Companies, large and small, have a lot of things in common and HR/payroll issues tends to be one of them.
Whether your company is in a good position at present, or in not such a good position, you still have HR and payroll to manage each month and, very often, a series of payroll challenges.
It may be that you have a high turnover of staff that causes ongoing issues, with people moving in and out of the business on a regular basis. Although, even with a fairly stable staff situation there are inevitably some issues: staff sickness, which is mostly unpredictable, and holidays are things that occur most, if not all, months throughout the year.
Keeping track of these issues can be very labour-intensive and most companies use at least some level of automation to help lighten the load. Whilst some of the issues involved don’t lend themselves to full automation, having automated processes that deal with most of the day-to-day issues can be a real help. In that way, the person, or team, responsible, have more time to handle the more complex issues that crop up.
So, what are the key challenges and solutions in payroll?
1. Ensuring that payroll processes are accurate and error-free, but time-efficient
Every payroll system requires some level of manual intervention and any level means taking up time that can be better spent handling other issues. Manual intervention is time-consuming and can also lead to human error – especially when the person, or team, is under great pressure.
2. The availability of experienced payroll operatives
Whenever a business is looking for an experienced payroll officer/operative, they inevitably come up against a key stumbling block: the lack of talent available. Nationally, and even internationally, there is a recognisable lack of experienced staff in all areas, but HR/payroll operatives, of all levels, would appear to be amongst the scarcest. Why this would be the case is unclear, although few would pretend that HR/payroll is the ‘sexiest’ or most exciting of roles.
3. The complexity of tax and compliance issues within payroll
Any area that covers payments, tax and other monetary issues, is always going to attract a lot of scrutiny and regulation. Ensuring that staff are paid correctly, have access to appropriate benefits and pay their taxes as needed, is difficult in an ever-evolving regulatory framework. Accurate record-keeping is essential and the failure to recognise and deal with adjustments to regulations, can prove very expensive for businesses. Human error can also contribute to this danger, particularly if individuals or teams are under constant pressure.
4. The need to review and update payroll systems appropriately
Although payroll systems can be viewed as a negative part of business spend, they are also an essential one. Failure to pay your staff on time and correctly will inevitably lead to poor staff morale, staff turnover and diminishing performance. It will also lead to regulatory scrutiny. So, having an efficient and up-to-date payroll system is an important part of any company’s success.
Delivering a consistent and accurate payroll system
There are a number of ways in which you can seek to deliver a consistent and accurate payroll system for your business. These will depend on the size and type of your business; the current HR/payroll support you have in place; what systems you have and what accountancy support you have.
Some of the options would include:
In-house team and in-house system.
If you have in place a process using spreadsheets and manual data, and it’s working for you, then that’s fine. Why change it if it isn’t broken?
Some businesses are quite comfortable with working in this way, because it works for them and doesn’t cause any issues. And, as long as you review this process and its efficiencies on a regular basis, in line with your business growth and plans, all should be well.
There is still the potential issue of human error which, with the best will in the world, is impossible to fully eradicate, but that’s the risk you have to balance against when looking at the alternatives.
Automated Software System
There’s no doubt that introducing a bespoke software platform to automate your payroll will help your business. If you are moving from a previously manual system, then the questions are: will the new system pay for itself; over what period; and can you afford it?
If you can answer each of these questions in a positive light, then there’s no doubt that an automated system will bring major benefits over a manual system:
Speed. Rather than your payroll team spending almost the entire month monitoring and managing a manual system, whilst fire-fighting any issues that arise, an automated system will do the bulk of the work for them
Efficiency. One of the issues with manual systems is when either there are bulk or sudden increase in entries to make, or the individual/team are under severe pressure to get things done to tight timescales. Mistakes can creep in when done manually, due to boredom or pressure, but an automated system ploughs through bulk and/or dull, repetitive tasks at speed. This provides consistency, as well as accuracy and makes the process far more efficient and reliable
Accuracy. Neither the regulatory authorities (if you are a regulated entity), nor the tax authorities, are very forgiving when it comes to errors. With the best will in the world a manual system is always going to be prone to errors of some sort. An automated system would eradicate these errors, safeguarding you against potential fines and sanctions.
Cost-effectiveness. Introducing an automated system doesn’t have to break the budget. Yes, there will be up-front costs as well as ongoing, running costs, but the up-front costs can be amortised across a number of years, against tax. Running costs can also be controlled by tailoring the features of the automated system to fit both your needs and budget
An automated system isn’t appropriate for everyone, but there are many circumstances where the introduction of some level of automation will be beneficial to most companies.
Contracting out to your Accountants
Most accountancy firms will offer a payroll service to their clients. In many ways it makes sense:
It reduces the need for internal resources, which in turn saves you money on headcount
It provides continuity, so you don’t need to worry about a key member of your team leaving and leaving a resource/knowledge gap, or wondering how you can upskill a new team member most effectively
It takes the ‘worry’ out of your payroll processes, because you can hand everything over to your Accountants to manage, rather than worrying if some key member of the team is sick or on holiday this month
You can have confidence that your Accountants will be ‘on the ball’ to avoid errors, as it is in their interests to do so
Managing payroll processes for clients is ‘bread and butter’ to accountancy firms, who have specialist teams to handle the processes involved. They also keep up to speed on all new tax and regulatory updates, so you don’t have to worry that your team is up-to-date and managing the processes to the latest edicts and rules.
Another big plus is that you have appointed your Accountants because you trust them to deliver to you a good service, so you can have the same confidence that they will do so for payroll also.