5 Common Payroll Problems and How to Manage Them

When you run a business, it is crucial that you keep things organized not only for your own workflow and productivity, but also to avoid mistakes. This is particularly true when it comes to payroll – a sensitive subject to and one that can cause ill will if not executed correctly.

In this post, we will explore what we mean by the term ‘payroll’, we will look at some common challenges facing employers, and we will find solutions that can help them to mitigate those challenges.

What is Payroll?

The term payroll specifically refers to the long list of people working for you, who you are going to need to pay. This should be updated regularly, to reflect the number of hours worked.

The payroll system used in your business is what will ensure that employees are rewarded for the amount of time they put into a day’s work. This should be a mutually beneficial system which ensures employees don’t get underpaid and that the company only pays employees for the work done e.g. not paying for unpaid illness days or vacation days.

The Challenges Faced

So that is the payroll. But while it’s very important, it unfortunately also poses a number of unique challenges. Here are some of the challenges faced, and the ways that you can solve them.

1 Keeping Track

Unfortunately, keeping track of the hours of this many different members of staff can be incredibly difficult. The more people you have logging their hours, the more math will be needed, and the harder it will be to manage all that data.

This is why an efficient system is required which can accurately record the time each individual spends at work. This is what a time clock is used for, also referred to as a ‘payroll time clock’, ‘punch clock’ or ‘employee time clock’. These need to be accurate, simple to use, able to somehow record multiple employees’ data and difficult to cheat. These days, this is normally a digital system, rather than a physical clock.

2 Global Payroll Challenges

Another development adding complexity to payroll management is the way in which companies and staff are distributed. Today, it is significantly more common for a company’s employees to be working around the globe – and that’s especially true if it has a lot of freelancers or contractors

Regardless of whether you’re using contractors, a professional employment organization to hire the employees locally or a local entity, streamlining this global payroll process can become extremely complex, with different monthly payment times and local employment laws to comply with. Whether you’re using an automated system, such as Papaya's global payroll solution or still relying on spreadsheet management its vital that your remote workers are paid on time and that you are locally compliant

3 Inaccurate Reporting

In a perfect world managers would be able to trust their staff to honestly report their time, as a company grows though it becomes impossible to keep track of every individual. At the same time the staff won’t know you personally, to the point where many won’t think anything of arriving late and ‘punching’ in on time. Harmless though this may seem, it is actually stealing from the company and can add up to seriously damage profits over multiple occasions.

Even where employees are honest, they may simply lose track of how much time they’ve put in and so over or under estimate what they’re owed. For this reason, it can sometimes be useful to find ways to check a workers’ hours such as a swipe in/out system.

4 Data Loss

Another potential problem with payroll management is data loss as sometimes systems can do down and data can be lost. If that data includes all hours/days worked by your staff, then retrieving that data can be a long and cumbersome task. It’s crucial therefore to ensure you have a strong data recovery plan to ensure your key payroll data never permanently get lost in the event of an outrage.

5 Misclassifying

Finally, keep in mind that not everyone who is on your books will count as an employee. Freelancers, contractors, and part-time employees work differently, will be paid differently, and will require different documentation.

Getting this wrong can not only lead to disputes within your organization but can also cause problems for your business – leading to fines and even legal action. Make sure that you have correctly classified all members of staff, and that your software allows you to keep track of this too.