Managing your payroll is often a complicated task, and it requires specialised knowledge. It’s not uncommon for errors to occur when handling payroll in-house, so here we share the most common and costly mistakes and give some suggestions for ways that you can avoid them.
1. Placing too Much Knowledge in the Hands of One Specialist Resource
Payroll is an activity that requires a great deal of current and accurate understanding of regulations and processes. Many small to medium-sized organisations place one resource in charge of payroll processing, posing a risk if the individual is sick, on holiday or leaves the organisation.
The administrative burden of processing a monthly payroll can also lead to data entry errors or to the omission of critical information. One way to avoid this is to ensure that you train several people to handle payroll processing, allowing sufficient time for them to get updated on the latest changes in laws and regulations. Another option is to consider outsourcing your payroll to an external service provider who will ensure resources are always available and trained to manage your payroll.
2. Maintaining Several Systems for HR Administration
Payroll processing depends on several employee data sources – for example, core employee data, time and attendance, and benefits and claims. When the sources for this information are in different IT systems, it creates a headache for those tasked with collating the data to calculate the payroll.
One solution is to implement an HRMS to hold data in one central place. An HRMS significantly decreases the payroll burden and offers security, audit trails, improved reporting options, and easier employee access to personal information.
3. Manually Processing Payroll Deductions and Additions
A challenging aspect of payroll processing to get right is handling salary deductions and additions that can change every month. Keeping track of when changes are required, and for whom, is a task that often leads to errors and delays. Deductions and additions are time-bound and dependent on supplementary documents or information such as claim forms, overtime logs, and leave applications.
Associated documents are likely to require checking and approvals before being processed, which adds to the potential delay. An HRMS will alleviate this problem as it provides automated approval workflows, connected data and processes, and pre-programmed deductions and additions based on dates or other criteria.
4. Inefficient Handling of Time and Attendance
A core input to salaries is the employee time and attendance log. Collecting all of this data, storing, and retrieving for calculations can be a difficult task. Determining working hours has become even more challenging with remote working and the increasing tendency to have employees engaged at different locations during a given period. Implementing a core attendance tracking system that you can rely upon to provide accurate and readily accessible data is key to simplifying this task.
5. Errors Caused by Handling Diverse Worker Demographics
It is common to see organisations using a wide range of worker types to meet operational needs. Workers can include full and part-time salaried employees with benefits, contract staff on various project rates, freelancers on hourly rates, or sometimes even vendor resources.
This wide range of worker types may form part of company payrolls, and each requires different payment calculations and can complicate the process. One solution is to use an HRMS that can handle pre-defined worker classifications to automate differentiated payments and any associated variations that might be needed.
In summary, you can alleviate the worry and headache of payroll processing by implementing a central HRMS or outsourcing the responsibility to an external service provider who will take care of all of these issues on your behalf.
Why not take a look at how our HRBluSky HRMS can help you eradicate these common and costly errors and make your payroll simpler to administer.