5 Common Payroll Errors | How to Avoid Payroll Errors
Category: HR & Payroll, Posted on: 20/03/2021 , Posted By: Webtel
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It’s no secret that a smooth and seamless payroll process keeps the business chugging along without a hitch. It’s like oxygen. When it’s there you don’t give it a thought, but when it’s not, you sure won’t be able to stop thinking about it. Payroll is one of the most critical yet quite unappreciated functions of an organization. It keeps employees happy when they see that little notification pop up telling them that they’ve received the month’s salary and helps the company stay clear of any nasty legal issues.

However, we’re humans and sometimes mistakes do occur. But not to worry! The most basic and frequently occurring payroll errors are easily avoidable and with the right tools, education and good ol’ planning, you can keep them at bay.

how to avoid payroll errors

5 Common Payroll Errors that should be Avoided

#1 Misclassifying Employees

Companies generally hire employees on a full time and contractual basis. Both these sets of employees have a different pay scale, working conditions, shift timings, etc. So, classifying both sets of employees under the same umbrella or payroll conditions would be a mistake. The crux of the matter is misclassification can deny an employee benefits that he’s obligated to. Moreover, it may even lead to overpayment or underpayment resulting in an expensive payroll mistake.

#2 Miscalculating Pay

Apart from the basic salary that an employee receives, there are a ton of other payables that HR admins have to keep track of - overtime pay, commissions, deductions, unused leaves that can be encashed and more. Another reason that causes miscalculation in pay is poor time tracking. If the company lacks a reliable method to track employee hours, then the chances of either overpaying or underpaying your workers increase manifold. These sorts of errors tend to result in payroll errors.

#3 Missing Payroll Deadlines

It’s no surprise that timing is critical in payroll. There are a number of steps in the payroll process - the number of days/hours worked, leaves taken, any commission accrued and so on which have to be completed before the pay is transferred to the employee’s account. Which makes missing a deadline far too easy but it’s no excuse for failing to deliver payment on time in a consistent manner. If the company fails to deliver pay on a timely basis, it loses its employees' trust, not to mention negatively affects the company’s reputation.

#4 Failures to Comply with Tax Policies

This goes without saying that staying on top of tax compliances is a crucial area wherein if any mistakes were to occur would leave the company in a big soup. The company has to ensure that it complies with statutory deductions - EPF, ESI, LWF and paid on time. Furthermore, employees should have access to their pay slips as per government norms. Also, it has to be ensured that the right tax rate is being paid. Tax rates change from time to time and need to be kept updated to avoid incurring any penalties.

#5 Keeping Incomplete Records

As an HR admin, you can never be too thorough with your record keeping. You have to stay on top of your payroll records - hours worked payment rates, payroll dates, etc. This comes in handy if you’re due for an audit while also helping you execute your payroll in a smooth fashion. Without updated payroll records, you may commit payroll errors such as miscalculating pay, misclassifying employees, etc.

How to Rectify Avoidable Payroll Errors?

All of the above mentioned payroll errors can be easily prevented and remedied by switching to nifty payroll management software. Take HR Pearls for example. It not only keeps track of employee timings, leaves, overtime accrued, but also calculates salaries, reimbursements, bonuses, gratuity, payslips, tax declarations and whatnot. Its a boon for both the company and the employee.

Also Read: How a Good Payroll Management System can Transform your HR Management

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