.

Outsourcing the payroll process is useful for small clinics in which those in charge of the payroll are likely to also be juggling many other roles – which could even include hands-on medical work with patients. Take the time to compare the reviews and rates of various different payroll management companies online. Some healthcare services may find that it is unaffordable and may prefer to handle it themselves. 

The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.