Every business requires efficient payroll functions as malfunctions in it will only create havoc and misunderstanding in the workplace.
Small business still have a manual pay roll system while big business invest in software packages that run their payroll automatically.
Whether it is manual or automated, there are hitches in the whole payroll function that is sometimes quite challenging and complicated and also you need to remember that even if you are using top of the line payroll software’s, common payroll problems still exist that need to be fixed.
Following are some of the most common payroll issues that companies have to deal with.
Common Payroll Accounting Problems to Avoid:
1. Managing absence:
Tracking an employee’s absence and sick leave is quite a challenging and ardent task. It is very important for employer to manage the resource wherever needed in case of long term or short term absence of employees.
This directly impacts the productivity and profits of the company or organization. Hence, it is advisable to have tracking system like punching system for example individual employee cards or finger prints of employees that stores information of the employees.
The most reliable is the latter one as no one except the employee will have to register their presence or absence for the day!
2. Easing the burden:
It’s a usual sight in many firms where payroll work for the HR is a huge and cumbersome task as there is lot of paper work and administration to be done.
Some companies invest in more manpower to collect data, feed them into systems, calculate the data provided, and reconcile the data.
The best is to have a proper software that links all the data and makes the calculation for them.
There are many payroll software packages that are available but needs to be revisited by the company to suit their needs or modified to the needs of the organization. Main aspect is to train the relevant users on the software being selected.
3. Planning for tax compliance:
Many organizations or companies have to face the issues of tax and must take care to avoid any legal compliance issues.
They must protect themselves from legal governmental investigations and any complaints. This issue arises when the company operates across multiple countries.
Hence, in such situations it is advisable to outsource the payroll to third party to handle this issue. It will help to avoid headaches and manage the legality issues.
A third party payroll usually have commitment to the legislative reforms and be in terms of adapting to the trends and changes.
4. Avoiding errors and fraud:
Most of the employees are paid through their bank accounts. Hence, an error could cost the company dearly.
The payroll software needs to be linked with the banks that are operating or functioning appropriately.
In case the employee does not have account then advice the employee to open an account in bank that company has transactions regularly and it will help to transfer on timely manner. Also it will avoid gaps in the system.
5. Easy access to forms:
One of the crucial factors in managing payroll function is get forms filled up by the employees and submit “on time”. Last minute submission will hamper the payroll transactions and create administration difficulties for the HR.
Most of the payroll software packages come with specific forms whether vacations, sick leaves, maternity leaves, medical leaves, official trips, travel allowances etc.
In case the company needs to have specific forms for their employees they could get customized forms that can be made easily accessible via the intranet or via mobiles and sent through the net. This saves a lot of time and moreover the information can be sent immediately.
6. Managing miscalculations:
Each employee has lots of payroll records that needs to be calculated every time the payroll transaction is run.
For instance, it has to track whether the employee has taken health insurance or life insurance, or employee has taken loan from the company. All these data needs to be managed appropriately and accurately.
Managing these data manually creates human errors as there is liability of miscalculations. Hence, it is advisable to have an automated system that has record of all these data in individual employee database.
Hence, while running a payroll transaction every month the relevant data is calculated leading to error less outputs. The only criteria is that master data for each employee must be updated regularly.
7. Managing performance:
Most of the organizations focus on getting a software package that helps them in getting their payroll run efficiently.
Little do they ponder on the future requirements of the company needs. There are packages that helps in knowing more about the employees like their performances.
The packages are fitted with tools specific to monitor performances and this will help in identifying individuals for promotions.
8. Streamlining headcount:
Sometimes workforce are recruited by the manager or the supervisor without going through the HR.
Most the departments in company carryout work through outsourced staff(s). Such instances when it comes to payment of their salaries, the payroll gets it done through proper channeling and this gets the employee to get on board the ship!!
Often this can be over viewed by having an internal audit to visualize the actual workforce and finance section to review their overheads.
9. Keeping deadline:
Some companies do a chaotic run of payrolls close to the date of dispatch of transactions. In such cases there is a chance for missing relevant data of the employee that he/she would be expecting that month.
Certain procedures needs to be created to give all section heads a certain time frame when the data needs to be input by them or handed over to the HR.
For example; if the payroll is dispatched by the 25th of every month, then the procedure could highlight that relevant data be handed over or entered by 20th of the month and any entry after 20th will not be entertained.
Such a procedure will help to gather all the data and complete the task before hand so that there is no missed out information.
10. Relevant training:
To be able to get the data of the employees into the system and ensuring correct information is gone into the payroll package it is necessary that the personnel handling the HR payroll is qualified and gets the necessary training to handle the software.
The staff must be empowered with relevant access and maintain high confidentiality. The employer need to entrust the responsibility to the HR personnel handling such critical data and ensure that personnel is updated on regular basis.
As you are aware that payroll in a business point of view is sum total of all financial records for an employee which includes their salaries, bonuses, benefits like accommodation allowances, travel allowances, medical benefits, deductions from insurances, loan etc. In terms of accounting, it refers to payment towards employee within a specific time frame.
Hence, a company’s accounting and HR sections must take it as top priority to ensure that the payroll activities are done accurately and in timely manner. Or else there will be dissatisfaction and mistrust among the employees where there is liability that the company can lose its skilled labours.
In one word, it is considered wise to outsource their payroll activities like calculations and disbursements to a company who will take care of the legal issues and also involve in the training of the employees.