With new work and payroll regulations springing up as global work environments evolve and industry changes are made, it is crucial that your organisation stays payroll compliant. This can be tedious for most organisations, mainly because they have to deal with payroll management issues.
This article shows you how to manage your payroll, the merits of each payroll management method, and how you can choose the right system to remain compliant.
How Does Payroll Compliance Work?
Some regulations govern how employees are paid and the compensations that they are due. While some of these regulations cut across the board, like federal and state regulations, others are industry or sector-specific. Payroll compliance refers to adhering to these regulations.
Flouting these regulations often results in penalties that can negatively affect the company. Depending on the degree of non-compliance, your organisation could face sanctions such as paying additional taxes, fines, audits, and even legal action by employees, industry bodies, or the government.
To prevent these, it is vital to learn how to navigate payroll compliance efficiently. The first step to doing this is learning how to manage your payroll.
How Do You Manage Your Payroll?
Payroll management has been employed over the years to ensure payroll compliance within companies. There are two major ways to manage your payroll: manual and automated payroll management.
Manual Payroll Management
Manual payroll management relies strictly on human effort. While using this method, the payroll manager administers payroll without help from any software. The entire process, including monitoring time and attendance data and calculating allowances, tax and other deductions, is done by hand and is primarily paper-based.
Today, many organisations are turning away from manual payroll management due to the challenges it presents. Below are some of these challenges.
It is prone to human error.
Manual processes are generally prone to errors even in situations that do not require a lot of paperwork; how much more payroll management.
A small payroll miscalculation can ruin the entire pay cycle, so manual payroll management puts an increased workload on your HR and finance departments, forcing them to either spend extra time meticulously checking through paperwork to eliminate all errors or let things slide.
Errors in payroll management can be dangerous to your organisation. It might mean that some employees may not receive the full payment due to them, leading to dissatisfaction and a dip in productivity.
It can also be challenging to handle complicated salary structures without the help of a software that helps you efficiently do gross-up calculations.
It is not secure.
Keeping sensitive information on paper documents or in Excel spreadsheets puts this information at risk of falling into the wrong hands.
Ensuring the security of your employees’ personal information is a significant part of creating a conducive work environment. Managing payroll manually increases your company’s risk of breaching data protection policies concerning your employees’ sensitive information.
It makes time and attendance management tedious.
Time and attendance management is an important part of payroll as it enables organisations to ensure that employees are paid commensurately for their work.
Sorting through piles of records of employees’ time and attendance can be tedious and inefficient, especially if your organisation is a medium or large-sized establishment.
It reduces organisational productivity.
Manual payroll management is typically done by hand. Even if your organisation has progressed from using logbooks and physical registers to using computer spreadsheets, people are still required to input the information. Having to manually input figures together with the worry that a simple mistake in the formula could affect everything on the spreadsheet and lead to wrong payments can be tiring and nerve-racking. This will reduce the morale and productivity of the employees tasked with handling payroll management.
Manual payroll management makes payroll compliance difficult.
A major demerit of manual payroll management is that making updates to new payroll policies will be cumbersome. Since everything is done manually, updating the system to comply with new policies will require extra work.
This can lead to defaults in payroll compliance and cause your organisations to face penalties for non-compliance.
Automated Payroll Management
In the automated payroll management method, a software handles all things related to payroll management and compliance. This software is designed to help with data collection and analysis without the HR or finance department having to input the data manually.
The automated payroll management method has many benefits that enable payroll compliance. Below are some of these benefits.
It protects you from legal risks.
Penalties associated with payroll non-compliance can only be prevented when you adhere to compliance laws.
The software helps you keep the organisation’s payroll related data in one place, making it easier for you to spot any irregularities regarding payroll compliance.
You can also create secure approval workflows to ensure the right people review and sign off at the right time.
Additionally, an automated payroll management system prevents your company from facing legal risks in relation to accounting fraud because it helps you collect, analyse and manage your data on one transparent platform you can access at any time.
It is cost-effective.
One of the major benefits of automated payroll management is that it helps you reduce present and future payroll management costs. It enables your company to be proactive and ready for the future by identifying risks before they arise, so you can solve them before they become non-compliance nightmares.
An automated payroll software also saves you money that would otherwise be spent on employing additional HR personnel.
It improves payroll accuracy.
Accuracy is an integral part of ensuring that your company is compliant. Discrepancies put you at risk of being payroll non-compliant, and there are so many factors that can cause payroll discrepancies. Some of these factors include amendments to existing payroll regulations, the introduction of new payroll regulations at the federal or state level or just within the industry, and changes in tax rates.
With the help of an automated payroll software, your organisation can eliminate discrepancies and ensure accuracy while managing your payroll. This way, you do not have to worry about payroll compliance and the financial, legal and reputational implications of non-compliance.
It increases security.
One of the major demerits of manual payroll management is the security risks attached to it. With an automated payroll management system, you do not have to worry about that. This is because it employs an integrated system that protects the sensitive information of your employees while adhering to payroll regulations. Such systems can be set up so that only authorised personnel within the company can access the comprehensive data on all employees, while restricted access is granted to employees to see only the parts that concern them.
Organisations must make the right choice concerning what systems they should use to manage their payroll. With SeamlessPayroll, the choice will be an easy one to make. This easy-to-use payroll management software takes away the complexities of running payroll services for your employees, ensuring that your company remains compliant at all times.
Ready to jump on the efficient payroll compliance train? Request a demo now.