Handling payroll, even with the help of a payroll service, is a hassle for most HR employees. The process can cause stress, which might lead to mistakes, which, in turn, results in a cascade of issues.
There are many problems that can arise while doing payroll. However, once the risk is acknowledged, they're typically easy to prevent. Here are four common payroll headaches and how to avoid them.
Outdated payroll solutions
One investment you should make is a service that accurately tracks your workers' time in and out. Using an outdated or faulty system can cause an array of issues, from late payments to miscalculated overtime, that lead to a domino effect.
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According to Robin Schwartz, human resources professional at MFG Jobs, some payroll processing systems might not be reliable, especially when you're on a deadline. In other words, employees might be paid late, forcing HR to cut special checks outside of the regular pay period.
Additionally, many employees might hit overtime without intending to do so.
"Whether it's how the employee reports his/her time or how it is calculated, overtime can cause serious issues if not handled properly," said Schwartz. "Organizations need to put in place proper time-tracking software or systems to ensure HR is aware of overtime hours being reported. Organizations, even small businesses, should also consider investing in payroll software to ensure the proper calculation of overtime rates and accurate record keeping." [Interested in online payroll services? Check out our best picks.]
Remote and freelance workers
There are varying policies for different types of workers and in different states or countries. Make sure you do your research so you clearly understand the rules and regulations.
"You may not be aware the different laws in another state, such as minimum wage or tax requirements," said Nate Masterson, HR and marketing manager for Maple Holistics. "Before you hire someone out of state, make sure someone on your payroll staff is aware of the laws of that state. Perhaps your tech doesn't support cutting a paycheck for an out-of-state employee, so do a trial run first before officially hiring them."
Because more companies are drifting away from a traditional workplace, bridging the gap may require the help of an outside expert, added Lisa Kerner, operations manager at Fueled.
"It is unrealistic for one HR manager to achieve a thorough understanding of multiple country-specific employment laws, so it's sensible to rely on third-party experts and payroll companies to handle this," she said.
It's crucial to factor in PTO or sick days to prevent mix-ups when handling payroll.
"Payroll is a complicated process, and it may be pushed off due to holidays or sick days," said Masterson. "To avoid this, make sure you have the work hours of all of your employees at least three days in advance. If you notice a paycheck will be late, let the employee(s) know as soon as possible."
Mistakes are inevitable, and they're bound to happen from time to time. However, as an HR rep dealing with payroll, your mistakes are more public and need to be addressed.
You also need to discuss any policy changes or areas of confusion to guarantee you're on the same page.
"HR managers need to ensure that they maintain an ongoing and open dialogue regarding any factors affecting their employees' paychecks," said Kerner. "For example, tax rules frequently change, and HR managers need to ensure that they have a solid grasp of these changes. They need to make the time to educate employees on issues such as tax withholdings, which is a difficult concept to grasp, especially for employees that have moved to the United States from abroad and are unfamiliar with the tax code."