Payroll is an important aspect of human resources that plays a crucial role in employee retention and workplace morale. Prompt and accurate payments, compliance with regulations and proper maintenance of employee records are obvious signs of good payroll management.
However, poor knowledge of payroll processing, obsolete systems and lack of discipline may result in costly payroll mistakes. While it is only human to err, here are some payroll sins that must be avoided in the workplace.
Insufficient skilled personnel
Your organisation may have the best HR payroll system but if your payroll staff are not equipped with appropriate knowledge, it ends up being white elephant. While payroll software can help to automate certain administrative tasks, your payroll employees should be the brainchild behind the mechanics. This means ensuring that they are equipped with knowledge relating to payroll such as overtime calculations, local tax laws and key tax filling dates. It might be helpful to run quarterly training sessions to update your payroll staff on any legislative or payroll changes.
Inefficient payroll system
Similarly, equipping your payroll staff with essential compensation knowledge would be in vain without appropriate resources to enhance the payroll workflow. Gone are the days whereby payroll involves computing the number of hours on employees’ punch cards and calculating employees’ wages on excel spreadsheets. With the rise of technology and data breaches, cloud-based payroll software is increasingly becoming more popular amongst organisations due to its efficiency and security. While there are plenty of payroll software in the market promising time-saving features, the key is to choose a payroll software provider that is able to meet your organisation’s payroll needs.
Inadequate data security
Failure to implement strong and robust security protocols within your payroll software is likely to result in data breaches and leaks. Given that your payroll system contains all your employees personal and confidential information, data leaks can be highly detrimental to both employees as well as the organisation in terms of costs as well as reputation. It is imperative to enforce robust and reliable data security protocols within your payroll system. At the same time, develop appropriate data security policies and enforce them within the organisation so as to ensure that employees are well-equipped to handle any data breach situations should it arise.
Payroll laws differ from country to country. This is particularly crucial if your staff is handling payroll computation for employees across multiple countries. Failure to pay labour tax or mandatory employee-employer contributions can result in hefty fines for the organisation. As such, organisations should pay greater attention to ensure that their payroll software is compliant and audit-ready. This means ensuring that your payroll process meets statutory compliance requirements and that there is regular communication between payroll, tax, finance, HR and mobility teams.
Poorly-managed workflow processes
Payroll is a time-sensitive process and a small delay can result in inaccurate salary disbursement and unhappy employees. As with the case of unskilled staff and an inadequate payroll system, a disorganised payroll workflow process can be highly disruptive. This may result in payroll mistakes and create opportunities for fraudulent activities. Have a standardised payroll workflow and ensure that there are appropriate controls in place. Concurrently, enforce these standard operating procedures on your staff to minimise the risk of payroll mistakes.
Lack of yearly process reviews
The recent COVID-19 situation has highlighted the importance of having business continuity plans (BCP) in place. Given that there is no warning as to when an emergency may arise, organisations need to have in place BCP and review them on a yearly basis to ensure its relevance. At the same time, organisations can create mock-up situations to ensure that staff are well-equipped to handle any business crisis.
Poor understanding of payroll needs
In addition to understanding payroll workflow processes and labour laws, organisations should always be on the lookout for ways to improve and streamline workflow processes. Poor understanding of payroll needs and how it aligns with business objectives can be detrimental to the organisation as well. For instance, in choosing an appropriate payroll software for the organisation, lack of understanding of the organisation’s payroll needs may result in poor selection of payroll software that does not meet the organisation’s requirements.
Payroll affects every aspect of the business as employees need to be able to rely on being paid consistently with delays. A poor payroll set up can affect the morale of employees right through to the financial stability of the organisation. Given that payroll and human resources are the most expensive aspect of the business, it is important for organisations to recognise the importance of payroll accuracy within the organisation.