Payroll Errors are Costly

By April 9, 2014 October 5th, 2015 Cloud Computing, Human Resource, Payroll

It is normal to make errors during the course of the business and if the errors can be rectified easily, things may not go beyond one’s control.   However, sometimes we tend to misjudge the magnitude of the repercussions that can be caused by a “minor” error. One of the common errors of the business world is payroll errors or compensation mistakes. Though easily rectifiable, sometimes they can cause more damage than you think!

Costly Errors

Making errors while computing the compensation can be serious and costly. This can hamper the reputation of your organization as well. Frequent over-compensations can result in extra payments and under-compensations can result in disgruntled employees and may even lead to fines to be paid for lack of compliance under the labor laws.

In the event of over-compensation, recovery of excess salary from the employee can be an uncomfortable process involving extra procedures and painful paper work. On the other hand, if the payroll reflects lesser salary compensation than the correct amount due, it can dampen the employee’s expectations and result in more dissatisfied employees. In both cases, the company’s image and reputation is affected and the capability of HR employees is questioned.

In the event of payroll errors, here are three quick steps that you can take for rectification:

  • Contact the concerned people – First and foremost contact the concerned people and inform them of the error. Inform them of the steps you will take next to rectify the error. Make sure you contact them in writing as well.
  • Admit and Acknowledge – It is best to accept your mistake. Admit that an error has been made but assure the affected people and the concerned officials that it will be amended without delay. The worst thing to do in such as a case if to cover up the mistakes or ignore them unless those affected come back and complain about it.
  • Act fast to fix the error – Without much ado, fix the error fast. The longer the delay, the unhappier your employee is and higher are the chances of fines. Delay in taking actions may aggravate the situation and worsen the organization’s reputation. Hence, fixing the error without much delay is important and you should let the affected people know that you are doing your best for early rectification.

Once the compensation is rectified, be sure to inform the concerned people of the same in writing and you can attach the amended compensation receipt as well.

Handling payroll and compensation manually can be a daunting task with many compensation heads and salary components and the numerous categories of employees. To ensure systematic and efficient payroll management, it is best to use a payroll management software. The automated technology minimizes and removes manual intervention and ensures that compensation calculation is accurate and that payments are processed correctly along with the required taxations. Hours of working over spreadsheets and excel sheets will be avoided and the payroll software shall help in preventing errors. A payroll software can easily ensure that correct payment is made on time. Thus, efficiency will increase without the need of ad hoc use of the spreadsheets. Hence chances of future payroll errors and mistakes will be weeded out as well.  Using an Online Payroll can further help you stay transparent with your employees and easily share payroll information. It can also help rectify some problems before payroll could be processed, like attendance and effort in hours.

It is important for any growing organization to focus its energies on core business areas and adopt technological solutions to give efficient and cost-effective management solutions.