The 5 Main Challenges of Payroll and How to Address Them

Posted by D&V Philippines
Jul 05, 2016
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Managing payroll is a very meticulous task that even a minor error could cost expensive damages. While managing payroll in-house is the best way to be in control of your finances, challenges in payroll processing are inevitable and are never just a basic back-office task.

addressing challenges in payroll processing

Here are the main payroll processing challenges that you have to consider and how to effectively resolve payroll issues

  1. Manual payroll processing

While manual payroll processing requires no upfront investment on software or any other electronic system (except for a calculator), manually keying in data and calculations makes you prone to errors or duplications, which can cause even bigger payroll problems for the company. Not utilizing any software means that employee data cannot be stored and calculations and deductions cannot be computed automatically, making all steps redundant every pay run.

Manual processing also makes it hard to produce reports and share information within an organization. On top of this, confidential payroll figures can also be easily leaked because there is no form of security at all.

The Solution: Automation is key. A specialized payroll software solves all these dilemmas and more.

  1. Non-compliance

Payroll compliance challenges remain a major challenge for companies that don’t hire the right people to do the job. Whatever the reason is for not filing taxes accurately and on time- whether it’s because of negligence or lack of knowledge, great penalties and even legal sanction await.

The Solution: Invest in hiring the right person to manage your payroll, with expertise on the taxation and regulatory laws and the years of experience to back it up.

  1. Payroll fraud

According to the Association of Certified Fraud Examiners, payroll fraud happens in 27% of all businesses. It can be committed in several forms such as falsified wages and commissions, faking injuries for insurance claims, or having ghost employees. Payroll issues like these happen when employees have access to critical components of the payroll software or when there are no internal controls in place.

The Solution: Random inspection of payroll database, periodic payroll audits, and strong internal controls must be established. Another effective solution is outsourcing to a payroll service provider for an objective view on payroll processes, wherein employees do not have access to the software and critical numbers.

Related: Fraud Risk Management: Are You in Danger of Payroll Fraud?

  1. Being up-to-date

Not all employees in charge of doing payroll get the chance to be updated on the latest taxes and legislations or the latest payroll software. This could once again result in erroneous calculations and inaccurate tax filing.  

The Solution: Hire someone who is truly a certified or accredited payroll specialist. Otherwise, enroll your staff to payroll training to learn the latest tax updates and best practices in payroll management and software.

  1. Time-consuming

Managing a small business payroll consumes a big chunk of time, even if it is done using a software. The time spent on the fine details of checking the accuracy of recorded hours, calculating salaries and deductions, and complying with government procedures—all these hours can be used on growing the business instead.

The Solution: Outsourcing to payroll providers is the best way to save time and not get bogged down with the details in payroll processing.

Challenges in payroll processing can be addressed through outsourcing solutions. Are you ready to systematize, automate, minimize risks, and save time and resources on payroll? D&V’s Payroll Solutions enable you to have access to a group of payroll experts as well as top-of-the-line payroll software. Download our whitepaper Australian Payroll Made Easy today or get in touch with us now!

New Call-to-actionThis post was first published 5 July 2016  and edited 19 March 2021.
Edited by: Maria Katrina dela Cruz


Our Outsourcing: How to Make it Work guide explores how you can utilize accounting and finance outsourcing to drive growth to your business and add value to your processes.