Payroll processing is a necessary but complex business process. Every business is striving to make it as efficient as possible, yet mistakes seem to be inevitable. The top 5 common payroll mistakes will be outlined and tips will be provided on how to avoid them.
Payroll is the amount of compensation a business must pay to or is due to its employees in a given period. Conventionally, small-scale businesses would handle payroll directly on their own by their accounting or human resource department. Depending on some variables like overtime pay and sick pay, payroll can sometimes be one of the major expenses to the firm and the amount is deducted from the gross income, hence reducing the taxable income. Nowadays, in response to the outsourcing economy, an increasing number of firms are outsourcing payroll to specialised companies that handle employee benefits, insurance, paycheck processing, and accounting tasks, such as tax withholding. Meanwhile, leveraging technology is used by fintech firms, such as Atomic, Bitwage, Finch, Pinwheel and Wagestream, to simplify payroll processes. With these solutions, employees will have greater convenience and innovative technology-enabled services required by the fast-changing economy.
An inaccurate rating of an employee can result in inaccurate salaries, which leads to overpayment or underpayment of salaries. One of the most common misclassification mistakes is making the wrong decision as to whether an employee should be counted in for overtime payment. Another common payroll error occurs when an individual is classified as an independent contractor rather than an employee. Misclassification mistakes often require investigating past salaries and making retroactive payments or other adjustments to employee salaries. Misclassification not only causes problems of trust with employees but can also cost the company.
Incorrect payment can be frustrating for any employee, especially if mistakes lead to undesirable payments. Miscalculations also waste time because they spend hours or days investigating and fixing errors. Employees can have difficulty paying invoices during the time it takes to fix these errors. Wage miscalculations can occur for both full-time employees and hourly employees. Common miscalculation scenarios include employee overpayments or underpayments, false retroactive payments, lack of initial salary at employment, incorrect amount deductions for benefits or other salaries etc.
Employees expect timely and accurate payments for each payroll cycle. Missing out on payroll cycles and delaying payments can disappoint employees. Also, your business may face potential filing delay fees and government penalties if the tax return is overdue.
Misrecorded over time can lead to inaccurate overtime payment and ultimately lead to corrections over several tax years. Fixing these errors can be time-consuming and very disturbing to employees. Overtime payment mistakes occur not only when your business misses a payment, but it is also likely to occur when your employees are working on breaks, spending time to commute between jobs, participating in activities outside normal working hours required by the company.
An unorganized and inefficient payroll process can be disastrous. Relying on manual payroll processing can cause errors that can take weeks or months to discover. Failure to keep records can lead to missing employee payments and tracking items that require urgent attention.
It depends as there is a compounding effect on fixing an error. Therefore, it is important to fix payroll mistakes as soon as you are aware of them. And errors caused by faulty information in the payroll software need to be fixed before the mistake can be rectified.
Create a manual that describes all payroll activities, including payroll exceptions and changes confirmation and approval procedures. A record management and retention policy have to be established to help you better comply with legal requirements.
An automated and integrated payroll system automates the payroll process, helping you to avoid manual entry, paper-intensive processes that can often lead to errors. Common payroll errors can be avoided by automating payroll activities and integrating them with other HR activities and reporting.
A clear payday process and adherence to wage tax obligations can help avoid penalties for late deadlines and late submissions. By following the year-round payroll calendar, you can keep track of the following and plan how much time you spend on your payroll more effectively.
Many laws are in force that affect employee salaries management, and regulations change over time. By understanding and tracking regulatory updates, you can make changes to the payroll process instead of catching up with all changes in the law.
As a leading human resources agency in Hong Kong, Zebra takes pride in providing professional and comprehensive end-to-end payroll outsourcing services with full compliance against local employment regulations. It automates payroll management and ensures accurate calculations of staff benefits and compensations. It reduces the costly inaccuracy from manual mistakes. Legal and human resources advice is also provided when in need. You no need to be worried about the payroll process after subscribing to Zebra’s ePayroll solution.