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Effective and accurate payroll management is crucial to ensure that your employees receive their payments on time. It also protects your organisation against any labour or payroll compliance issues.

Payroll mistakes can happen due to human errors or payroll system issues. Payroll mistakes can be costly, and they also affect the employees’ trust in the organisation. Hence, organisations need to make sure that their payroll managers and staff are equipped with the knowledge to handle the payroll processes effectively.

Here is a list of the most common payroll mistakes and how to avoid them:

Misclassification of Employees

Misclassification of employees is one of the biggest payroll mistakes many business owners make. Misclassifying employees as regular employees or independent contractors results in fines, penalties, and even lawsuits. As regular employees and independent contractors have vastly different benefits, misclassification denies a regular employee his or her benefits, legal rights, and wages–and all of these can turn into a costly nightmare.

Another kind of misclassification is misclassifying exempt and nonexempt employees. Exempt employees are not paid extra for working more than 40 hours per week, while non-exempt employees must be paid overtime. When you incorrectly misclassify these employees, the non-exempt employees miss out on their overtime wages.

Miscalculation of Pay and Working hours

Receiving an incorrect payroll check, whether you are being overpaid or underpaid, can be frustrating for employees, especially when your employees are expecting to use the money to pay their bills and expenses. Miscalculations may also take hours or even weeks to resolve depending on the complexities involved.

Disorganised Employee Records

Disorganised employee payment records can result in delays in payments and the issue of perks and benefits to your employees. Employee records include the hours worked, payment rates, and dates needed for future audits. Without organised employee records, misclassifying and miscalculation are bound to happen.

Missed Payroll Deadlines

Employees expect timely and accurate payment on each payroll cycle, and missing out on a payroll deadline can drastically affect your organisation’s reputation and credibility. Missing important payroll due dates can also result in costly consequences including penalties and even lawsuits.

How to Avoid These Payroll Mistakes?

A smooth payroll process is one of the most important aspects of an organisation’s success.

Here is a list of proven and tested strategies to avoid the above mentioned payroll mistakes that many companies face:

Develop a Clear Payroll Policy Handbook

A payroll policy handbook contains information related to the administration of salaries, including payroll payment schedules and methods, timekeeping, payroll procedures, and exceptions. An organisation with clear payroll policies ensures timely and accurate payroll, as well as compliance to legal requirements.

Create a Checklist and Detailed Payroll Calendar

Adhering to a payroll calendar helps an organisation avoid penalties as a result of missed deadlines and late filing. Hence, it is important to establish a payroll calendar and set reminders in advance to make sure that you process your employees’ payroll on time.

Stay Updated to the Latest Laws and Regulations

Educating yourself with the latest trends, laws and practices in the payroll process and management helps ensure effective and compliant payroll processing. You can also subscribe to payroll news offered by government agencies to keep yourself updated to any changes in payroll rules and regulations. This is especially important if you are managing employee payroll for different countries, to avoid any penalties and legal implications associated with payroll non-compliance.

Invest in the Right Tools and Resources

You can subscribe to a cloud-based payroll software system that helps you automate your payroll process, so you can focus on other important aspects of your business. If you prefer a more manual approach, hiring payroll professionals or specialists is a necessary investment to minimise losses and repercussions in the long-run. Here are some international payroll software and service providers to choose from:

You can entrust your payroll management to Globelise. With our reliable experts and seasoned professionals from 141+ countries, as well as a world-class international payroll management system, we can guarantee you a hassle-free payroll management experience for your international employees.
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