Payroll can be very difficult, that are many areas that face challenges. If Payroll is perfect, people go on with their business as usual as it’s expected. If there are errors, employees are unpleasantly surprised. So, what can you do? Avoid errors (more on this in the next blog) and if they appear, fix errors swiftly. Everybody knows errors will occur for various reasons, but the rate in fixing them is what makes you stand apart.
In this article, you will find the benchmark figures on Payroll error resolution based on employers in medium and large-sized companies. Let’s first look at the most common causes of Payroll error:
Incorrect Payroll set-up
The most important thing is the implementation. This issue isn’t necessarily something you deal with every year because you’re probably not changing Payroll companies that frequently. However, when you do switch, if you do not have the correct data, it can cause big problems down the line.
For example, if you switch companies in the middle of the year, and you don’t start a payroll fresh from 1/1, it can be hard to get the implementation right from the start. This issue has a lot to do with keeping records organized, it can fall apart if you must piece information together, and things are continuously missed and roll over year after year.
There is a growing number of temporary employees, consultants, and other independent contractors in the modern economy. It is essential that you properly determine the classification of everyone working for your company so you can determine how to report payroll information for tax purposes.
Miscalculating overtime pay
This payroll error is very common, but somehow it creeps infrequently. Over time it is calculated over a one-week period. Non-exempt (hourly) employees earn overtime for all time worked over 40 hours in a week. The laws here are clear so any ideas that hours can be diluted over a pay period is wrong.
Bad date in is bad data out. One of the most common causes of Payroll errors is the time and attendance system not providing the right data. Part of a flawless payroll is having the right systems in place which feed your payroll.
Estimating the last days of your Payroll cycle
With monthly and semimonthly payroll cycles ending on different days, some companies estimate the last days of the payroll cycle. There is a long list of reasons why you don’t want to estimate your employee’s hours a day or two before the close of payroll. You are likely to either overpay or underpay your employees since actual time worked may not reflect that estimate. Plus, doing this makes your records inaccurate which, if you ever get investigated by the DOL, it will put you in trouble. It is both an inaccurate and risky practice you should avoid. If you are already estimating payroll and want to learn how to reset your payroll cycle, let us know and we can assist.
Payroll rules and regulations change. Almost annually there are significant changes made to how payroll is processed either on a federal level or state level. While businesses typically strive to stay updated with regulatory changes that may occur, too often the overwhelming amount of information leads to compliance gaps.
So, we mentioned the most common errors with payroll. And, errors will still likely happen. Employees don’t like errors but what is most important is how you handle errors and how quickly you can resolve them. Are you up to par to other companies? Below you will see the results of research based on data from a sample of 870 employers from APQC’s Open Standards Benchmarking database.
Source: APQC’s financial management research
The top performers resolve errors more than twice as fast as the bottom performers. How can you improve your time in resolving payroll errors?
The answer is in procedures and tools. Spotting a payroll error can be made easy with the right payroll software. In SAP SuccessFactors payroll, you have the Payroll Control Center. Below are the areas where the Payroll Control Center can help:
Payroll admin can run Payroll Simulations, view results, run checks, run productive Payroll in steps (release Payroll, trigger Payroll run, posting simulation, Payroll checks, and exit Payroll), print pay statements, generate bank file, print checks and post Payroll results to finance or review off cycle Payrolls.
The tool comes handy in reviewing the current status (stages) of the Payroll. The upcoming processes tab shows the processes which are due or overdue. The upcoming processes can be started and moved to active processes tab where they can run and are confirmed a step at a time. There will be an opportunity to review results at every step. Once the last configured process step is confirmed by the payroll manager, the process will move to the completed processes tab. The completed processes can be revisited at any time to view the results.
It can generate test results, show errors and helps the Payroll manager to assign errors as well as the resolution of the errors.
Payroll Control Center has processes and assigns policies using the front end which otherwise is a back-end activity. Based on the roles-based permissions various options can be made available to Payroll managers/ administrators.
Now you may think, how can I avoid Payroll errors? In the next blog, we will dive deeper into smart strategies to make sure they don’t happen at all!