Human Resources professionals sometimes face challenges and make mistakes in their day-to-day activities. What really matters is how you deal with these challenges. When we take a closer look, you will find out that you can avoid some of these challenges and mistakes. One of such avoidable error is made when processing payroll. Any error in the payroll process can ripple across the entire company.
Payroll processing, when done right, is an employee retention strategy that helps companies stay safe from legal repercussions. On the flip side, paying employees incorrectly or untimely can hurt employee morale. It may also be a failure to comply with tax or labour laws.
Learn more about employee retention and implementation strategies
According to the Federal Inland Revenue Service (FIRS), 40% of small to mid-sized businesses face FIRS penalties related to incorrect payroll filing, i.e., small businesses aren’t immune to the consequences of payroll processing errors. This is because it involves many complex procedures as the tax laws and compliance rules keep changing from time to time. In this process, you may experience some challenges while running payroll.
To help you steer clear of common pitfalls, we’ve listed seven of the most common payroll process challenges and how to evade them.
1. Compliance issues with employment law and tax legislation
The laws and regulations that govern payroll processing, tax, payment schedules, and record-keeping are often very complex. Keeping up to date with these laws can be challenging for payroll professionals.
If a company’s HR professional fails to notice regulatory changes, doesn’t meet the standards, and doesn’t adjust its processes accordingly, employee pay or tax liabilities may be incorrectly calculated into the payroll. This could cause serious repercussions, such as getting slapped with a fine, penalty, or even a lawsuit.
It is therefore critical to actively monitor changes in payroll processing laws and regulations so your company can take the necessary steps to update its payroll processes when required.
2. Lack of confidentiality
In this era of technology, privacy and data protection concerns are higher than ever. It is imperative to maintain and handle payroll records with confidentiality while we store them in a secure environment. Be sure not to disclose any personal employee information without securing the employee’s permission beforehand, unless the disclosure is for the purpose of complying with a court order or government mandate.
This means that you must handle records carefully – e.g., you shouldn’t leave payroll processing information carelessly on a printer or visible on a computer monitor in a generally accessible area of the office. Having documents in plain view can affect your reputation with clients and employees. Keep payroll documents in a locked cabinet or a password-protected or encrypted file that only authorised personnel can access. This ensures confidentiality among staff.
3. Not backing up payroll data
It’s common for start-ups or new businesses to throw out or incorrectly file payroll, making them difficult to track down. Nevertheless, when running payroll, we highly recommend that you always keep a backup of all payroll data. We advise that you save this backup somewhere other than the hard drive of the computer you use to process payroll. Using a cloud platform or an external device to back up data is the safest option to ensure you never lose valuable information should something happen to your computer.
Try a Payroll Processing Tool That’ll Improve Your HR Processes. Try NotchHR now!
4. Managing employee information and timesheets
Timesheets keep track of the number of hours employees have worked, factoring in overtime hours, leave, sick leave, and other relevant factors. This gets even more complicated when you are dealing with large companies with many employees, different pay structures, or offices in different locations. Accurately processing this with spreadsheets becomes incredibly burdensome, therefore increasing the need for remarkable payroll processing software. With a solution like NotchHR, you get to solve these problems, automatically update payroll calculations, and pay employees correctly via direct deposit or with your own NotchHR E-Wallet.
Read more about NotchHR E-Wallet
5. Miscalculating Employees’ Pay
A simple data entry mistake could lead to an employee being overpaid or underpaid. If an employee is underpaid, this may mean an expensive bill when the underpayment is discovered, and you need to repay them. If an employee is overpaid, it can be tricky (and cause a lot of upset) when trying to get the money back. It’s best to double-check and make sure you’re calculating overtime pay accurately. Feel free to triple-check your calculations if you’re doing payroll by hand.
6. Dependence on Multiple Payroll Input Sources
Another common challenge in payroll processing is the non-compatibility of payroll management system. For example, the software used for keeping employee records may be completely different from the one that you use for leave management, time tracking system, requisitions, or employee benefits.
Investing in HRMS software like NotchHR, which integrates all the functions mentioned in this article, helps to streamline the overall process and reduce the total amount of time spent on inputting data or tracking, thus allowing your company to become more efficient and cost-effective in the long run.
NotchHR is a FREE full-stack HR software that enables you to run payrolls, monitor productivity, make take and pension payments. The app allows you to pay staff salaries and remit salary deposits directly. You can efficiently work through the day without stress while avoiding all these challenges.
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