Is Your Payroll Costing You More Than It Should?
Nov 29,2020 / Haroon Juma / Payroll Blogs
Payroll management can be complex. It is not always easy to understand when payroll affecting operational decisions are made, if they are communicated and applied correctly.
Payroll processing managed by another department such as finance or HR is often separate from line management agreements with employees. Hence unless these decisions are tracked and applied, employee payroll will likely lead to issues that will cost the business in overpayments and employee morale.
If your business runs a manual payroll and employee records management process, our useful blog highlights the risks and issues that could lead to compliance and financial related consequences that will cost your business.
There can be numerous facets involved in running an accurate payroll, hence processing a manual payroll can be a time-consuming and complex task. This can include management of employee allowances and deductions, end of service calculations and data security requirements when handling sensitive employee related information such as banking or private details.
This makes manual payroll processing an error-prone activity and presents risks that could adversely affect your organization’s reputation and employee satisfaction.
Challenges – Manual Payroll Processing
Manual processing can be error prone. Studies have shown, many companies experience higher payroll costs if they cannot track and understand expenses and payments. It is quite common for employees to receive more or less compensation than they expect and dispute end of service gratuity.
Some typical issues under unstructured and manual payroll processes include:
- Inaccurate records: Manual data-entry comes with risk associated with human-error, which leads to inaccurate data interpretation, incorrect employee documentation and late payment processing. This as result can cause underpaying or overpaying your employee along with delayed payroll processing.
- Allowances and deductions management issues: Ensuring that the employee allowances and deductions are accurately reflected in the payroll is a vital factor. Managing this manually can have consequences such as, not compensating your employees accurately for the allowances they are eligible for and/or employee deductions not included in the employee payslip.
- Compliance mistakes: An organization must ensure that it meets the minimum compliance requirements under the law. In addition to calculation errors, manual payroll processing poses a risk of employees not being categorized accurately or withholding inaccurate amounts that could lead to litigation. In the UAE, evidence of payment under WPS required by the MOHRE is mandatory and when producing such a report manually can be error-prone. Mistakes of this sort and the failure to abide by the compliance requirements can incur fines and penalties against the business, causing added stress and a loss in an organization’s revenue.
- Increased costs: Managing and processing the payroll manually is time-consuming and can consume HR and finance resources which in turn reduced productivity and increases added costs for the business.
- Security concerns: In all HR related matters, payroll data includes sensitive employee related information such as, bank details, privates address, national identification number, etc. and the breach in that data from any possible data leaks can lead to adverse effects on any type of an organization. Maintaining payroll confidentiality via a manual process with hard copies doesn’t ensure the level of security required. It not only slows down the process of payroll processing but also presents a threat when safeguarding sensitive employee information.
Automated & Outsourced Payroll Processing
In order to prevent these and other payroll related issues, many organizations opt to automate their payroll process either through automating their payroll management and internal HR workflow and outsourcing their payroll processing and management. Maintaining and processing an accurate payroll while sustaining costs and promoting efficiency, automating your payroll is a definite path to consider.
Benefits – Automated Payroll Processing
There are countless benefits associated with automated payroll processing, a few key advantages include: –
- Accurate payroll processing: Automating your payroll means all payroll related calculations will be done automatically, based on the rules/equations configured into the system. This ensures maintenance of an accurate payroll, preventing any human errors such as data-entry mistakes, miscalculations, etc.
Automated payroll processing enables you to avoid any interruptions in the scheduled payroll, compensating your employees on time. As soon as the salary batches generated with the defined dates gets approved, all the employees in those batches get compensated and notified upon payment.
- Streamlining payroll deductions: It is highly essential that any type of deduction(s) against an employee is reflected in the payroll accordingly. HR automation software feeds such deduction(s) imposed on an employee by the manager or HR admin directly into the payroll for that employee. For example, loan installment amount gets automatically deducted from the employee salary payslip for that month.
- Compensating allowances: Compensating employees for the non-recurring and/or fixed allowances can easily be done by automating your payroll. The HR automation software will include all such allowances in the employee payroll. For instance, a fixed allowance for monthly transport costs will be reflected on the employee payroll for each month and a non-recurring allowance such as one-time air ticket will be reflected on the payslip for that month.
- Compliance requirements: Ministry of Labor requires every organizations meets the minimum compliance requirement under the law. An automation software enables you to pre-built policies, configure templates, auto-generate reports for evidence of payment and maintain a record of all employee related transactions and history.
- Safety and security: As discussed earlier (above), payroll data includes sensitive employee related information. An automation software ensures that the security and safety measures are in place when safe-guarding all employee related data. The system provides robust verification methods and the view/access to certain modules can further be controlled through access rights.
- Reduced costs and increased efficiency: Automating your payroll and other related HR processes is time-efficient and reduces the consumption of HR and finance related resources. This not only increases productivity but also simultaneously reduces the business costs.
If your business wants to reduce costs in HR management to review constantly changing regulations and managing required HR documents and payroll processes, implementing a streamlined process and automation delivers substantial benefits.
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