Payroll Management: Problems and Modern Practices

Payday is a day many employers dread - not because they have to pay huge sums of money but because of the complexities involved. And woe betides the employer who delays wages or makes calculation errors!

In an ideal setting, an employer or a human resource manager would like to pay by a simple formula: number of hours worked times pay rate, plus any overtime. Indeed, wages were paid by this formula until pay structure changed and things like leave, bonuses, allowances, deductions, exemptions, taxes, savings, insurance, superannuation and dozens of other rules and regulations came into play.

The modern system of payroll processing, record keeping and compliance can be too complex for many organizations to keep up with. In smaller companies with minimal staff, payroll management may be handled by a single HR manager or even the business owner. For mid to large organizations with hundreds of employees spread over different locations and time zones, the task becomes extremely cumbersome and costly.

From a business ethics perspective, flawless payroll management is always fundamental. Accurate calculations and timely payment are two cornerstones of efficient payroll management. However, in spite of best efforts, irregularities, errors and delays do occur which can cause issues with employee morale.

Modern computer software has somewhat eased the burden of payroll processing, still, the sheer volume of data can frequently be beyond the capacity of in-house payroll departments. HR departments worldwide are now divesting from the burden of payroll management so that they can concentrate on their core areas like recruitment, retention and development of employees and are now delegating payroll functions to external agencies via the outsourcing route.

The advantages of outsourcing payroll services are many. An external payroll service company can provide customized payroll solutions to cover everything – gross/net salary calculations, withholding tax (state, federal or local) deductions, voluntary deductions, bonuses, leave pay outs, leave accruals, medical insurance, issuing payslips, online payroll and superannuation payments, year end payroll tax reporting and compliance, and many other options.

Apart from the cost saving in terms of maintaining trained in-house employees, systems and software, outsourcing helps in saving employers’ time that can be utilized in the area they know the best – growing their business.

Disclaimer: The information provided in this document is for general use only and is not intended as advice in any form. Readers should seek professional advice from appropriate sources before making any decisions regarding their payroll management.