Challenges of running manual payroll systems

Challenges of running manual payroll systems

HANDLING payrolls manually can be really difficult. When you are working for a big company with lots of employees, it becomes difficult to manually compute and give out payrolls to each of your employees.

For some companies, the traditional manual payroll method is still the standard, but this method has many inherent problems that a more technological solution could solve. If you are looking to take your HR in a more modern direction, automating or outsourcing payroll processes may be the path to consider.

How does a manual payroll work?

Manual payroll computation refers to the process of calculating and processing a payroll by hand. The payroll process has several parts.

It includes evaluating the number of hours an employee has worked and calculating that employee’s pay based on their hourly rate or contracted salary.

It also includes deductions, such as employee health benefits, contributions and tax.

Please note that it is important that both sides of the payroll — pay and deductions — are accurate and that is not easy to do manually.

Risks and challenges

Payroll processing is one of the tedious tasks which are performed by every businesses irrespective of their nature or size.

It is not only time-consuming, but one of the most intricate processes. It takes a lot of hard work, time and dedicated effort to make  the payroll a success every month.

Because of the various facets of running a payroll, including handling sensitive employee information like bank account numbers as well as managing deductions and tax-related factors, a manual payroll system does not only slow your business down, it can also result in costly errors.

A manual approach to payroll is not only cumbersome, but it is also prone to human error. Here are some of the challenges a business might face with manual payroll system.

High risk of human error

Errors are always a possibility when using manual methods of calculating a payroll. Employees may inaccurately enter their work hours on a timesheet, or data may be uploaded into your payroll software inaccurately.

Companies that run their payroll processes manually face great frustration.

A manual payroll system overloads the HR and finance teams with daily activities such as documentation and repeated cross-checks.

It is also subject to human error which, therefore, can result in incorrect payments. The majority of manual tasks are not part of an employee’s core functions. It takes time away from a manager to focus on strategic initiatives that propel the organisation forward.

Manual entries are time-consuming

Making data entries in attendance timesheets eats up a lot of time. Your employees may have to wait in line to enter or leave, and your HR professionals will have to cope with time ticket concerns.

This could include things like updating the scorecard, fixing time input errors, and other issues that can arise when using manual timesheets.

When you are working with many employees, you have to invest a lot of time in handling the payroll. Many companies outsource their payrolls, and outsourcing them will transfer the burden of handling payrolls to the service providers.

Managing and calculating leave manually every month for each and every employee is part of the payroll. This is prone to large errors and takes up a lot of time.

Piles of documents comprising manual recordings of attendance and time tracking of employees is  frustrating.

Compliance mistakes

A manual payroll system increases the risk of some employees being incorrectly categorised or having an incorrect amount of tax withheld. Whether that error increases or decreases an employee’s take-home pay is bad for the business.

Mistakes in this area can lead to fines and penalties against the business, and create extra stress for employees and lower revenue for the company.

Miscalculation can lead to employees getting less or more than they are entitled to and also wrong remittances to the regulatory authorities.

If an employee gets confused or any information goes unaccounted for, there is going to be a hiccup in your audit trail.

Documenting problems of employee files

Like all things in HR, payroll can often include sensitive employee information, like address, bank account, and social security number.

Maintaining privacy and avoiding data leaks is a high HR priority that becomes much harder to do when the payroll is being managed manually.

Automating HR processes like payroll not only helps to expedite the process and ensure its accuracy, but also increases security and safeguarding of important employee information.

When handling payrolls manually, it is difficult to keep information in an organised manner.

Also, all the documents are generally stored sometimes, and problems occur when the documents are misplaced. Thus, manually handing out payrolls has many pitfalls

Lack of accuracy in manual payroll

You might face accuracy problems while handling payrolls manually. You might send wrong payments to persons because of stress and burden from the work involved.

Paychecks that are not delivered on time may have a bad influence on employee relations and may even lead to employee attrition if the situation is not resolved quickly.

For example, manual time tracking systems are inefficient and obsolete and they have the potential to have a negative impact on the performance of your employees.

Clocking mistakes can be quite costly to your company and the discomfort of using manual time management solutions can cause problems of payroll accuracy.

Moving away from manual payroll

Managing the payroll may sometimes be the most challenging of all the many activities that need to be undertaken.

When we speak about payrolls, we are referring to payments, salaries, wages, overtime, double-time, commissions, taxes, bonuses, raises, salary deductions, and other aspects of compensation. Installing software that can automatically process the payroll is a wonderful present for organisations.

This is an automated system for processing payrolls, which also controls all of the payments that the company makes simultaneously. The employer is able to process the payroll via the use of a computerised system if they have an automated payroll system.

Automated methods simplify the process of processing a payroll and lowers the likelihood of mistakes, which are more likely to occur when using the manual system.

Error-free financial planning

Due to the fact that outsourcing payroll services is both more cost effective and efficient, it is recommended to investigate the possibility of doing so.

Employers are able to better manage their finances and create a more accurate budget with the assistance of an automated payroll system, which also makes it possible to transfer cash immediately and without any complications into the payroll account for each pay period.

In that regard, it lessens the likelihood of delayed payments, which, in the absence of this measure, may result in legal repercussions.

Additionally, there is no need to make many visits to the bank or pay costs associated with cashing checks.

The workers are aware of the exact day and time their pay will be deposited directly into their bank accounts.

The use of a software that automates payrolls not only contributes to the smooth operation of the business, but also helps it to be ready for the competitive environment.

Get in touch with us right away to schedule an appointment for the purchase of such software for your firm, and we will tailor the software to the size or scale of your operation.

Manually doing all this work can be problematic, you, therefore, need a payroll solution for your company.

Emmanuel Zvada is an award-winning global HR practitioner and the managing consultant for 3rdeye Africa Consulting Group Zimbabwe and Namibia. For comments inbox or call +263771467441

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