The Real Cost of Payroll Mistakes
Payroll mistakes cost employers billions of dollars annually. According to the IRS, 33% of businesses deal with payroll errors. There are many cautionary tales about the larger impacts of even minor slips in payroll.
For instance, a Texas company failed to pay employee overtime of $608.05. A small mistake when caught in time. But, they paid a hefty price. Ultimately, the company ended up paying $42,459 including penalties, over a lawsuit.
Payroll errors tend to leave a trail behind them. The consequence is that you spend valuable labour hours not only correcting these faults but also rebuilding and recompensing your secondary losses from these operational lapses.
Payroll mistakes thus have secondary costs. They have an impact on people and the employer’s brand.
Common mistakes and their secondary costs
Payroll is an important touch point between an employer and employee. Delayed or short payments not only affect employee productivity, they also tarnish employee morale and have a negative impact on the work culture. Some employees may even leave the organization. This means added costs towards recruitment and training of fresh talent.
Mistakes such as defaulted tax payments due to misclassification of employees, result in hefty penalties for non-compliance. Dodging these regulatory bullets is no mean task as there are inherent complexities in processing payroll for divergent employee groups and contracts.
Payroll requirements are different for employees and independent contractors. Employers are liable towards payment of benefits, overtime, and taxes for employees, whereas they are not required to do so for contract workers. It is therefore important that businesses carefully update and maintain employee records so as to avoid these payroll pitfalls.
Varying jurisdictional laws add to the complexity of processing payroll for a large organization. Minimum wage limits, for example, differ across states and are also constantly updated. If payroll teams are not on top of these regulatory updates, the organization is prone to vulnerabilities.
The smart solution
A cloud based automated payroll management system that packs a knowledge base can help employers stay updated on state-wise regulations. In addition, by maintaining a payroll calendar with important dates, deadlines, and audits, organizations can simplify payroll management and reduce errors.
Decentralized payroll services work well for large organizations spanning geographies. A payroll outsourcing services provider with local knowledge and global expertise can simplify payroll management while adding value in terms of returns from process efficiencies.
Last but not least, transparent communication of payroll policies and procedures with your employees is essential to avoid unpleasant surprises for either party.
With a payroll management system built on RPA and cloud, you can not only protect revenue streams but also contribute to a positive work culture by gaining employee trust.