In days gone by, Payroll systems would attribute a high proportion of their focus on two key areas - the gross to net calculation of payroll, and ensuring employees were paid correctly and on time.
Whilst both areas remain vital and at the core of the systems functionality, today's ever-evolving Payroll landscape means that systems are now expected to cover a much wider range of duties. Performing key administrative tasks such as submitting and receiving Real Time Information (RTI), managing auto-enrolment duties, implementing salary sacrifice arrangements, and applying OpRa rules brings an added level of complexity. As a result, it's vital that your Payroll system stacks up to ensure your organisation is meeting these demands in a fully compliant manner.
Inevitably, the combination of outdated and complex systems, paired with the sheer number of tasks a system is expected to undertake leads to an increase in errors. For example, failure to check that all statutory rates are correct within the system could lead to incorrect payment calculations or incorrect deductions of National Insurance. This then creates confusion in the workforce, resulting in more time being used to resolve queries. In some cases such failures make headline news, seriously impact the reputation of your organisation and having an adverse effect on staff morale.
Knowing how complicated Payroll systems can lead to errors, the question is - what can you do to simplify your approach to minimise the risk of mistakes? Here are two areas that you can look at:
Integration and Automation
Integrating your Payroll system with time and attendance tracking and employee databases allows for an automated process. As a result, the Payroll team no longer needs to manually input data for every pay run, which in turn reduces the risk of human error,freeing up a considerable amount of important time to focus on other business-critical activities.
Such an approach can also help with compliance. For instance, well integrated systems are developed to send automated alerts to the user should an aspect of Payroll be in danger of being non-compliant. The user can then quickly react to ensure the organisation doesn’t suffer from the penalties that would have been imposed for non-compliance.
Furthermore, the use of automated tools within an integrated system plays a vital role in empowering employees by allowing them to easily request annual leave, check the status of their pay run, examine the accuracy of their payslip, and retrieve historical payroll data at their leisure.
In short, integrated systems reduce the likelihood of human error, encourage full compliance, promote employee empowerment, and save a significant amount of time for Payroll professionals.
Outsourcing your Payroll
Considering Payroll outsourcing very much depends on the needs of your business. For example, for a rapidly expanding company, managing Payroll in-house would become more difficult due to the increase in employee numbers that coincides with such growth. Handling the considerable amounts of data that vary from employee to employee then becomes more time-consuming and creates more room for error. Adopting an outsourced service could help mitigate these risks.
Improved data security is another benefit that comes with outsourcing Payroll as typically, outsourced data gets stored on secure servers that use highly advanced encryption technology to protect data from theft. Obtaining the same level of security in-house would take a substantial amount of investment as you'd have to create your own secured network. Outsourcing could simplify the need to maintain complex database infrastructure.
Finally, outsourcing your payroll can help to guarantee government compliance. Government regulations change throughout the year, making it difficult to keep on top of them and remain complaint. Payroll firms specialise in understanding tax law and can guarantee compliance with any changes.
Payroll is an area that every business needs to consider for their operations and as a cornerstone for employee relations. It is an area that either needs to be trusted to the right system or fulfilled by the right partner and should be reviewed regularly to ensure that, whichever approach you take, it remains right for your business and your people.
Read Jaspal’s other blog which focuses on how AI will impact the future of Payroll
Manager, Payroll & Legislative Product Management
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