8 Ways the Payroll Process is Sabotaged
The payroll process is an integral aspect of any organization. However, there are specific ways organizations bring disaster on themselves while handling their payroll. That is why this aspect is outsourced to payroll processing services for better results. Here are 8 ways payroll processing is sabotaged in an organization.
- Incorrect Data Entry
A common occurrence that payroll managers are guilty of is errors in data entry. Incorrectly, entered data such as mistakes in spelling or mistakes in details like bank account numbers, government documents, etc. could be costly errors to any organization.
- Payroll Tax Regulations
An area where many managers tend to incur heavy penalties to organizations is not being updated with payroll tax regulations. Failure to pay payroll taxes or stay updated with the latest payroll tax developments can cost companies heavily. The cost of payroll outsourcing will seem minimal compared to the amount of payroll tax penalties to be paid. Depending on the extent of misreporting or failure to report, the tax can be minimal, or a penalty of 200% of tax payable may also be levied in India, as penalties.
- Data Security
Data security is something organizations take very seriously. According to an IBM survey in 2020, while the average cost per incident decreased, the cost of a single data breach event is worth USD 3.86 million. For smaller businesses, it is not the kind of cost that they can afford to have. Data security is one of the functions that payroll services for small business concerns can aid with. This small investment can go a long way in ensuring that data breaches and data theft are not a possibility.
- Failure to Stay Updated with Compliance
Compliance is an integral aspect of the payroll process. Compliance management refers to an organization’s practice adhering to laws, standards, or codes as set forth by governing bodies. Similar to payroll taxes, failure to comply with these regulations can result in excessive fines or penalties. These regulations refer to how business activities are carried out and outlining how employees should be treated within the organization. Compliances are subject to change, and managers make costly mistakes when they fail to keep up with changes in these compliances.
- Missing Benefits
Certain organizations offer incentives to employees. These can range from medical benefits, dental benefits, reimbursement accounts for housing rent allowance, travel allowance, and so on. Certain organizations fail to take advantage of tax benefits, incurring unnecessary costs. Payroll processing services are easy fixes for organizations to take advantage of while handing taxes related to payroll.
- Client Support
Systems and software can fail. At moments like those, it always pays to have support for those outages from those third-party concerns. It becomes even more essential in the case of startups. Payroll processing services can help out and find areas where the organization can save more on taxes, an investment that could help the organization grow.
- Failure to Meet Deadlines
Another way organizations sabotage their payroll process is very simple, the failure to meet deadlines. Payroll taxes and compliance-related reports require organizations to submit them by a specific deadline. Penalties are levied on organizations that fail to do so as well. Third party payroll concerns will eliminate this aspect by submitting relevant documents and forms in a timely fashion.
In a competitive economy, misclassifying workers is a common but costly blunder that managers can make. Employees could be contract employees, temporary hires, interns, or even part-timers. Managers have to ensure that they do not incorrectly incorporate or enter wrong categories for their employees while reporting them for payroll taxes.