5 Common Payroll Errors That Are Easily Avoidable

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Payroll Processing

Payroll processing is all about salary verification and structure, adhering to payroll laws, maintaining payroll records, responding to payroll queries, providing monthly payout on time, and related stuff. It is a series of the most elaborative tasks that require careful attention and an organized flow of operation; otherwise, payroll errors can occur frequently.

The entire payroll workflow could be adversely affected and ultimately ruin employees’ experience due to payroll errors. Thus, steering clear of the big-small errors, glitches, and mistakes is of utmost importance for any organization. No matter how big or small your company is, you need to get rid of payroll errors in your system.

To say that resolving these problems is as tricky as processing payroll would be wrong because almost all the payroll-related grievances can be managed using payroll management software.

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In this blog, we will tell you about the 5 common payroll errors that are easily avoidable with a bit of consideration and precautions.

  1. Uncategorized employees & contract workers
  2. Untracked irregularity & unpunctuality
  3. Wrong salary evaluation & deposit
  4. Non-compliant statutory deductions
  5. Mismanaged reporting & documentation

We will also brief about the repercussions of payroll errors:

  1. Loss of employees’ trust
  2. Additional recruitment costs
  3. Penalties and losses

Top 5 Common Payroll Errors

Let us throw some light on each error in detail, and then we will spill the beans about the 5 problems’ one-stop solution, i.e., payroll software.

  1. Employee Classifications

“Up to 30% of companies misclassify employees” –National Employment Law Project

There are two categories of paid workers in any organization—the ones who work on a contractual basis and the full-time permanent employee base. The working conditions, nature of work, policies, and pay scale are different for both. So, keeping the two types of professionals under the same radar and putting them under the same payroll conditions is a huge mistake. 

Payroll software in India is highly employee-centric. So, while implementation, it is ensured that the employees are classified as per their job specifications and kept separately.

  1. Time & Leave Errors 

Payroll and TNA (Time & Attendance) go hand in hand. Another blunder that could happen is the lack of coordination between the two systems. If the daily attendance, holidays, and leaves are not recorded and managed correctly, the final payout would be erroneous. Therefore, keeping track of the attendance and incorporating the salary calendar is a must to ensure no time-related errors in payroll management.

Payroll software can help you integrate multiple software to avoid time and leave errors that occur due to mismanaged record keeping.

  1. Salary Miscalculations

The error mentioned above (points 1 & 2) can lead to another fault in payroll, which is, overpaying or underpaying the employees. But, apart from TNA issues, there are other reasons for the same such as missed arrears and reimbursements, benefits & compensations, wrong paid day calculations, earnings & deductions miscalculations, etc. 

A top-notch payroll software can automate the salary calculation without any errors or discrepancies including deductions and compensations.

  1. Tax Non-Compliance

This is an important area where errors are common but highly troublesome. The payroll software in India must be compliant with government laws and policies. The statutory deductions like EPF, ESI, LWF, Professional taxes, among others, should be as per the norm. Moreover, the payslip and tax slips should be auto-generated, and the challans must be in the government-recommended format.

Payroll software can send you notifications for better tax compliance and provide you relevant templates to generate challans or any other document.

  1. Poor Record-Keeping 

Lastly, the misunderstanding caused in the employees due to incomplete payroll information mentioned in the reports is a massive cause of errors. Therefore, the reporting and documentation should be thoroughly done and saved on the system. Furthermore,  it is necessary to maintain good record-keeping to save yourself from future troubles and enable decisive decision-making through insightful reports. 

No matter how cumbersome people call payroll operations, the solution to each issue is quite simple. And if nothing suffices, payroll management software will always come to the rescue.

Repercussions of Payroll Errors

When any payroll error occurs, the first thing you do is get it corrected. The process can take a couple of minutes to hours. The situation gets worse when you do it manually. The employee file, you would want to see, may have been lost or misplaced by then. Then the time consumed can extend up to days. The HR and the employee’s time will also go in vain. 

This will hamper the productivity of the employees along with the following repercussions:

  • Loss of Employee’s Trust: Employees trust their employer; they expect the employer to credit the right salaries into their account without any errors. So, when the employer fails to meet the expectationS of the employees, they start losing trust and even get demotivated. This can affect employees’ loyalties and dedication into less productivity and absence.
  • Additional recruitment costs: If the errors are significant, employees may start looking for a job change. When they find one, they will leave your organization. Searching for their replacement will add to your recruitment costs unnecessarily.
  • Penalties for committing errors: Penalties for late tax submission, incorrect amount payment, or incorrect employee details- these are just a sneak peek at what payroll errors can lead to. There are many repercussions and penalties that you may have to pay if you do not comply with payroll. Even a single error can cost your business a lot.

While large companies embrace payroll software, payroll services for small businesses are still considered an unnecessary expenditure. 25% of small businesses use pen and paper to track finances, and 45% don’t have their own accountant or bookkeeper” –Clutch

But now, when you know how much payroll errors can cost you, it has become necessary to implement payroll software to your system. 

How can Payroll Software Minimize Payroll Errors?

For proper resource allocation, risk mitigation, compensation determination, and positive company culture, it is necessary to minimize payroll errors. To efficiently manage and automate payroll processing workflows, you can implement effective payroll software into your system.

Payroll software offers following  features to-

  • Auto-assign salary structure to the new joiners for avoiding further discrepancies
  • Configure paygroups and pay components department wise or at OU level 
  • Schedule and pre-define payroll as per the financial year followed by your organization
  • Generate error list with employee details after payroll processing at the end of every month
  • Compare the difference in pay components and highlight the difference to concerned HRs
  • Offer 3D reports to facilitate the salary structure of the complete organization
  • Auto deduction of all statutory deductions for PF, ESU, Professional Tax, etc
  • Empower both admins and employees while improving their experience
  • Generate resorts to analyse effective cost, CTC trends, liabilities and much more
  • Integrate with third-party platforms like SAP Business One, Oracle ERP, etc

Payroll software is not just about calculating and process correct salary but with these multiple features, it help in increasing overall productivity, efficiency and strategy making power of organisation. To make your payroll system error free, you must explore more about payroll software and start with the trial sessions. 

Payroll is probably the most error-prone HR task. HRs need to have a hawk’s eye to make payroll error-free. But, it is quite unrealistic to expect a human not to commit errors, especially when the number of employees is above 50. After all, there are many things that need to be taken into account while calculating each employee’s payment, like the employee records, leaves, absence, working hours, etc.

Whether your organization is small, medium, or large, time, money,and employees are valuable for each one of you. So, it’s always better late than never, deploy robust payroll software today and stay assured of no errors ever again! You can start exploring the best payroll software online and start your free trial with HROne for the best payroll module.

It is essential to use payroll solutions for both small and large businesses that offer impeccable compliance with tax related guidelines  as payroll errors can cost your business not just money but a lot more. Implement HROne Today!

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Sukriti Saini

Sukriti Saini works as a content marketing strategist at HROne. She has done Bachelors in Journalism from Delhi University and carries several years of experience in content development. HR trends, Productivity, Performance and topics related to Employee Engagement garner most of her writing interest here. During leisure, she loves to write and talk about fashion, food & life.

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