Payroll is a legally and ethically sensitive business function. It also has a great impact on the overall performance of an organisation because of how it affects the employees. Challenges in payroll are inevitable, but there are surely many strategies and ways to effectively overcome them. Below is a list of common payroll challenges organisations face and how they can be addressed.
Manual Payroll Processing
While this payroll processing method does not need to invest in software or other automated systems, manually maintaining payroll makes an organisation extremely prone to errors and duplication. This often results in legal problems for businesses, expensive fines, and sanctions.
With manual payroll, data cannot be stored in an organised manner and calculations cannot be done automatically, making the procedures highly redundant in every process.
Besides these, under manual payroll, it is hard to efficiently produce payroll reports and share information within an organisation. Even maintaining the confidentiality of these payroll data is at risk as there is no form of security in a manual process.
How To Address: Automation and digitalisation are key. There are many cloud-based HR software that incorporates payroll processing into their functions. They can be customised to suit your business needs and their respective payroll functions. Using automated solutions makes the payroll process efficient, accurate and, most importantly, assures a high level of security for confidential data.
Payroll processing is confined to a timeline. In the UAE, payroll processing times are monitored by WPS (Wage Protection System), where any company that releases their pay for employees beyond a specified deadline will be fined. Payroll also calls for accurate tax filing and documenting, which will be regulated by relevant government authorities. If these procedures are inaccurate or delayed from a given timeline, whether it’s because of negligence or lack of knowledge, expensive penalties and even legal sanctions are imposed on a business.
How To Address: Hiring the right person or executing an effective HR system that can efficiently process payroll within the proper time frame are the two main ways to address this challenge. Make sure the employee handling the payroll function has the expertise in taxation and regulatory laws and has the experience to back it up. If you’re planning to implement an HR system, then customise it to the nature of your company’s payroll tasks and timelines.
On average, payroll fraud happens in 27% of businesses. It can happen in many forms: falsified wages and commissions, faking injuries for insurance claims or having ghost employees. These challenges are widespread when employees have easy access to critical and sensitive payroll data or when there are no internal controls in place to govern employee access to payroll software.
How To Address: Some of the best ways to address this problem and any related dilemmas are to have random inspections of the payroll database, periodic payroll audits, and strong internal controls. Another effective solution is to tighten payroll software security and limit general employee access significantly. Companies can also outsource services that can audit payroll processes and report any evident forgeries to address this challenge.
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