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Payroll Processing: Challenges & Solutions

By greytHR
4 minute read

Payroll is more than just about calculating paychecks. It is an intricate set of processes that requires different teams to work in tandem. Several economic, legal and ethical factors make it crucial for businesses to keep spotless records and manage their payroll efficiently.

During our Parichay‒Ask the Expert session, Anurag Jain, Co-founder and Partner of ByTheBook Consulting LLP, narrowed down some of the typical challenges faced by organisations while processing payroll. He presented interesting facts from some service provider surveys and picked out practical solutions to overcome the common challenges.

5 Critical Challenges of Payroll Processing

Coordination with multiple teams

Payroll teams spend countless hours collecting information from the HR, finance and attendance management teams. Even employees submit information like reimbursement
bills and tax-saving record details. It takes a lot of effort to collate everything on time, every time. It wouldn’t be surprising if the task seems overwhelming, especially while multitasking.

Staying compliant with payroll laws

Businesses have to take care of all the statutory documentation and remittances on time. When it comes to Indian businesses, laws like Provident Fund, Professional Tax, Labour Welfare Fund and Shops and Establishment Act have to be considered for computation. Any issue with tax remittance or miscalculation of these components could give these companies a serious disadvantage.

Caring for employee morale

Employees expect to get paid on time for their time and work. Indian payroll teams must collect investment declarations and proof accurately to avert tax-related issues. Sometimes, even a small paycheck error can demoralise people and diminish their trust in the company. As per a survey, almost 44% of the employees considered leaving their employers because of incorrect payments.

Dependence on legacy methods

The paper-and-pen approach for calculating work hours can open the door to inaccurate calculations and waste a lot of time. Physical documents can be misplaced. Even the spreadsheet-based payroll system doesn’t fully resolve the problems of every type of organisation. That’s because not all organisations have staff with mastery over
spreadsheets.

Maintaining data confidentiality

Payroll data contains highly sensitive information about companies and their employees. As data has become a critical asset, the threat to its confidentiality is more intense than ever before. How is it possible to ensure 100% confidentiality? What happens if this data reaches the wrong endpoints? It can cost companies a fortune, besides creating immense stress on the staff and management.

Top 2 Solutions to Minimise Payroll Challenges

1. Payroll outsourcing

One of the most remarkable results from a survey was that payroll jumped from number eight to number three on the list of HR domains most suitable for outsourcing. Most of the companies count on a third party to some degree or are willing to do so.

These are some of the key benefits of payroll outsourcing:

Lifts team spirit: When you outsource payroll, you relieve your staff of the stress that comes with unforeseen situations. Equally important is the fact that outsourcing gives them the necessary space to add more value while doing repetitive HR tasks.

Facilitates a new way of working: Decentralised HR teams can benefit from cloud-based solutions to manage payroll data anywhere. The provision of integration with other modules can help drive higher efficiency across the HR function.

Guarantees tight compliance: Lack of adequate legal knowledge or absence of a subject matter expert can put companies in a tight spot. Payroll outsourcing is a way to access experts who can advise the company on the processes and best practices to be followed.

Lowers costs: It’s nice to have an in-house team of payroll officers but there’s a salary cost commitment every month. There’s also a cost for annual software licences. What if they make costly manual errors? After all, they are your people! A tough call to take. A smart option is to pay a monthly fee to a payroll provider and outsource your tasks and concerns!

Creates opportunities to shine: Repetitive yet complex and time-consuming tasks place a burden on internal teams. When payroll is outsourced, team members can focus on more strategic projects like talent acquisition, learning & development and HR data analytics. This not only enables them to generate long-term value, but also creates opportunities for them to perform and shine.

“Automation is the need of the hour. Every company, irrespective of the headcount of their employees, should look at automation as a solution.” Anurag Jain, ByTheBook Consulting LLP

2. Payroll automation

Smaller companies might rely on spreadsheets to manage their payroll. But companies of all sizes should consider a payroll automation solution, thanks to the below merits.

Improved efficiency: Since payroll is an ongoing activity, the accuracy of processing and turnaround time are vital. Automation saves time by minimising manual work, and reduces expensive errors while keeping sensitive data secure.

Employee self-service: When payroll is automated, employees can mark attendance remotely, download their payslips, submit their investment declaration, and do a lot more on their own. This frees up bandwidth for the HR/payroll team, who can then focus more on other value-added tasks.

Easier compliance: Payroll solutions are usually coded with the current legislation that are required to be followed. Otherwise, organisations that deploy them would end up with non-compliance issues and face the risk of penalties.

In Conclusion

To ensure an efficient payroll management process, the payroll administrator needs to plan the payroll process step by step. Nonetheless, challenges are inevitable on account of the complexities involved in the entire process.

The solution lies in either outsourcing the process or taking on board a payroll expert. If the latter is the preferred choice, then the person has to be empowered with the right payroll solution. Compatibility, ease of use and accessibility are some of the vital factors to be considered while choosing a payroll solution.

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