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What are the Common Payroll Mistakes & How to Prevent them

Common Payroll Processing Mistakes

Outsourcing payroll services means hiring outside payroll service providers to execute payroll functions for your organization including some or all of the activities that come under the scope of payroll. It can include paying, incorporating, and managing all the employees and other contractors of a business. Employees are the heart and soul of an organization, therefore employee payroll management is critical for every business. Not only payroll management is directly related to employee satisfaction, but there are also enormous areas that can be impacted by payroll management, especially when it is not well managed.

Payroll Mistakes

When payroll processing tasks are done manually, errors and mistakes can occur. Sometimes businesses do not consider payroll functions important unless an error is made and they face harsh and serious outcomes because of that. There is a need to consider the payroll functions critically just like other functions that an organization executes. Critical evaluation of the performance of the payroll department should be done regularly to ensure its productivity. Consider the following description to learn common mistakes that can occur in payroll functions and that should be avoided;

You should know : How Payroll Outsourcing Increases HR Productivity?
  • Misunderstanding Employee Status

Sometimes the payroll managers can misunderstand the exempted or unexempted status of the employees. This can result in serious outcomes because both exempted employees and unexempted employees have different legal rights. The underpayment as a result of this misunderstanding can impact the employee who was waiting for a complete salary package. Other than this, the employee can also miss bonuses and other benefits because of this misunderstanding of him/her as an exempted employee. This does not even end here, the government can also be impacted by this mistake because it misses out on the tax that it had to take out of this salary. This error can force the government to take action against the organization and the organization can face penalties.

  • Miscalculation of Employee Wages

Employees are always excited about receiving paycheques. For employees, it is the most relieving feeling to know that their hard work is paying off. In this situation, an incorrect paycheque can ruin the pleasant mood of the employees and leave them frustrated. The employees that work for a business for a pre-set and ordinary amount of salary start waiting for the salary and even start planning to do things with that salary. Miscalculation errors can leave employees in an unsatisfied position. Moreover, such payroll errors take time for correcting and the process can not be expected to be completed before a minimum of a week. If these problems occur frequently, employees will end up leaving the organization due to dissatisfaction.

  • Not Updating Tax Rates

Payroll taxes such as local income tax, state unemployment tax, state income tax, federal unemployment tax, medicare tax, social security tax, federal income tax, etc, keep on updating. Payroll managers sometimes lose track of these continuous updates which can result in problems related to tax payments. Every state has different laws about how such a situation can be handled, but it is clear that fines and penalties can easily be attracted by noncompliance with a country’s tax regulations.

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  • Not Paying On Time

The reason why it is said that payroll is directly related to employee satisfaction is that it is the job of the payroll managers to pay off the employees for their hard work. If payroll managers tend to pay the employees days after the date of payment, it can result in employees losing their trust and satisfaction in the organization. No business can afford the loss of employees because of these mistakes in payroll management.  

  • Losing Records

It is important for businesses to keep their payroll data safe and protected. These records of payroll are very useful for organizations. If this record is not organized properly then there are high chances of losing the data or making it useless and unable to be interpreted. At the time of making financial reports, the businesses need these records, and missing these records can create hurdles in building financial reports and records.

  • Ignoring Overtime & Extra Hours

Another error that is frequently made by common payroll managers is that they miscalculate or falsely track the service hours given by employees. This can lead to deduction of their pay and losing records about service hours. Such circumstances are extremely frustrating for employees because they give extra service hours for the completion of organizational goals. Frequently making this mistake can lead to losing employees.

How to avoid payroll mistakes?

For a successful business, it is important to take payroll errors seriously and make efforts to avoid these errors. These errors and mistakes can be avoided by increasing the productivity of the HR department of the business. However, the HR department of some businesses fails to manage such tasks due to the excess of responsibilities on them. The best solution that can be suggested to businesses that are unable to avoid payroll errors is outsourcing payroll services. Hiring an outsourced payroll service provider can be useful in avoiding payroll errors in the following ways;

  • Payroll service providers take complete responsibility for employee payroll management including the correct identification of employee status.
  • These service providers always keep track of changing tax policies and there is no chance of missing out on any update.
  • They use the latest software for paying the employees the right wages on time. The notion of late payment or incorrect payment is not related to outsourced payroll.
  • In payroll outsourcing, they use cloud software which is able to build and protect the data and information about the employees, ultimately leaving no chance of losing data. Plus, cloud technology also provides backup options for data retrieval.
  • Outsourcing payroll services increases the productivity of the business by taking the payroll functions to the level of excellence.

Choose FAR Consulting Middle East

If you are dealing with frequent payroll errors and want a single solution for all payroll issues, choose Payroll Middle East for outsourcing your payroll functions. Our qualified service providers know how to take your payroll to high levels of perfection. See your business growing and thriving with the help of our experts. Contact us now.