Article: 7 Effective measures to solve payroll problems and reduce errors

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7 Effective measures to solve payroll problems and reduce errors

As companies refresh their technology priorities in view of the changing world of work, here are some focus areas you should be thinking about.
7 Effective measures to solve payroll problems and reduce errors


HR Technology has been used to streamline operations, to enhance efficiency, and to improve effectiveness across business functions.  With a hybrid workplace shaping the future of work and the modern worker, the use cases for HR technology are amplified. 

Technologies such as Artificial Intelligence, Machine Learning, Automation, Internet of Things are ushering a digital HR transformation. Every people-touchpoint, whether it is a prospective candidate, or an employee could be profoundly impacted using these technologies. This is aided by the fact that digital savviness is one of the key talent magnets for a generation of millennial and GenZ workforce. To meet these expectations, it is important that organizations embark on the digital HR journey with a clear purpose and process. This starts with identifying the HR areas that will truly be benefited from HR tech.  

Payroll and HR technology

Payroll management is often considered a transactional element of HR, due to its seemingly operation-heavy nature. Yet, it is important to note that much of HR is held together with this core hygiene factor which impacts employees directly. For example, an employee not getting his or her salary due to a basic error such as a miss in payroll input, can lead to an unwarranted impact on the financial wellbeing of the person. From a business perspective, payroll errors can lead to a huge cost impact, either in terms of financial leakages or legal litigations. 

According to a recent report on the “Global Payroll Outsourcing Services Market 2017-2021”, one key driver highlighted in the payroll market is the growing need for payroll cost visibility. Economic and cultural globalization, the extension of manufacturing processes across geographies, and the widespread use of lean methodologies are driving the demand for payroll cost visibility. 

It is critical to solve payroll challenges  proactively, using technology: 

1. Clearly define payroll processes and policies: Since any payroll system takes inputs from various sources such as multiple departments and multiple people, it becomes essential to validate the various data sources and data inputs and to not miss payroll deadlines. This can be achieved by defining the payroll processing norms and timelines and factoring these into the payroll system. Payroll professionals must include guidelines related to leave, attendance, time and expenses, invoicing, reimbursements, compensation, etc.

2. Adopt privacy-enhancing salary computations: Salary computations are often automated through Applicant Tracking System (for candidates  ) and through the payroll system (for employees). It is important to uphold the data privacy of the stakeholder by ensuring that HR technology systems are embedded with features such as two-factor authentication, encryption, etc. With changing data privacy laws, the payroll related analytics capabilities must uphold privacy policies from both a current and future perspective.  

3. Streamline accounting and administration: Flawless record-keeping requires HR to build system capabilities around data management. For example, once the payroll cycle is complete, storing the historical data in a form that is accessible and analysable is important. Especially with the changing nature of work and a globalized workforce, it is important to devise specific records of different employment types such as full-time workers, contract workers, freelancers, etc. The need for streamlining emerges with payroll requirements differing across geographies, this makes the task difficult for companies to conform to regulation policies of certain regions. As a result of the local compliance requirements, outsourcing service providers must establish a strong presence and a greater degree of centralization for clients to ensure streamlined payroll operations.* 

4. Build in the cloud: With the workforce becoming increasingly global and virtual, a great idea is to enable a cloud-based payroll system  earlier in the company’s operations. It increases performance and productivity by automating routine processes and minimizing risks. With the cloud, HR teams can access, run, and control all aspects of payroll with just a computer and an internet connection, without the requirement of onsite data storage facilities. 

5. Code in compliance checks: Payroll management calculations involve a huge volume of statutory compliance checks related to TDS, EPF, etc. Total reliance on manual processing by humans is bound to create errors. Hence it is important to build a payroll management system based on compliance and legal adherence. However, it is important to build human-led checks and balances too, to allow for a judgement call in certain cases.

6. Build a ‘secure’ system and align cybersecurity priorities: Given the extremely confidential nature of data that a payroll system holds, it is critical to secure the system using adequate cybersecurity means, in line with cybersecurity laws. This is especially true in the post-Covid era where remote working has become the new normal and many organizations are sticking to work-from-home or turning to hybrid working. Many employees working out of personal devices exacerbates the risk of cybercrime. 

7. Automate payroll communication: Modern-day payroll systems must have the functionality to automate payroll communication. Whether it is releasing payslips across different levels, functions, job roles in a timely manner, or communicating a change in compensation policy, intuitive functionality to send and receive communication is important for modern-day payroll systems. 

Apart from the above seven features, a payroll system can add greater value if it is integrated with the overall HRIS. For example, the payroll data must flow to other HR areas such as employee compensation, rewards and recognition, performance management. HR can tap into data to make talent decisions holistically.   

Errors in payroll processes can have a lasting negative impact on both people and organizations. Inconsistencies in salaries can lead to loss of trust, eroding the very core of the employer-employee relationship. Once the credibility of an organization is affected, it may prove difficult to attract, engage and retain talent.  Above all, payroll misses directly impact the bottom line. Leaders must, therefore, closely look to build an effective and efficient payroll management software  as a bare-basic step towards streamlining the HR processes.

Whether you identify the right talent using a ‘build or buy’ approach, there’s a need for putting in place systems from a place of simple, yet accurate and avoid unnecessary complicating the workflow  . An error-free payroll process can go a long way in streamlining and sustaining organizational processes. 

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Topics: Performance Management, #TheHybridWorkplace

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