6 Most Prevalent Payroll Mistakes

To err is human; we are prone to make mistakes but a mistake in the payroll calculation is worse. Prompt payment, correct payment and compliant with the regulations are good habits to follow that avoids miscalculation of payment.

However poor calculations, keeping records, handling obsolete document, poor staff record handling are some of the bad practices that lead to errors in the payroll management.

Running a payroll is as challenging as any other job in the HR department. Wrong calculation of pay or taxes leads to issues in audits and end up having huge fines. In this article let us see the 6 most prevalent payroll mistakes that we commit.

Miscalculation of wages

While calculating the payroll there are good chances of making mistakes in calculating the overtime wages and their pay. Also, we have to note that overtime payments will be different in rates than regular payments.

If we make mistakes in the calculation of overtime payment, we may have to pay the wage back with interest and penalty. Industry standards sometimes have penalties that are 1.5 times higher than the actual wage paid to the employee.

However, the total number of days and hours should be calculated correctly for regular payment. 

Read Also: DynaPay is the present and future of payroll management

Poor Record Keeping

Every detail of an employee should be maintained properly to avoid mistakes while calculating their payroll. We must take utmost care to keep the employee profile updated with all the information like 

  • PF details
  • Overtime details
  • Gifts and incentives
  • Eligibility to claim paid holidays

If we miscalculate the pay of an employee who is eligible for overtime or incentive then they may suffer underpayment and we have to pay them back with interest and fines. Inaccuracy in the staff database is also an important reason for payroll errors.

Improper Tax Calculations

We need to comply with all the industry standards and the rules of the some countries (Income Tax Department) while calculating the pay. If we miscalculate the taxes for employees then we have to pay them back with interest.

Taxes changes after each financial budget, taxes like professional tax and income tax should be deducted from the employee pay.

Read Also: How a Payroll Management Software Can help your business save money

No paying in time

Not only paying wrong payment in an offence but paying late is also a big issue when comes to the industry standards. We have to process the payment right on time to reach the employee account. Pick a regular date and time to credit the payment to your employee accounts.

Human Error

This is the most common mistake while calculating pay. We make calculations errors and time consolidation error that affects the payment of the employee.

Risk of compromise

The staff database, salary details and payroll calculations should be kept confidential. If there is a risk of not keeping secrecy then it becomes a headache. If these data are in undesirable hands then the company will be in big legal trouble.

To avoid such problems in payroll management, use an automated payroll management system. To know more, speak to our expert at +971 4 447 5525 or inbox us your query at  inquiry@dbsae.com

Dynamics Business Solutions (DBS) is certified Microsoft Dynamics partner in UAE, we take pride in our ability to develop and deploy the right business solution that matches our client’s requirements.

We understand the needs of GCC businesses and can develop solutions that not only meet all their requirements but is also compliant with the latest industry regulations.

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