The Common Pitfalls Of Automatic Payroll Processing

Posted on: 16 December 2015

Your staff count on a regular paycheck; therefore, payroll should always be processed accurately and on time, regardless of your business's financial situation. Payroll mistakes can cost you big, resulting in lost time, unnecessary expenditure, tax penalties and unhappy employees. While technology can significantly improve the way in which you conduct business, it has its limits. These common problems will make you think twice about relying solely on software to perform your payroll processing.

Software Glitches

Whether it's a server problem, hardware issue or human error, a minor accounting glitch could put your payroll completely out of balance, leaving your staff short of pay. Technology should should be used as an aid, not a replacement.

Incorrect Time Records

Even if your staff use automatic readers, such as time cards, there's still room for error. For example, if one of your employees forgets to check in or out, their working hours won't add up. While most payroll processing software will allow you to log in and adjust an employee's working hours as needed, the problem may not present itself until wages have already been processed. 

Payment Delays On Public Holidays

Due to bank closures, public holidays can lead to delays in payroll processing. Plan in advance to ensure payments are distributed early. If you're relying on software and the processing date overlaps with a closure, it will distribute earnings late.

Unforeseen Absence

Software may not be equipped to calculate accurate payments during unforeseen situations of absence, such as sick leave or personal time. How much compensation absent employees are entitled to could vary depending on their contract; therefore, irregular wage reporting must be dealt with manually by your HR representative and payroll clerk.

Sudden Penalties

Penalty charges are almost always unexpected. Failure to submit the correct payroll information to Australian Taxation Office (ATO) can lead to substantial and unnecessary costs that you haven't budgeted for. This will not only eat into your profits but could leave other aspects of your accounting off-balance. Most accountants will take on the responsibility of penalties as a guarantee that they'll provide a first-rate service.

Worker Misclassification

If your business uses freelancers and temp workers, their tax threshold and reporting process will be different to your permanent staff. In addition, if their circumstances within the company change, software will not reclassify their work status automatically. This could lead to incorrect reporting to the ATO.

Court Ordered Debt Collection

If one of your employees has a problem with a creditor, the courts may give the creditor permission to take a certain percentage of their income. This amount is often taken directly from their paycheck. As an employer, it's your job to comply with the decision. Payroll processing software is not designed to accommodate court ordered debt collection; therefore, you could incur penalties for failing to process the payments.

Professional payroll accountants will help you to monitor your business more efficiently, allowing you to create more accurate financial projections and ensure employee satisfaction remains high.