Mistakes happen, but there’s little room for mistakes with timeliness or accuracy when it comes employee paychecks. A survey by the Workforce Institute reveals that an estimated 82 million Americans – more than half of the U.S. workforce – have experienced a problem with their paycheck during their career. Common errors included late payments, non-payments, over-payments, and incorrect payments. The same research shows 54% of Americans have experienced a problem with their paycheck.
Gig workers like contractors and freelancers have the toughest experience when it comes to being paid correctly, according to the Workforce Institute’s survey results. One in five have been paid late; one in five have been paid too little; and 16 percent say they’ve had their paycheck direct deposited into the wrong account.
According to research by the American Payroll Association (APA), almost 49% of American workers will seek new employment after just two payroll mistakes, such as being paid late or incorrectly. Thirty-seven percent indicate that they’d had to make a late payment on a bill due to a payroll error by their employer.
How can you keep a close eye on maintaining accurate payroll data and keep your staff happy and still have time to manage the other areas of your business? This article will help you understand where the common traps are in the process and explain how using modern technology can help you overcome them.
Payroll data inaccuracies
The more your paycheck system relies on manual data entry, the greater the risk of inaccuracies in your paychecks. Research by the American Payroll Association shows the top five most common causes of imperfect pay are missed clock-ins, wrong time recorded, missed time cards, wrong paycode applied, and pay rate applied with errors. You’re more prone to these mistakes if you use a spreadsheet system that doesn’t offer accuracy checks, or if you use outdated legacy software that limits accessibility.
Challenges with maintaining federal and tax compliance
There are hundreds of federal, state, and local compliance regulations that impact small businesses payroll. Not all of them will affect your staff, but those that do can be costly if you aren’t aware of them or let them slip. If you’re not keeping up with local legislation and don’t have a system in place to regularly check for compliance, your organization is vulnerable to discovering inconsistencies when it’s too late. Businesses that implement processes to control compliance are more prepared in case of an audit and can catch costly inconsistencies in advance.
The Wage and Hour Division of the U.S. Department of Labor found more than $266 million in back wages for more than 280,000 workers whose employers failed to comply with federal labor laws in 2016. Modern solutions account for ever-changing compliance and tax rules as software-as-a-service (SaaS) providers can push updates of the latest legislature to your software without you having to do anything. That way you can be confident you are paying staff within compliance requirements every pay run.
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Features and benefits that support growth
Do you plan to do any hiring or expansion over the next 60 days? As your business grows, naturally your payroll needs will grow as well. What’s sufficient for your business today may not be once you add more staff or contractors.
There are many options for a transformative solution but not all are created the same. To get the most value out of your provider, look for these eight key features and benefits:
1. Dedicated support tailored for your business
Your provider should want to make onboarding as easy and pleasant as possible for you. They will want to demonstrate the value in their service early in the experience to earn your trust. That said, look for providers that assign a dedicated customer service representative to each customer. This will ensure you speak to the same person throughout the on-boarding process and for any additional assistance, so the nuances of your business’ payroll taxes are covered.
2. Retroactive audit controls
Leading solutions also offer historical analysis to catch any retroactive discrepancies – another immediate benefit of upgrading your provider. With a simplified view of all your company’s payroll tax data and pre-configured report generation, payroll becomes a speedy process and the time spent managing and validating data can be put to other use.
3. On-demand reporting and analytics
This will keep you informed on how payroll is impacting your bottom line and help you make smarter business decisions. You will not only want to conveniently run standard reports, but also customize those reports and create dashboards to show the data elements of most importance to you. Your payroll application should come equipped with the latest dashboards and analytics tools available, including support for regulatory reporting. Looking at payroll data over time so you can make informed forecasts about your business’ financial health and performance, which empowers you to make better business decisions now.
4. Seamless integration with time and labor management
To improve data quality and ensure pay checks are accurate. Having the time and labor data in real-time – paired with the ability to make real-time changes – helps reduce the number of errors, mitigates the risk of non-compliance, and allows for automation throughout the payroll process from data collection, to process, to pay check.
5. Comprehensive ability to track multiple worker classifications
This could include seasonal and temporary employees in addition to full- and part-time. Employees sometimes shift from one classification to another during a payroll period or over several periods.
By having the ability to (1) update employees when needed, (2) track the status of employees in real-time, and (3) report on them properly, you can eliminate errors that may occur based on pay rules that could change in conjunction with the classifications, time management rules that are based on government regulations, or company rules that flow through the payroll process. Keeping track of these classifications can also mean the difference in the employee being offered certain benefits with the company as well.
6. An intuitive user experience
Your tools are useful only if you and your staff are comfortable using them. Through the years, payroll has evolved from ledger paper to spreadsheets to cloud based software applications. As the systems have changed, so have the needs of those using the solutions. As for the process itself, there hasn’t been a drastic shift one way or the other. It has been streamlined, though, and made more accurate by digitizing the way things are handled from end to end. To make these things possible the user experience has had to adjust alongside digitization and payroll applications have now become a vital piece of the everyday back office.
7. Employee self-service
The ability to provide certain functions and features to employees so they can self-manage their employee and payroll records has become not only a time saver for small businesses, but it has also allowed companies to streamline processes, become more accurate, and in turn pay little-to-no payroll fines.
8. Security-access levels to minimize exposing sensitive information
Modern day payroll and human capital management systems should by default have accessibility for someone in payroll and human resources or in IT to maintain and update any of the security levels in real-time. Most organizations that provide specific access to data elements for payroll may even have certain rules where specific users are allowed to process payroll for specific locations or classifications of employees. Security, data access, and data privacy are all key components when making a decision about a payroll application.
Cloud-connected software for payroll management offers many benefits and the right solution for your business is the one that simultaneously saves you time while accounting for accuracy. The latest versions of payroll software are built from the ground up with consideration for regulatory requirements like local tax laws, making it less easy to make a mistake.
If the payroll system you use today doesn’t include automation that adjusts to compliance and regulation changes, you’re missing out on new levels of accuracy, productivity, and increased flexibility.
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