4 Challenges That Hinder Smooth Payroll Processing

By Author: Exela HR Solutions Team
Total Articles: 50
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The advent of COVID-19 and the emergence of recession rumors have entirely rehabilitated the way of doing business. But on the positive side, rather than worrying about an economic slowdown, companies are seeing enormous growth potential ahead. And that’s a kickstart to the eminent future. Businesses are increasingly expanding their footprint instead of scaling back; they are hiring instead of trimming the workforce. Though there are several economic dilemmas in the rearview mirror, the way ahead is about growth. For many businesses, expanding is turning out to be acquiring other companies.

The global mergers and acquisitions surpassed the highest volume in 2021, $4.3 trillion.

Going global is a prodigious way to gain a foothold in international markets and explore new opportunities. However, this can drag HR and payroll professionals out of their comfort zones. It is well-communicated that there is a specific patchwork of national and regional laws for every country that can affect hiring and payroll. And falling afoul of those is bound to confront consequences. This means payroll is one of the most common stumbling ...
... blocks for organizations expanding across international markets.

As multinationals continue to hunt for process excellence and economies of scale, most processes are being standardized and centralized. And one of the recent entrants to this is payroll – several organizations are moving from disparate local, regional, or national payroll systems to one global payroll processing, yielding significant cost savings. But it is not without challenges. Dive into the below session to know the four most common challenges that hinder smooth payroll processing.

Steps involved in the payroll management process
Global payroll processing determines employee pay, tax computations, deductions, bonuses, compliance, and more for globally situated teams. To get more acquainted with potential challenges and find solutions, you must know the process first.
Here are the primary steps in payroll processing.
• Establish a payroll policy, including payroll processing norms, such as attendance, leaves, and compensation guidelines.

• Keep a record of each department’s leaves, attendance, and tax requirements.

• Once you gather all the essential information required for payroll processing, you will have to check it for legitimacy and accuracy – for instance, exact unpaid leaves or accurate categorization of employees.

• Run payroll calculations, including taxes and other deductions.

• Payroll processing calculations are accompanied by ensuring statutory compliance, such as EPF, TDS, etc.

• Once you are done with payroll processing calculations, you need to enter the data into your accounting software for accurate accounting and administration.

• Lastly, you need to distribute salaries and provide employees with salary slips.

• Though the process seems relatively straightforward, it is meant to face challenges when it comes to global payroll processing. Below are the four most common challenges that can hinder smooth payroll processing.

Also Read - Withholding HR and payroll data from employees? Unnecessary!

4 Challenges that Hinder Smooth Payroll Processing
• Precise payroll calculations
(Making errors while computing different aspects of payroll manually, including reimbursements, gross pay, allowances, and more.)
The operational duty of payroll processing teams starts with calculating countless deductions and additions to the final salary. The calculations that go into the payroll construction are unique for each employee. Multiple factors are considered during computation depending on the taxes, output, union memberships, and bonuses offered. In addition, daily wages and payments for line workers depend on their attendance and hours of work.
The payroll team must get into a plan where it computes overtime and leaves undertaken by the employees, adding and deducting the amounts settled on a contractual basis with the company. The payroll professionals also need to authenticate the taxes applicable to specific amounts and withhold the payments after careful consideration. Moreover, employee benefits and bonuses are there to be considered. Thus, it is clear that a vast amount of time is devoted to scrutinizing each employee’s information. Classifying employees and accurately calculating their payroll data is a long and daunting task that is prone to errors. This can only be solved using an automated system or outsourcing payroll services.
• Security of sensitive personal information
(Failing to keep sensitive personal data safe from hacking and data breaches.)
Two crucial elements of payroll are data security and confidentiality. Any errors in payroll processing or security breaches can lead to long-term, severe consequences. As we know, organizations today deal with an unprecedented amount of data daily. The vast majority of this data consists of sensitive and confidential information such as employee personal data, bank account details, insurance information, taxation data, and more. And the last thing you might hope for is the loss or theft of this data. Data insecurity comprises unauthorized, illegal, or accidental access to data. Any unauthorized access to information, whether altered, mishandled, copied, lost, or destroyed, indicates that your data has been compromised. This may lead to filthy penalties, legal actions, or even cost your fortune. Thus, data security and confidentiality are the biggest challenges HR and payroll professionals must worry about. However, this can be handled with the help of trusted third-party payroll software or by outsourcing payroll services from a leading service provider.
• Scattered payroll data across multiple systems

(Using diverse systems to collect payroll inputs, including time, attendance, and leave data.)
Imagine being asked to gather information from different sources and then perform the payroll procedure. HR and payroll professionals go through this pain point every day. They must collect all the necessary inputs, such as leave details, attendance, overtime, reimbursements, etc. With this data distributed across systems and teams, payroll processing often suffers inaccuracies in processing, loss of data, and a lot of back and forth. Even a slight error in the payroll processing significantly brings down the trust and morale of employees. Thus, HR and payroll professionals must be bestowed with unified software for all their payroll needs. This can help reduce manual errors, increase data security, and provide accurate salaries on time.
• Compliance and legislation issues

(Failing to stay on top of the changes and amendments that are made to payroll-related labor laws.)

Running a business isn’t a cakewalk. Ensuring compliance with different laws and legislation is one of the biggest challenges. Irrespective of the pressing cost drivers or any other motive, no organization can afford the transition to a global payroll system if this involves the risk of lack of compliance. Such concerns over compliance have traditionally been one of the main inhibitors preventing organizations from expanding their businesses.
When it comes to payroll, labor laws, statutory compliances, and state regulations are some of the rules that exist. Following these is not an option; it’s oh–so–necessary. Failing to adhere can lead to significant penalties and legal actions. Nevertheless, compliance errors tend to happen when there isn’t any automated system or a dedicated person for payroll compliance in place, as the laws keep changing. On the other hand, hiring a payroll service provider is always a better idea, as they keep track of recent laws and compliance activities to help your payroll stay updated.

Conclusion
The payroll is a highly dynamic sector with consistent updates and changes. While payroll is gaining attention these days, it goes without saying that the challenges and struggles coming along are pretty extensive. The above challenges will give you a rough idea of what is coming your way so that you can prepare for the obstacles accordingly, beforehand. If you are still facing issues in your payroll, talk to our experts for a more unified solution. Exela HR Solutions is a leader in HR outsourcing, offering unique solutions to all your payroll and HR problems. Get Exela HR Solutions now!

DISCLAIMER: The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly, and Exela cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a licensed attorney in your area.

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