5 Bad Payroll Habits You Need to Drop Right Away

BY Therese Pempeña Efficiency

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Managing payroll for companies of any size comes with its own challenges. The paperwork and time commitment involved alone can overwhelm even the most experienced professionals. And even with a reliable payroll system in use, subscribing to the wrong kind of practices can prove harmful to the business. At a time when inefficiency and payroll errors cost companies around the world billions annually, it pays to know what practices you should avoid.

Utilizing an Overpriced Payroll System

It’s ideal to invest in a payroll service that could easily adapt to your company’s growth. But keep in mind that you should not sacrifice practicality for scalability. Too many small and medium businesses make the mistake of using payroll systems that are designed to cater to larger companies. As a result, they pay more than they should when there are alternatives that can provide the same features at a more affordable price point. Carefully consider your options to pick the best fit.

Entrusting Authority to One Person

Letting one person have full authority over the management of your payroll is a huge oversight that may lead to data corruption. Although this is not as big an issue today, having a chain of command keeps things in balance. Instead of giving one person full control of the system, appoint different people to enter information of new hires, audit data before generating payroll, etc. Having this measure in place helps ensure the accuracy of your payroll and keeps your business low-risk.

Hiring Unqualified People for the Job

For so long, payroll has been treated as a “hand me down” role, often assigned to people who did not receive formal training. Although automation cuts down the work by more than half, there’s still a lot at stake to let it be managed by someone who is not familiar with the process. More importantly, you should give your payroll officers or anyone else who manages your payroll the opportunity to upskill, especially when there are major changes in the law.

Failing to Keep Proper Documentation

Disputes regarding payroll is not that uncommon, and there could be a time when you will be required to justify the figures the system generates. This is why you should have the ability to pull up digital records when needed but beyond that, you must also have the paper trail to back it up. For instance, if an employee says that they are supposed to receive a bonus for this cutoff, don’t just rely on verbal communication. Make sure that there is proper documentation and that it went through the right channels for approval.

Not Double Checking Your Totals

Just because you’re using a payroll software, doesn’t necessarily mean that you don’t have to check your totals, according to an article on Human Resources Today. While payroll systems make things simpler for you, there should always be series of checks and balances to lower the risks of errors. A well-trained employee must verify your company’s gross, totals and reconciliation before finalizing payroll. Generating pre-processing reports from cycle to cycle can also help you find issues that need to be resolved.

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