There are two aspects that a business keeps in mind while coming into conception, paying right and earning right. Both of them are linked to each other and it is important to maintain balance your business health. However, most of the companies have their focus bent towards earning and do everything possible in their right to make sure it happens efficiently. Payroll processing is a complicated task and requires continuous surveillance and audit to ensure efficient flow. But many businesses face challenges in doing so which may include:
Compliance
If a business is running in multiple locations, then ensuring a standard payroll process with respect to the local and federal compliance bodies becomes a challenge. Good Corporate Governance has become a mandate now and not meeting the regulations can come at a high cost for the organization. An ideal payroll process is formulated keeping in mind the industry standards and employee requirements.
Accuracy
Maintaining the accuracy of payroll process is another challenge quite abundant in large organizations. Generally, payroll process works in batches in which updations happen on either weekly or monthly basis. In case of forward looking scenarios like promotions, incentives and hikes, keeping track of payroll process accurately may become difficult. Other miscellaneous expenses by the employees during the month require manual inclusions which may lead to error in payroll processing.
Cost Implications
To manage payroll process efficiently, many organizations switch to automation tools or online platforms. These are usually expensive and may require a dedicated employee to work on and manage them. Another challenge with automation tools is the handling of exceptions. When it comes to including manual exceptions like exception against leaves, compensations for overtime, etc., the employee handling the tool may forget to do so. Due to this the time spent to correct these errors may result in expense in the form of man-days.
Confidentiality
Payroll process is an internal process and is confidential for the organization. The payroll data defines the workflow and can reveal the capital infrastructure of your employee base too. In an industry that relies on big data, such confidential documents are prone to leaks which may cause serious harm to your organization.
Taxation Compliance
Tax rules are dynamic. They change over time and are varied for different countries and, at times states too. The inclusion of these tax changes is not easy when it comes to payroll processing. Many times, over deduction of taxes lead to law suits from the employees and lesser deduction lead to loss for the organization. Retrieving these negligible amount becomes another time taking task for the finance and accounts team. These miscalculations and failure to compliance may also lead to exceptions in the payroll cycle. As it is mandatory for all organizations to withhold Income Tax for their employees.
Burden On Finance Department
The finance department in any organization has to take care of both accounts payable and accounts receivable. While large organizations may have large teams with dedicated personnel to cater to each aspect of the finances, small and medium sized organizations do have the privilege to do that. With the amount of finance tasks being less, small and medium sized organizations assign these tasks to any employee in the HR or accounts field itself. In many organizations, the directors themselves take care of such tasks. These practices lead to several mistakes and unnecessary iterations. Also, the analytical part of these tasks fades away.
How To Overcome Payroll Process Challenges
Outsourcing
With the ascending age, a company should ensure growth in every aspect of its working. The best way to do that is to assign a separate department for every field of work. But, in this case, outsourcing comes as a boon. Many organizations are outsourcing their finance and HR functions with the primary motive of lack of regular functioning. This brings along multiple benefits for the organization as an outsourced service provider provides dedicated focus and insights in that particular field. Other benefits of outsourcing are:
- Less utilization of work space within the organization
- Lower payroll process costs
- Improved technological platform to ensure safety and confidentiality
- Tax and regulatory compliances
- Deeper insight of your finances through regular analytics
- Lesser errors, reduced turnover time and documentation
- Allocation of payroll itself as an operating expense rather than capital outlay
- Scalable & Sustainable model ensures not to incur additional capital cost
- Standardization of process
- Drive Value adds through SMART SOLUTION
- Implement Best practices for End to End Process
An outsourcing company ensures better functioning as it hires expert in the specific field of requirements only. It is like having an entire organization working for yours without the hassle of physical presence. By outsourcing your payroll process, you not only improve the streamline flow but also get expert surveillance to prevent unwanted errors. For MNCs working in multiple geographies, outsourcing ensures standardization, centralization and uniformity of payroll process across all branches.