8 Ways You Can Screw Up Your Payroll Process And How You Can Dodge It

Do you still complete your payroll process with a pen and paper or excel sheets for that matter Are your attendance timesheet and data records lying in dustcovered registers By the look of it yoursquore probably facing major payroll issues not to mention your company is leaking money and you are possibly heading towards lawsuitsYou are not alone in this mess About 4237 of the companies who rely on traditional methods for calculating salaries sail in the same boat as you Not just that they have lost lakhs of rupees annually in correcting the mistakes that took birth from the adoption of manual workDo you need a clear picture on how and which mistakes forced companies to shell out all that cashTake this reallife example An Indian retail company had 100 employees in total 61 of these were fulltime employees while 27 others were contractbased and the rest 12 interns Despite the size they chose to go the traditional way of handling payroll When it was the time to calculate and credit salaries the company made a small error It tabulated a fulltime employee as a contractbased employee This resulted in the former being denied hisher overtime wages and a considerable difference in the base amount Moreover as contractbased employees arenrsquot taxed the company witnessed itself in the midst of taxtheft accusations meaning legal trouble Though the company saved itself from lawsuits from the employeersquos side it faced heavy penalties fines and payroll mismanagement lawsuits from the court By the time it got out of the ruckus it had spent over 20 lakh rupeesShocked that an honest mistake cost years of revenueThis is the effect a payroll process has on a company Think of it as oxygen No one notices its presence but its absence sucks life out of everyoneIf we think about it in a simpler way a payroll process is nothing but the procedure of crediting salaries to employees based on the amount of work they have done or as per their contractfixed pay Seeming easy and doable right Think again The actual process requires the correct tabulation of the employee timesheets attendance work position and a dozen other things A tiny mistake in any of these can cost your company a lot of money and legal problemsIf yoursquore still not convinced here are the ways manual payroll process completion can push your company in dire situations1 Miscalculation of overtime wagesAccording to the Section 51 and Section 59 of the Factories Act 19482 of India the maximum working hours for an employee are 48 in a week and 9 in a day If he works for more than this period he is entitled to receive double of his regular wages per hourHowever the private sector has some differences and each company sets its own bunch of HR policies If your organization does furnish overtime wages to its employees it is vital to keep a record of these documents Miscalculating them means inviting interest penalties and other financial problems that come hand in hand with old regimes of payroll evaluation2 Vulnerable paper docs and mishapsPapers files and registers are perishable Comes in an unfortunate situation like a flood or a fire and years of documents can go up in flames or destroyed by the gushing water Excel sheets are no better than paper docs We are all aware of computer viruses and data deletion A slightest mistake can rob you of all the sheets created Apart from the fire or flood tragedy you will also be freaking out about how you will be calculating your payroll now with no employeersquos working hours recordNot just that registers can be easily changed and manipulated There have been several cases where employees altered the number of hours mentioned in the paper documents3 Compliance gone down the drainUnless you love lawsuits for wrong compensations or are overly confident about the people who manage your payroll calculation you will not continue using pen and paper for staying compliant with the regulationsComplying with all the governmentset laws is not a piece of cake Legal cases erupted from not following the laws will land you in the dock4 Buddy punching systemColleagues often turn good friends thatrsquos not an issue The problem arises when these good friends mark attendance for their absent friends It is as easy as letting the buddy swipe his debit card for him This becomes worse for companies that are using paper timesheetsThough the problem is real and happens frequently there is no cure to it except the adoption of technology Today we have digital methods that can track time leave and attendance through biometrics selfies and more that can ensure time thefts become antique5 Human typo errorsMistakes happen We are only human However sometimes mistakes can prove to be very costly Imagine your HR writing lsquo20rsquo instead of lsquo2rsquo as the working hours of a specific person Small mistake right Just a zero is addedIf we say the hourly pay for the employee was Rs 500 he was supposed to receive Rs 1000 for the work he did Yet he was credited with Rs 10000 If things continue this way the employer will have no option but to shut down the company6 Working on holidaysMixup of time overlapping can lead to serious consequences If a person who is on a vacation has a sudden work requirement and does it for a certain number of hours he is supposed to receive the pay for it The calculation is not so difficult when the company size is smallHowever as and when you grow this problem takes the centre stage It becomes tough to keep a track of the time and name of employees who worked on their leave7 Misclassification of employeesSuper simple to do and super expensive to the employer Wrongly noting a manager as an intern and an associate as a level 5 employee can create a huge ruckus Lawsuits are bound to follow if the situation isnrsquot brought under controlAlong with the internal issues professional tax not paid will be levied on the employer who will have to not only pay the government but also the right wages with compensation to the employee8 Sleepy staff filing taxes lateTaxes change from time to time The rules and figures you started with might not be applicable today It is important to follow this shift with the governmentrsquos changes as it can financially harm the company tremendouslyFor example the Indian government released the new taxing regime earlier this year If the payroll staff of your company doesnrsquot file taxes according to the employeesrsquo choice on time you will have to face the sword ultimately not your staffWith the complexities attached to a payroll process it is easy to actually fall in its trap if manual methods are followed If your company is already seeing itself in the pitfall then yoursquore aware of the consequences that came by sticking with the traditional routeThe only thing that can help you dodge this situation is the adoption of an HRMS tool Technology isnrsquot as complicated and expensive as you think it to be If it looked expensive then you must have been on the pricing page of the wrong softwareAgreeably startups are jam packed with financial requirements right from paying their employees to the hefty electricity bills Hence they often disregard payroll software and consider such tasks to be feasible manually to save money However the lack of a transparent accounting system can lead to serious economic hardships so much so that the funds which stopped them from hiring a software can be lost in multiple folds due to the absence of it