HOW TO AVOID THE MOST COMMON PAYROLL MISTAKES 

October 2021

Humanity as a species have certain programming that evolved from the world our predecessors lived in and had to navigate and survive. One of these is our mode of learning. We learn through trial and error. Making mistakes is a necessity for us to adapt to the most optimal course. But over the past three centuries, we’ve developed complex social systems that require us to be almost machine perfect. Payroll is one of these systems where mistakes must be avoided at all costs, if possible.

But compared to our evolution and when payroll started becoming a profession, our evolutionary instincts are still prevalent. And we make mistakes.

*Copyright: Smithsonian Institute

TIMELINE FOR PAYROLL DEVELOPMENT

3100 BC: It wasn’t called Payroll back then, but archeologists discovered evidence of records carved in stone of rations for workers in Mesopotamia.

 

Around 1750 (AD): First use of the word “Payroll”. The emergence of the payroll profession, handled by paymasters. 

19th and 20th Century: Development of banking that allowed people to save, spend and manage money.

20th and 21st Century: Rise of the service economy and Payroll as a profession.

However, there are ways to avoid or minimise the risk of mistakes in payroll.

What are some of the common payroll mistakes

Being aware of the most common payroll mistakes can help us manage these mistakes preventatively.

Miscalculating pay

Miscalculating pay is a common mistake because it’s easily done. Payroll staff can go into autopilot and save time with shortcuts by assuming employees’ payroll remains the same month after month. But this is not always the case. To avoid over-or underpayment, Payroll’s job is to check every individual’s paycheck for increased payments, like overtime or a new benefit scheme, or new or once-off deductions, with a sizeable risk of error.

Miscalculation of overtime pay

Miscalculating overtime can cost a company money. Overtime payments are governed by legislation, and command compliance or incur penalties. Payroll must know the rules of overtime payment for different categories of employees.

Failing to keep complete records

Accurate and complete, up-to-date payroll records are crucial for auditing purposes. Failing to do so could cost the company dearly in fines, penalties, and other payroll-related issues, and it leaves the company vulnerable to fraud.  Keeping your payroll records pristine will keep your company’s reputation intact.

Missing payroll tax deadlines

This mistake links with the previous one. If your records are not up to date and complete, the risk of missing crucial tax deadlines increases exponentially. Missing payroll tax deadlines can incur massive penalties and trigger audits. It’s a headache best avoided.

Causes of payroll errors

For an accurate payroll, employers and employees each have a role to play in satisfying certain responsibilities. Understanding these responsibilities and the implications of errors is crucial to both parties to avoid payroll errors.

Employee late or incorrect payroll submissions

The employee must ensure that their payroll information is correct and submitted by the required, clearly stipulated deadline. Here a great tool is a Human Resources Management System (HRMS) that automates the check-in and check-out of employees in the workplace, minimizing mistakes and oversight. An employee can change their bank details or update their address.

Late tax submissions

Tax submissions fall fully within the ambit of the employer’s responsibility. The Payroll department must be crystal clear on the employment tax due dates or these will be late and incur penalties and interest.

Incorrect employee title and records

Ensuring the correct employee records and details is the combined responsibility of employers and employees. Incorrect employee records and titles can lead to incorrect payments, employees charged on the wrong tax codes and a horde of other errors that can frustrate and negatively affect employees and employers alike.

How can we avoid payroll errors?

Lucky for us, Payroll is not stuck in 3100 BC – or the 1750s, for that matter.  We have made great technological strides to help us avoid and prevent costly payroll errors in the 21st Century.

Eliminate human error

As our mode of learning and adapting as a species is encoded in our DNA – namely learning through mistakes – it is probably better to outsource those areas where we’d like to avoid human error. Like payroll. Who better to outsource it to than our clever, fast-advancing technologies?

Payroll software solutions, some specifically designed for the UAE, offer error-free, lightning-fast payroll processes error-free. Intelligent HR systems have evolved to include all manner of payroll functionality that not only minimises human error but also ensure automation, like the calculation of taxes and ensuring up-to-date compliance, automatic money transfers to authorities where required, and payroll runs.

gulfHR designs bespoke HR software solutions to fit each organisation’s specific HR and payroll needs. Let us know what you need.

Keep employee records up to date

Keeping employee records current is a no-brainer with an HR management system. You find all your employee details in one place. It’s easy to manage, maintain and update as necessary. And you can choose your HR software program based on your company’s specific needs, depending on the number of employees, stage of growth, budget, and more.

Build a payroll checklist

When a company has a process, detailed in incremental steps, helps everyone involved to adhere to the process. Build a payroll checklist that clearly defines the role players and each person’s responsibility, as well as dates and deadlines. It saves a lot of hassle further down the line.

Run the payroll early

Payroll is a high-pressure environment because it is time-sensitive and must be executed precisely and accurately. Give your Payroll team enough time to perform their tasks. Start early in the payroll cycle so that you have a time buffer built in to audit the run, pick up mistakes and make corrections where applicable.

Deal with payroll errors immediately

As soon as an error is highlighted, address it. Acknowledge the mistake and correct it immediately. If the mistake went out with the payroll, notify the affected parties immediately and assure them that the Payroll team is correcting it. Notify affected authorities to avoid punitive penalties.

Invest in a good HR management system

An HRMS reduces mistakes because it automates many processes in payroll processing, like marking attendance, generating salaries, calculating overtime, ensuring compliance, storing documents, and so much more. Additionally, an HRMS provides data security that manual processes and paperwork can’t offer, with insurance against the risk of ruining a company’s reputation, and providing a complete backup in case of mishandling or data loss.

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