How to Avoid The Most Common Payroll Mistakes [5 Practical Solutions]

Industry Trends

25 January, 2023

How to Avoid The Most Common Payroll Mistakes [5 Practical Solutions]

Karolina Kulach

Karolina Kulach

Senior Content Marketing Expert

How to avoid costly payroll mistakes? Payroll mistakes are unfortunately common but fortunately preventable.

The reality is that you can avoid most payroll mistakes. It may require extra vigilance and choosing smarter solutions, but you’ll save your precious time and money.

Only 1 wrong digit in payroll calculation can result in disastrous consequences. Therefore, it’s worth getting your payday right.

In this article* you’ll learn about:

  • The 8 biggest payroll mistakes
  • How to correct (and prevent) payroll mistakes and errors (5 practical solutions)
  • Effective ways to improve your payroll process, including using modern HR technology

*The information, data and guidance provided in this article is for general information purposes only and does not constitute professional or legal advice.

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Avoid these 8 biggest payroll mistakes

In today’s business world, It’s much easier to make payroll mistakes than ever before. We’re increasingly dealing with complex payroll transfers, especially in fast-growing startups and in the gig economy sector (a.k.a. digital platform work).

Digital platform work growth

Here are the most common payroll mistakes companies make:

  1. Wasting time and money on manual payroll processing
  2. Miscalculating pay and misclassifying employees
  3. Wasting time and money on fixing payroll errors
  4. Low flexibility of your payroll system
  5. Missing payroll deadlines
  6. Poor payroll records management
  7. Having a poor payroll process
  8. Payroll processes slowing down your growth

For more detailed information about the 8 payroll mistakes, check out our article: “The 8 Biggest Payroll Mistakes Most Employers Make”.

Most payroll mistakes result from poor payroll processes, such as entering data into payroll software, calculating wages, processing payroll taxes, etc.

The bottom line: no company is immune to payroll mistakes/errors, but all companies can, and should, minimize their number. After all, wasted time in HR has a long-term impact on your company’s profitability, especially when retaining employees is challenging.

Your HR should focus on what counts: your employees, not solving errors. HR should focus on building a happier workplace where “employee turnover” sounds like a foreign word.

Read on to learn how to solve and prevent the most common payroll mistakes.

How to avoid payroll mistakes: 5 practical solutions

In today’s dynamic workplace reality, it pays to avoid outdated HR and payroll systems and instead choose accurate, flexible, and adaptable solutions. This is even more important when your business and workforce are growing.

Here are some actionable recommendations to help you avoid payroll mistakes.

1. Streamline your payroll process

Make sure your payroll process works smoothly, and your system is flexible. Don’t risk forgetting to meet important deadlines or to send forms on time. Most payroll solutions have alarms and reminders to help you avoid missing important details.

Additionally, go through and spring-clean your existing records. Use a proven system to gather all the relevant details about your employees.

Use a payroll effectiveness & efficiency checklist to identify any potential glitches.

Finally, to reduce manual work and paperwork in HR, consider creating a payroll master file for automation. It will free up time for strategic HR activities and boosting employee engagement.

2. Take care of your payroll documentation

Ensure your payroll admin has all the necessary information and data to handle the payroll process properly.

Here are some recommendations:

  • Keep backup records if something happens to the original files/your device or software crashes.
  • Only allow authorized people to have access to employee payroll records.
  • If you have a dispute about payment/employment with an employee, keep all payroll records until the dispute is resolved.
  • You must keep payroll documents for a set time (based on legal regulations). Keeping them for longer than required can put business owners at risk. Thus, destroy them after the retention time frame to prevent the misuse of confidential data.
  • Keep track of which payroll records you’ve destroyed and when.
  • Consult payroll experts if you have doubts about the accuracy of your payroll-related matters, e.g., records and deductions. Talk to HR & payroll specialists, accountants, tax consultants, or other relevant experts in the field.

Additionally, make sure you reduce manual payroll processes to a minimum.

Does it make sense to use your HR team’s time on manual data entry, salary calculations in Excel spreadsheets, correcting payroll errors, and dealing with high employee turnover? Is it a good idea to give up the benefits of the innovative technologies of the 21st century? Can your company afford (more) problems with payroll? You probably know the answers to those questions.

Anna Jagiello, Digital Product Expert

The right HR and payroll software will help you:

  • Access all of the documents you need in one place (at any time, any place)
  • Organize your payroll records and find information easily
  • Download chosen reports at a click
  • Keep your data secure, especially sensitive and confidential information
  • Prevent many errors, like payroll miscalculations and tax filing delays
  • Stay organized and compliant
  • Keep your organization safe in case of future audits

3. Solve payroll problems quickly

If any payroll problems/errors occur, resolve the issues immediately. If necessary, report them to relevant entities. Correct errors promptly to minimize employee dissatisfaction and avoid penalties.

In the case of minor payroll errors, you can usually do one of the following:

  • Cancel the payroll immediately, make updates/corrections, and reprocess it.
  • Run an additional manual payroll for the affected employees only (with the necessary adjustments).
  • Make adjustments on the next payroll to counteract previous mistakes.

To prevent payroll errors:

  • Make sure you adhere to local legislation.
  • Provide your employees with automated, clear, and easy-to-read payslips so they understand what they’re paid for.
  • Stay on top of ever-changing laws and policies, especially if you operate globally. Consider global payroll solutions that can help prevent payroll mistakes from happening.

With the right payroll software, payroll teams can identify problems that may negatively impact the payroll cycle’s completion. This way, they can solve them before the payroll is run.

Payroll software helps to:

  • Minimize the risk of human/calculation errors, double entries, and delays in payroll processing
  • Save your team the hassle of correcting mistakes
  • Reduce your existing payroll costs
  • Make informed business recommendations based on accurate data and reports

4. Solve payroll problems before running payroll

Low-performing organizations can take around 5-10 days to resolve a payroll error (APQC). But why take your precious time to resolve payroll errors instead of preventing them from happening in the first place?

If you have access to payroll software, run a few key reports before processing payroll. This will help you catch and prevent mistakes.

Consider running the following reports:

  • Deductions summary
  • Payroll register (all payroll information in a summary format)
  • Cash requirement (how much money your company must have available to pay payroll)

Additionally, to prevent payroll errors:

  • Do your research.
  • Create a payroll checklist (for yourself and your administrators) to keep track of all the process steps.
  • Keep a list of all the changes made during a given pay period. Ensure that the system is up-to-date.

Do your best to spot payroll errors before they happen. Using human eyes alone for this may be too risky.

5. Use automation and AI for better data collection and decision-making

Payroll and HR need better data for better decisions. Unfortunately, HR departments have lagged behind in this regard.

According to the study by Capita Resourcing:

  • A quarter of businesses say their HR and recruitment teams are the least proficient at collecting, analyzing, and acting on data.
  • 4 in 10 said that the ineffective use of data was likely to have a negative impact on candidate and employee experience.

Luckily, AI and automation can help with a big data gap in HR, starting at the onboarding stage.

AI can help HR professionals analyze key data and identify trends as well as pain points. This way, issues can be addressed proactively. For instance, high resignation rates among employees from particular departments or pay grades can highlight the areas that need particular focus.

There is a strong link between payroll and HR. Together, they can gain an excellent collective understanding of their employees and what makes them want to stay or leave (whether pay-related or not).

Payroll and HR can take co-ordinated steps to improve employee satisfaction and retention.

Finally, many employers understand the benefits of AI and automation in HR. But often, they don’t know which software to choose or how to implement it. Locating the right payroll partner requires some legwork and due diligence. But it’s worth the effort: it saves lots of time, money, and hassle long-term.

Use flexible payroll solutions

Today’s complex payroll cases require flexible systems and technology capable of handling multiple variables and processing the fast-changing payroll data.

Nowadays flexibility is critical. It’s a top factor that could prevent employees from leaving an employer. Thus, many employers cite flexible workplaces as their top retention strategy. They’ve started experimenting with different solutions to address labor shortages.

For example, to make jobs more appealing, some retailers offered to pay store workers daily rather than weekly. To provide flexible pay like that, a flexible payroll system is a must.

Many employees want their salaries on demand. Paying your employees once per month is outdated and can negatively impact employee retention.

That’s why, for better talent attraction and retention as well as keeping business costs down, businesses need a modern and flexible payroll system.

Furthermore, flexibility is required when companies expand globally and hire remote employees. Keeping track of the latest employment regulations, taxes, and policy changes in various countries is essential. Otherwise, non-compliance or incorrect filing can result in fines and penalties.

Therefore, you need a smart and flexible system to ensure you stay compliant in non-standard situations and at all times.

Such a system will also help you avoid messaging your payroll provider to ensure they have up-to-date and correct payroll data. Avoid this inefficient process with a tool that can instantly detect incorrect data.

Payday and its impact on the profitability of your business

Payday is directly related to profitability and the success of your business. For example, many employees will start looking for another job after experiencing only 2 payroll errors. Unfortunately, replacing every employee who leaves is costly.

That’s why you must pay your staff correctly and on time, every time. You must manage your payroll in a smooth, smart, and fair way.

Paydays are much more than financial tasks and bank transfers. Paydays:

  • Have significant psychological consequences
  • Motivate employees’ behaviors
  • Influence employees’ perception of their workplace
  • Impact employee satisfaction and retention
  • Are directly related to profitability

Payroll errors cost companies money and time and lead to employee dissatisfaction. It’s in your interest that your employees are satisfied with what they’re paid and how they’re paid.

The Great Resignation and employee retention

The Great Resignation is a shortcut for the historical quit rate happening on the job market as a result of the coronavirus pandemic. Even though we’re living during the economic downturn and high inflation, employees continue to leave their jobs.

The pandemic has reshaped many employees’ priorities. Today employees value:

  • Compensation
  • Flexibility, including flexible work hours and remote work
  • Work-life balance
  • Mental health and well-being benefits
  • Meaningfulness in work
  • Career advancement
  • Positive culture
Employee retention in the Great Resignation: why are you looking for new opportunities?
Employee retention in the Great Resignation: survey

Compensation is still at the top. But like never before, employees value work-life balance, flexible schedules, advancement potential, and the ability to work remotely.

Furthermore, according to Gallup estimates, disengagement among employees costs US businesses around $500 billion annually.

Therefore, make sure your staff is:

  • Satisfied with what and how they get paid
  • Engaged and happy with their workplace experience

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Finally, avoid wasting time on manual, repetitive work and processes that tools can do. Thus, payroll has a critical role in employee retention as an area where you can automate unnecessary work. The right HR & payroll provider will help you achieve that.

Automated payroll services

Plenty of business owners still use spreadsheets to manage their payroll manually. But there’s an alternative to this outdated and inefficient practice.

Creating a payroll master file for automation will help you:

  • Simplify and improve your payroll system
  • Speed up wage calculations
  • Reduce payroll errors
  • Lower business costs
  • Increase efficiency
  • Make it easy to run reports, file taxes, and distribute payslips
  • Facilitate the easy flow of data between departments
  • Ensure the security of sensitive data
  • Guarantee compliance
  • Solve questions more quickly
  • Improve employee experience
  • Solve retention problems
  • Free up time for strategic and employee engagement activities

Make time for the things that count. Think about how you can automate repetitive tasks and prevent payroll errors so you can be there for your employees when they need you.

Symmetrical offers easy, automated payroll services with the support of a dedicated team of payroll experts to help you:

  • Minimize the risk of payroll errors/mistakes
  • Put an end to payroll and HR chaos by automating tedious tasks such as manual data entries or calculations
  • Hire and pay people in a cheaper, easier, and more automated way
  • Connect all your HR-related systems and integrate them into one automated process

Avoiding payroll mistakes: conclusion

Do your best to avoid or, ideally, prevent payroll mistakes. Automation may be your safest bet in today’s complex payroll world.

Automated payroll services will help you:

  • Minimize payroll mistakes
  • Reduce payroll processing costs
  • Pay your employees accurately and on time
  • Stay safe from legal consequences
  • Address changing employee needs by giving employees more flexibility
  • Improve employee satisfaction and retention

Invest now in improving your payroll processes so your company doesn’t pay for it later.

Ready to take your payroll (and business) to the next level? Learn more!

Sources

8 Must-Have Benefits of Automated Payroll
Common Payroll Mistakes
How Global Payroll Can Meet the Challenges of the Great Resignation
The Great Discontent: 2021 Worker Survey (US)
8 Definite Benefits Of An Automated Payroll System
6 Ways Global Payroll Can Meet the Challenges of the Great Resignation
What to Expect Post the Great Resignation in 2023
Automated Payroll: Benefits
Employee Payroll Records
HR automation in 2023
69% of UK workers ready to move job
Is salary important to workers?
The Risks of Poor Payroll for Businesses
Top 5 Ways Payroll Automation Will Benefit Your Business
7 Ways Payroll Automation Is Beneficial for HR
How to Prevent Common Payroll Processing Mistakes
How to Tackle U.S. Employees’ Stagnating Engagement

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