6 Ways Payroll Software Guards Against Business Payroll Errors

To an increasing degree, businesses in virtually all industries are relying on software that addresses and automates tasks that once required more direct human involvement. This has allowed employees in various departments to focus their energies on more productive tasks instead of handling administrative duties.

In many instances, the right software can also help businesses avoid errors that could otherwise cost a lot of money to fix. Consider the example of PayloCity. Payroll errors can literally cost businesses tens of thousands of dollars (and even more in some circumstances).

That’s changing thanks to innovative software-based solutions. The following are just some of the ways payroll software has begun to help businesses avoid mistakes:

Source: ITChronicles

1. Integrating Time-Tracking with Payroll Management

Time-tracking and payroll go hand-in-hand at any business where employees are paid hourly wages or are paid for overtime work. To ensure employees are compensated properly, payroll departments must accurately keep track of how many hours employees have worked, and how much money those hours translate to based on each employee’s rate. The example linked to above illustrates how a company failing to properly pay an employee a few hundred dollars for overtime resulted in the company eventually paying greater than $40,000 to cover the employee’s legal fees when the case went to court.

Depending on a given business’ processes, in the past, ensuring payments properly corresponded to the number of hours employees had worked in a given pay period could have been a cumbersome task with much room for error. That no longer needs to be the case. Now, strong payroll management solutions come with their own timekeeping tools, so that both payroll and timekeeping are essentially part of the same system. Some payroll management software options can also integrate with a business’ current timekeeping system so that they don’t need to switch over to a new one. This can save a business a lot of time that might otherwise be spent training employees to use a new timekeeping system.

Source: InCorp Advisory

2. Automatically Updating Tax Rates

Payroll errors can also occur when businesses fail to account for changes in applicable tax laws and rates. Sometimes, businesses withhold too little, causing problems for employees when tax season arrives. In other instances, businesses may withhold too much, which can also cause frustration for everyone involved.

This is another type of error that’s less likely to occur when businesses use payroll software. The best payroll management tools are designed to automatically update when tax rates change. Although business owners should still protect themselves by researching any changes and confirming that the tool they’re using has also changed its tax tables accordingly, in general, if they’re using a reliable solution, errors resulting from improper tax calculation are no longer something they need to worry much about.

Source: Lively HSA

3. Using the Right Tax Forms

Similar to not updating tax rates, failing to use the proper tax forms can also cause major payroll errors with potentially serious consequences. Payroll management software has reduced the frequency of such errors at many companies by automatically determining which tax forms should be used based on the classification of the employee being paid.

Source: Expense Management

4. Expense Management

Without the right payroll management solution, it can be extremely easy to make payroll mistakes by failing to properly compensate employees for their reimbursable expenses.

For example, perhaps an employee of a company is authorized to expense the cost of travel to and from various job sites. If their request for compensation of said expenses is overlooked, technically, that employee isn’t being paid as they should be. The consequences of this can range from employee dissatisfaction to a lawsuit if the problem isn’t addressed in a timely manner.

That’s why many business owners have specifically begun using payroll management software that offers expense management capabilities. By automating expense reports and the payment process, a payroll solution can substantially limit errors.

Source: CreditCards.com

5. Garnishment Management

Payroll errors overlap with garnishment management errors to such a degree that some may consider them to be no different in any major way. Essentially, if an employee’s wages are being garnished, it’s the responsibility of their employer to ensure the proper amount of money is being withheld. Failure to comply can result in legal trouble.

Once again, businesses have begun to more effectively avoid these types of problems by implementing payroll management solutions that also include garnishment management features.

Source: MarTech Series

6. Offering Transparency

This particular point has less to do with the way payroll management solutions can help businesses avoid actual payroll errors, and more to do with how the right software can help prevent disputes or errors resulting from miscommunication between employees and HR, managers, payroll teams, etc.

Some payroll solutions allow employees to access their payroll profiles and make certain changes directly instead of coordinating with someone else at the company. For example, an employee can go in and change their bank account number themselves, rather than requesting that someone else handle this task.

This feature can help those who would normally be responsible for fulfilling such requests focus more on other valuable tasks. Perhaps more importantly, it can also add a degree of transparency to the entire payment process. For instance, if an employee failed to receive a payment because their bank account information hadn’t been updated, they could check their profile and discover that they in fact had neglected to make the proper update. If they were unable to do so, they might assume that their employer was the one who’d erred in this situation.

This may result in a dispute. Resolving it might be excessively time-consuming, and the situation in general could harm an employer’s relationship with the worker in questions. This is yet another scenario that’s become easier to avoid thanks to the emergence of payroll management software.

That’s not to say that all payroll management solutions are equally effective in regard to preventing errors. Business owners must take the time to carefully assess their options when choosing a new payroll tool. Generally, though, it’s become very clear that new software has the potential to save businesses a lot of money in the long run by ensuring errors are minimized.

About Margharita Evanom