Common Mistakes in Doing Payroll – Payroll can be the biggest expense for any company, but it is complicated and error-prone. Every company can make mistakes in the employee payroll process. Companies have their own ways and policies in the employee payroll process. There are those who directly provide salary in full at the end of the month, there are also those who have an employee payroll system that is twice at the beginning or end and the rest in the middle of the month.

However, no matter how well the employee payroll system is implemented, there will still be the possibility of the company making a mistake. Many factors cause errors in employee payroll.

Here is List of Mistakes That Often Occur in The Company’s Payroll Process

List of Mistakes That Often Occur in The Company's Payroll Process

1. Payroll Defined

While getting paid may seem straightforward, in reality, it’s complex and requires great attention to detail. Payroll may be defined as the list of employees a company provides wages to. Although, it may also be defined as the total sum of wages a company pays to its employees. In either case, when people talk about processing payroll, they are referring to calculating the payments for employees. 

2. Payroll Issues

Since employee payments is often the biggest expense for a company, processing payroll needs to be done with pinpoint accuracy. Even the smallest mistakes can be costly and take time to fix. In this lesson, we’ll go over the most common payroll issues and explain how each one can impact employee pay.

3. Processing Incorrect Information

One of the most common payroll issues involves processing inaccurate information. This can result in paying an employee the wrong amount. While we personally won’t complain about being paid a little extra, this is actually not good for the company as a whole because it results in financial losses that negatively affect the company’s bottom line. On the flip side, if employees are paid less than what they should be, it can cause employee dissatisfaction. Correcting these errors sometimes requires a lot of rework and time.

4. Late Payments

Employees need to be paid on time. Period. When payroll is processed late it causes delays in employees getting paid. As you can imagine, this can be frustrating and as a result, could dampen morale and productivity. 

5. Misclassifying Employees

There are many types of workers, including full-time employees, part-time employees, and independent contractors. Getting these classifications right is very important as they each have different tax requirements and are reported to the regulatory tax agency differently. If a full-time employee is misclassified as a contractor, for example, that employee may be denied certain company benefits, such as overtime, vacation pay, or company sponsored pension.

6. Regulatory Changes

There are a number of laws and regulations that affect how payroll must be processed. For instance, companies may need to follow certain tax, payment schedule, and record keeping requirements. When they fail to keep abreast about changing regulations, they risk not only noncompliance with the regulatory tax agency (which is serious), but they will also risk underpaying or overpaying the employees. As an example, say a law came into effect that cuts income tax by 5% for everyone. If the payroll team is not aware, employees will see no changes in their next paycheck even though the final amount should be higher.

7. Tracking Overtime

Another common issue in payroll is not accurately reporting or calculating overtime. Firstly, there are laws that usually require companies to pay its employees premium wages for overtime. Specific laws depend on where you live, how overtime is defined, and what the premium wages are (time-and-a-half, double-time, etc.). For instance, say an employee worked a total of 10 hours in overtime. This means that he may get paid 1.5 times his normal wage for the first 5 hours, and then get paid 2 times his normal wage for the next 5 hours. As you can see, it’s not easy! This leads us to the second problem, which is when overtime hours are not tracked and reported accurately. This results in employees either being underpaid or overpaid.

8. Bank Holidays

Forgetting bank holidays happens. But when it happens in the payroll department, it causes delays in paying employees. Take, for example, payday Fridays. When a holiday falls on a Friday, it means that paychecks can’t be cut until the next Monday, when the bank reopens.

9. Other Common Payroll Issues

There are many other common payroll issues that can affect an employee’s pay. Here are some of them: 

  • Managing Overtime;
  • Ineffective Time Records;
  • Multi-State Complications;
  • Untimely Payroll Processing;
  • High Dependence on Technology;
  • Etc.

Payroll Outsourcing as a Solution

Payroll Outsourcing

Based on the list above, many companies choose to use payroll service provider in overcoming employee payroll systems. Payroll outsourcing is one solution. Payroll outsourcing has specific duties and roles in terms of payroll, payroll service programs are considered to help companies to handle employee payroll matters.

The following below, the benefits of using outsourced payroll services that you need to know :

1. Potential Time Savings

Regardless of the number of people employed by your business, your payroll process still requires a great deal of time and attention to detail. In fact, according to one study, and average business may spend as much as six weeks out of a year doing just payroll. Outsourcing this function immediately frees up precious time.  Time saved is money saved. When evaluated on a per-payroll-period or a monthly basis, a time/cost analysis can quickly reveal the value of outsourcing to a full-service provider.

2. Generating Reports for In-House and Accountant Use

At the end of each payroll period, the amount of pay earned by all employees, any benefits or miscellaneous deductions withheld, and all payroll tax amounts must be carefully recorded for future accounting purposes. Depending on the size and structure of the business, payroll reporting may be included in any fiscal year-end reports, especially if the business is publicly traded or currently looking for investors. Even if those reports are not required, many business owners evaluate previous payroll reports to make hiring and staffing projections.Payroll figures are also necessary for tax purposes, both for business year-end income tax filing and for quarterly and annual payroll tax reporting. Keeping this information organized and easily accessible for future reporting or delivery to an accounting professional can take additional time each period.

3. Avoiding Reconciliation Uncertainties

It is hard to keep track of the payments through the bank during the time when employers have to give paychecks to the employees. It is a very complex and time taking process. You can avoid bank reconciliation uncertainties by delegating payroll services to an experienced payroll outsourcing

4. Compliance Risk Management

With the correct partner, you can gain access to expertise in legislation, government regulations, privacy, and security in order to lessen the risks. Your payroll provider will provide you with a precise, correct and authentic report that helps you to make sure that your data is protected from payroll theft and fraud. Furthermore, choosing a payroll services providing company can save you money on legal fees, and put compliance in the hands of a business that understands these legal issues.

5. Enhanced Security of Payroll Data

Payroll processing is a complex and potentially risky business operation. Even with trusted partners , there is always a risk of identity theft, embezzlement, or tampering with company records for personal gain. Outsourcing payroll to a stable, experienced provider can offer a “safe haven” for your confidential payroll data. In addition to redundant backup and multiple server locations, a quality payroll provider invests in state-of-the-art systems for storing and protecting data, simply because it’s part of the service provided to clients.

6. Professional Payroll Expertise

Payroll processing companies hire professional and experienced payroll experts to do your payroll. You can get consultancy and tips regarding payroll services during the expansion of the company.

7. Tax and Payroll Penalties

Irregular payroll management might lead to inaccurate tax filing which results in tax penalties. This can cause serious trouble for you. Therefore, a professional payroll company makes sure that your payroll has no irregularities.

If even one of the above payroll benefits could improve profitability and efficiency in your organization, it may be time to consider outsourcing. With so many options available, you may question how to choose the right payroll service. Consider first outlining the key features that would benefit your business in relation to your company size, payroll frequency, and industry type. Once you’ve pinpointed what you need from a payroll provider, explore payroll options that meet your specific criteria.

We Indoservice, consist of dedicated professionals who will work with the needs of a good payroll system service for your business. You can count on us to provide quality services that best suit your needs. Contact us now to get special offers.



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