How to Prevent Payroll mistakes

Payroll is a vital part of any business. Any issues or mistakes with payroll can lead to employees becoming de-motivated and disgruntled resulting in possible productivity issues if not corrected in a timely manner. It can also cost the company money or have a damaging effect on the company’s reputation.

Examples of Payroll Errors

To be able to prevent Payroll errors we first need to understand what the main errors are and put measures in place to avoid them from happening. Let us look at some common errors.

  • Incorrect pay – This happens more often than you think due to things such as incorrect hours logged or incorrect employee information.
  • Not factoring in Public holidays – Some banks do not consider certain holidays as business days. If not factored in these issues can cause delays to payroll.
  • Miscalculating overtime.
  • Running payroll too late.
  • Forgetting to keep relevant records.
  • Neglecting to pay overtime – Due to inefficient accounting in place not paying for overtime negatively affects payroll. 
  • Misclassifying Employees – Some organizations slip up and misclassify their employees putting them as independent contractors or making them exempt to certain procedures.
  • incorrectly calculating fringe benefits.

Read also: How Can Payroll Services Provider Save You Time and Money?

How to prevent Payroll mistakes?

The following tips can help your clients avoid common payroll mistakes:

  • Apply the latest laws and regulations – By keeping up with these vital factors you safeguard yourself against possible changes that can occur at any time. Doing this step can prevent many avoidable errors.
  • Make sure to periodically audit your entire payroll procedure to make sure that the employee payments, overall deductions, and fringe benefits are being submitted correctly.
  • Correctly classify your employees from the start to stop misclassification. This step avoids possible audits or significant penalties and lawsuits from employees who would have been underpaid.

Double-Check Employee Details

Periodically check your employee database to ensure all have been entered correctly from ID numbers to all their names, addresses, and bank details. Employees may forget to update their details should they move or alter any other particulars. To make it more efficient put in a CRM which allows employees to update their own details where possible. This efficient verification process then allows all Staff at all levels that cross-check all their details.

Prepare a comprehensive overview of staff

Informing employees effectively makes Payroll runs better. Here are examples of the type ‘Q and A’ the overview should have:

  • Deadline and regularity to submit their hours?  – Daily, Weekly, or Monthly?
  • Method of submitting hours outlined clearly.
  • Who approves of the hours submitted?

On top of this allow for a means of open communication so that the staff can ask questions as and when they need to easily.

Read also: Payroll Problems of Businesses in UAE

Invest in Technology

Reduce human by implementing tracking software that allows your staff to submit their required details in a few clicks.

Implementing such software can call eliminate time theft (buddy punching) which happens when employees punch in and out for each other because their colleague may be late. Such practice can be stopped by using OCR software such as thumb or facial recognition so that only the correct employee can log in.

Should the budget permit placing all this information onto the cloud to further increase security and minimize errors?  

Perform some reports before payroll

Carrying out a few handy reports before actual payroll can minimize possible mistakes and give time to correct discovered issues before the actual payroll is run. A few such tests include:

  • Deductions summary – Shows deductions for all the employees allowing for the verification of amounts.
  • Payroll register–  Basically a summarized Payroll.
  • Cash requirement – Report showing the money needed in order to make payroll presented in categories such as taxes, wages, etc.