To Err Is Human: 4 Common Errors In Payroll Processes

Posted by Cedric Joshua Martinez

Jul 7, 2016 12:30:00 PM

At some point in your business, mistakes or inconsistencies are bound to pop up - and sadly, payroll is no exception. But how do you fix common payroll errors?

accountant dealing with common payroll errors
Familiarity with typical payroll errors easily helps you remedy or even avoid them. While some of these errors don’t have enough impact to bankrupt your company, being aware of them saves a lot of headaches in the future (such as a huge drop in either employee morale or profits).

Here are 4 of the most common payroll mistakes that you should strive to correct (or avoid) before they snowball into something irreparable.

Over and underpayments 

Among payroll errors, overpayment happens for numerous reasons: from simple oversight to calculation error. This is why these issues are at the top of the list of things that can go wrong, and thus need to be double-checked as much as possible. Among these reasons are:

  • Inadequate understanding of labor laws, like overtime
  • Forgetting employee benefits they have earned
  • Wrong classification of employees
  • Forgetting to consider earnings and deductions due to taxes

However, given the sheer volume of employees and files involved in the entire process, mistakes are bound to happen. This is especially true if the person in charge of payroll has other duties to attend to. If anything, hiring another payroll professional or outsourcing your payroll can be a viable solution to the issue. 

Related: 4 SMB Headaches Solved by Payroll Outsourcing

Late or incorrect deposits 

While the above reasons for wrong payments may have a hand in this, late or incorrect deposits are mainly caused by an ambiguous deposit process. How often should you deposit? What forms are required by your state laws to fill? Is electronic deposit an option in your country or state? There needs to be an employee payroll system to organise these steps and make everything clear from the very start. So how do you fix this payroll error?

Being suddenly struck by this problem in the middle of processing payrolls can lead to two things: either you file the incorrect forms and invalidate your payroll, or delay the accomplishment of forms and cause trouble. Either way, your payroll will end up late and inconvenience you and your company every single time until you manage to stay on schedule.

Throwing away records 

Payrolls result in piles of paperwork you’d want in the recycle bin as soon as possible - but did you know that, depending on where you are, throwing your records away immediately may actually be illegal? This may differ depending on your country’s laws, but there is a set time that you must store your records before disposing of them, which can be up to 3-4 years. This is to ensure that if a problem ever arises, you would have the proper paperwork to present.

This shouldn’t be a problem nowadays due to the rise of digital payroll management. With today’s technology, uploading your files to the cloud can hold enough paperwork to fill a room, maybe even the files of an entire company. Aside from its massive capacity, you can also make sure your confidential numbers are well secured.

Excessive dependence on software 

Imagine if you were to encounter the above problems, with your accountant nowhere to be seen. He could be bedridden or could have left the company without warning, but that doesn’t change the fact that there’s a pile of work left unattended. You could be thinking that you can just rely on your accounting programs, but these can only do so much. Such tools are limited by their very own programming and may cause errors that human eyes would have caught. 

While you don’t need to be told that a deficiency in the workforce can impair any aspect of your business, it typically happens in this field. It is one of the most ignored parts of the company, so much so that these tasks are usually just delegated to those that already have other matters to attend to.

 

Common payroll errors could easily be averted by implementing an internal control system. Simply put, this is quality control for all of your accounting and auditing needs. This can come in many different forms and can specialise in certain aspects, such as payroll. With this in place, you’re assured that payroll processing is done efficiently and without a hitch.

Want to learn more about avoiding such problems or be more informed about internal control systems? D&V has a team of expert accountants with the right knowledge to answer any of your payroll questions and problems. Get a copy of our Australian Payroll Whitepaper to know how D&V Philippines’ premium payroll services get through your next payroll without breaking a sweat.

Download the Australian Payroll Management WhitepaperThis post was first published 7 July 2016  and edited 04 January 2021.

Topics: Payroll Services

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