Payroll management is a critical function that influences a company’s relationship with its employees. Sustaining a workforce also depends on a company’s payroll function, and any mistakes made in this regard can disturb a healthy employee-employer relationship. Apart from this, payroll functions are subject to legal compliance, so any sensitive issues encountered within a payroll system will also face the consequences of legal penalties. Above all, persisting payroll issues can significantly impact the quality of work from employees and, in general, have a negative outlook on business morale and reputation.
Despite the advancements of HR Systems in streamlining an efficient, accurate and seamless payroll function that combats all possible payroll challenges, some organizations continue to maintain a manual payroll system. While the issues facing manual payroll systems may seem manageable, they impact payroll operations beyond what you can think of. To give a clear understanding of this, here are three persistent manual payroll issues that do more harm than good.
Human errors are inevitable in a manual payroll system. Even if triple cross-checks and other safeguards are practiced, as manual payroll involves humans, they are still prone to errors, even with the best HR and Finance teams. This issue can get complex if your company has a complicated salary structure that computes the correct pay with extra parameters.
This manual payroll issue, when persisted, leads to incorrect documentation and delayed employee payments. Delayed or inaccurate payments reduce employee satisfaction. In addition, depending on the country you operate, the payroll function can be strictly regulated, giving employees an easy choice to take legal actions against the employer for delayed and inaccurate payroll.
Besides this, errors can also add several days of unnecessary work for your payroll department, delaying core payroll activities, decision making, and even piling up more work.
Manual payroll can make room for compliance mistakes. For example, your payroll staff can categorize employees incorrectly or have an incorrect amount of tax money withheld. Whether these errors result in an increase or decrease in the amount an employee gets to take home, it subjects your business to fines and penalties, lowering the revenue for your company in the long run.
Another persisting manual payroll issue, in line with compliance mistakes, is the inability to effectively update a payroll process to a country’s constantly changing payroll legislation. For example, suppose your company operates a multi-country payroll system; it’s manually tedious for a payroll team to learn and upgrade payroll processes to adhere to the changing regulations in different countries. This will then lead to producing outdated documentation that needs revisions in line with the latest regulation and other related legal penalties due to noncompliance.
Lowers HR Productivity
Another payroll issue that is often overlooked and does more harm than good is its tedious nature. While you can structure your payroll department or managed payroll services to perform repetitive or tedious tasks effectively, it still consumes a considerable amount of time. It creates a drain on HR and Finance employees. While repetitive tasks can be a part of payroll job roles, the time spent on this can be effectively used for other payroll tasks requiring more human thinking skills.
On the other hand, saddling employees with repetitive tasks can quickly exhaust a payroll department and decrease employee engagement. This will likely delay payroll processing and all other payroll interrelated functions in an organization, setting up a highly unproductive work environment. In worse cases, this exhaustion caused by tedious payroll functions can increase employee turnover within the payroll department, which can be costly to rectify.