Managing the salary process is hard enough to give any person a headache. Your staff relies on an accurate and timely payroll cycle but handling it is often complex and prone to errors. Updating timesheets, measuring performance metrics, and worst, taxes are burdens of HR managers. Your business can only live on a correctly balanced budget and accurately generated paychecks.
Mistakes in the salary process can result in costly consequences for the business. Therefore, most companies rely on technology as it streamlines the work. However, you can deal with the majority of them with proper planning and preparation. So, why spend money when you can do it yourself?
Here, we have mentioned some ordinary payroll errors and their solutions you must go through.
Calculation inaccuracies can make you underpay or overpay the staff, and both scenarios can lead to serious issues. If the staff is underpaid, paying them again would be costly and affect their morale. In the other scenario, you will have to ask employees to return the overpaid amount. This can also affect employee morale negatively.
Staff members rely on their salaries to make ends meet. They cannot wait for a day or more for you to complete the salary process. Infrequent paychecks can make the workforce lose trust in you and increase employee churn.
Build a comprehensive employee database and define pay rates for each person. Determine an efficient formula for salary calculation and set a particular schedule for paychecks. If you are managing a huge workforce, automating HR can also save you from making mistakes. Ensure that the salary amounts are accurate enough before finalizing and are paid within the deadline.
It is essential to consider the achievement of weekly work hours for generating salaries. There might be fewer or extra hours, and the salaries must be computed after subtracting and adding work hours to the total amount. Correcting the inaccuracies wastes your time, and it is unsettling for the staff.
Failing to calculate the actual hours or overtime properly can ultimately increase your business expenses, affecting profitability negatively. Confusions often arise in these scenarios:
- When employees work during lunch/another break
- When the staff often travels among different branches or other places
- When employees take part in activities outside of standard work hours, such as training or teambuilding
Determine efficient overtime and work policies and ensure that they are implemented effectively. Cross-verify employee attendance in doubtful cases and ensure that the calculations done are accurate. Also, consider using physical timecards or digital tools to mark employees’ attendance.
Poor Records Management
Bad bookkeeping can lead the business to severe consequences and legal issues. So, it’s quite essential to prepare accurate and on-time salary records. Inefficiencies in it can lead to confusion and accounting blunders. In addition, the expense records of the company get disturbed if the payroll records are not maintained properly. The government requires businesses to keep at least three years of records. Criteria for that have also determined that registers should include details of total work hours, payroll dates, rates, deductions, employee names, addresses, and social security numbers.
If the business runs on a large scale, then relying on one person is also an invitation to mistakes.
Make a robust documentation strategy to note all the information and organize the data. Also, brush up on how long to keep the records and find a proper place to store the files. If your organization is generating salaries for a huge workforce, then digital solutions are more advisable than manual paperwork.
Any mistake in computing taxes results in paying costly penalties. Furthermore, year-to-year changes in laws and regulations make it more confusing to manage taxation properly. Additionally, handling the taxation and compliance process without any expert’s guidance can lead to spending money unnecessarily.
Inaccuracy in calculations and forms can also be troublesome for the staff members. If employees’ tax forms don’t match the employers’ forms, then their refunds can be delayed.
Re-check all the figures before submitting the forms and ensure that the latest tax updates are followed. Verify that all the information is accurate such as name spellings, social security numbers, pay rates, etc. Also, check the data is placed in the correct places. State the company’s financial data as reported to the revenue department. Consider hiring an expert or outsourcing your taxation process to ensure higher efficiency. If it seems costly, then you should subscribe to an automated system.
Businesses often make mistakes in classifying the staff correctly, and it leads to over or underpayment of wages. It also results in lapses in legal requirements such as tax and audit. The most common mistake is to separate non-exempt workers from exempt ones. As per the standard laws, exempt employees get a salary rather than a wage but aren’t eligible for overtime pay. On the other hand, non-exempt workers are paid wages and are eligible to get paid extra for working more than 40 hours a week.
Another confusion of classification is between employees and contractors. An employee is paid a salary and provided benefits by the employer. While the contractor is paid by multiple employers based on the projects and is not usually offered benefits. Paying methods for each employment type is different, and therefore, misclassification can severely affect your payroll budget.
Spare time to read government guidelines to avoid making mistakes in classifications and payment types. Or you can also consult a payroll specialist to assist you.
Errors happen sometimes, and that’s okay to do it. But not making efforts to solve those mistakes is a big no. There are proactive steps you should take to minimize the errors. You must follow these solutions to keep your company payroll running smoothly. Additionally, you should consider providing employee benefits to your workforce, such as insurance, maternity leave, PF, etc. Because better pay and benefits result in increased job satisfaction, ultimately boosting overall productivity.