Payroll may not be one of your core business processes, but it’s nevertheless an important part of any business venture, whether a corporation or a small- or medium-sized enterprise (SME) like yours. But whereas major corporations can usually afford an entire department for their payroll, SMEs and startups may have a limited workforce, if any, that can work solely on payroll processing.
In some cases, the business owner may take it upon themselves to do the payroll processing, especially if there’s only a limited number of employees to take care of. And while there’s nothing wrong with doing so if your payroll management is fairly straightforward, if you’re not a trained accountant, you may be taking on more work than you can handle. This may result in different errors that your employees may not appreciate, and payroll management may become a thorn in your side come tax filing season.
As someone who heads their own business, set a good precedent by making sure that your employees always get paid properly and on time. Here are six payroll management pitfalls that you should make it a point to avoid:
1) Miscalculating an Employee’s Salary
One significant, yet woefully common payroll management mistake is miscalculating an employee’s salary. If this error recurs, it can sow discontent among employees and, in some cases, incite legal complications.
Various factors can lead to salary miscalculations, such as failing to account for overtime, incorrect government contributions, or even basic arithmetic errors. To avoid this pitfall, you should consider investing in a reliable payroll system and upgrading from a predominantly manual and error-prone approach.
Maya Business offers Maya Disbursement as a practical payroll system Philippines solution for all your payroll needs. This payroll management system and fund disbursement system is specifically designed for SMEs and startups based in the Philippines. It will draw directly from your Maya Business account and requires zero maintaining balance. This means you can freely utilize your cash for your payroll if you need to.
In addition, Maya Disbursement also comes with free tutorials for business owners to make it easy for you to manage your payroll processes. Having this kind of technology on your side will reduce your risk of calculation and disbursement mistakes for your payroll and ultimately make it more pleasant for your employees to work for you.
2) Inaccurate Records
For successful payroll management, you also need to have accurate records. Aside from resulting in costly payroll errors, inaccurate records can spell trouble during audits or legal disputes. This can potentially lead to fines or significant reputational damage for your business. As such, you must diligently commit to maintaining records that include detailed information about your employee wages, deductions, and hours worked.
Efficient record-keeping processes will shear down the risk of incorrect inputs. Digital record-keeping systems can greatly simplify this task and make it easier for you to track and update your payroll data. A predominantly digital system should also strengthen your reconciliation and review process for your payroll records, helping you identify and correct errors as promptly as you can.
3) Relying on Manual Calculations
In an increasingly digital society, it’s quite risky to rely on manual calculations for payroll. Manual calculations are prone to errors, whether due to human oversight or outdated tax tables. These errors can lead to discrepancies in employee paychecks, causing frustration and mistrust from people who do valuable work for you.
Avoid such mistakes with payroll tools that can automate calculations with precision. Not only will this reduce the likelihood of errors, but also save you time that can be better spent on strategic business activities. This is also a cost-effective investment that pays its dividends in terms of error-free payroll processing.
4) Missing Payroll Deadlines
A delayed paycheck can be a source of significant dissatisfaction among employees. Moreover, continually missing your payroll deadlines can not only harm employee morale, but also result in legal repercussions for your company. Whether the delay is due to administrative inefficiencies or unforeseen circumstances, the impact remains the same.
Keep your employees happy and ensure that they’ll have the financial resources to take care of their needs by observing a timely and efficient payroll schedule. Using a Philippine payroll system like Maya Disbursement for scheduling your payroll is a practical way to ensure paychecks are consistently delivered on time. Such a solution will also allow you to manage your payroll and settle other obligations remotely, so you won’t miss any deadlines even while you’re on vacation or away from your business headquarters for an extended period.
5) Failing to Remit Government-Mandated Benefits
One of the gravest payroll mistakes you can make is to fail to remit government-mandated benefits, such as social security contributions and income taxes when applicable. Non-compliance in this area can result in hefty fines and potential damage to your brand’s reputation.
Stay on the right side of the law and ensure timely remittance of these benefits. It’s your responsibility as an employer to keep abreast of changing tax laws and regulations, and to integrate these changes into your processes in a timely manner. You should also perform regular audits to help confirm your compliance and rectify any discrepancies in your remittances.
6) Not Outsourcing Payroll Processes When Needed
Managing payroll in-house may not be the most efficient or cost-effective solution for all businesses. For some SMEs or startups, outsourcing the payroll processes may be a more sensible approach than for an employer to do it all themselves.
If you do consider outsourcing your payroll management, take special care to evaluate the specific needs and capabilities of the business. Outsourcing to someone else can reduce your risk of committing payroll errors and being remiss in your tax compliance, but it may also be a costly expense for your business. Be choosy about your contractor and ensure that the service you’re getting is worth the cost.
Payroll management is one aspect of doing business where you cannot afford to make any significant mistakes. It’s important that you recognize gaps in your payroll and make the best effort to rectify and improve your payroll management processes. A good payroll system elicits trust and goodwill from employees, as well as good standing among regulators. For its contributions to a well-managed business, the investment in a better payroll management system is definitely worth it.
HR Future Staff Writer