Top 5 Payroll Processing Problems

What happens when one of your primary functions is compromised? In light of Equifax’s data breach that broke the news in September, we are sorely reminded of the fragility of companies towards fraud.

We have yet to know the full consequences of this hack compromising the financial identity of millions of people, but what we do know is that when a primary function in a company breaks down, the repercussions are immense and can possibly mean the downfall of giants.

On a similar note, we thought we’d highlight the top five problems people have with payroll to help companies better secure their primary functions.

1. Misclassification Error

A lot of costly errors that result in administrative headaches can actually be prevented if the right measures were taken to begin with. Misclassification is one of these errors.

Not everyone working for the company is considered an employee. Generally speaking, workers are classified as either employees or independent contractors. This status determines whether or not they are entitled to employee benefits, which include insurance coverage, retirement benefits, equity compensation and more.

Misclassifying this can be costly and can result in legal issues.

2. Time Record Keeping

Not all staff work the same hours, salespeople in particular have more flexible hours, working at various times and on various hours. A notorious point of complication in payroll processing is sometimes in the recording of the time that people enter. This is especially true for companies still using paper time cards and even simple digital time sheets.

As a result, your staff can either be underpaid or overpaid, both of which are not ideal for the company. Another problem that can arise with manual timesheets is the recording of employee absence. By having a more encompassing digital timekeeping system you can mitigate most of these errors and also better manage time.

3. Multi-Region Complications

Payroll compliance is very important and, when your company is set up in multiple locations, keeping up with the different laws and regulations can be a hassle.

Rather than hiring someone and expecting them to stay on top of each location’s payroll laws and regulations, an easy solution is to outsource your payroll to a professional with in-country staff who are dedicated to keeping your payroll secure. This way, when there is a problem with regulations, you are also protected, as the blame automatically falls on the external entity, limiting your liability.  

4. Untimely Payroll Processing

If you were to place payroll into Maslow’s hierarchy of needs, it would be classified as a “basic need”. There is little value that can be added onto payroll and,for the most part, people don’t think about it until that time of the month when they expect to be paid.

It is because of this that the responsibility of payroll can sometimes be pushed aside and forgotten until absolutely necessary. This, of course, is not good practice, as payroll is not always so cut and dry, with sudden complications such as holidays and sudden pop ups, which can affect the process and result in miscalculations and delays affecting the entire pay process, impacting your staff morale.

5. Inexperienced Staff

In the case of in-house payroll processing, the task is sometimes pushed onto less equipped staff, which can be a major problem. If the personnel does not have the right training and necessary expertise to handle the complexities of payroll, the results can be detrimental.

Perhaps the problem may not be observed right away, which can be a bigger problem in and of itself, especially when it comes the time for filing your taxes and you find that you are left with very limited time to actually fix all the issues that are at hand.

Outsourcing your payroll

At the end of the day, what you want is to optimise your HR processes. By outsourcing your payroll you can easily do that. Instead of having your staff handle payroll on an ad hoc basis, or hiring personnel dedicated to payroll, it is more efficient and a more effective use of your resources to use external payroll services and invest on more value adding propositions.

Links International is a leading payroll outsourcing provider in Asia and supports 15 countries across Asia-Pacific. If you’re interested to explore the idea of payroll outsourcing, please do not hesitate to contact us.

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