The potential pitfalls of payroll administration

The potential pitfalls of payroll administration

The potential pitfalls of payroll administration

By Calvin Gower, Trüpp.

Payroll administration is notorious for being one of the more high-pressure aspects of Human Resources. Employee pay has an immediate and direct impact on people’s lives. A small mistake can have a significant ripple effect, which leaves little margin for error. Managing payroll internally exposes the company, as well as the owner, to both corporate and personal liability without producing any profit in return.

Whether you’re focused on keeping payroll administration internal or considering the idea of outsourcing, it is important that you remain aware of the potential pitfalls and related repercussions.

Pitfall number 1: Calculating pay incorrectly

This concept seems simple enough, but the truth is that there are a significant number of factors that go into calculating payroll correctly. The list below provides some key components. These are merely some of the aspects of payroll administration, most of them tied to legal requirements.

  • Accurate calculation of regular and overtime wages
  • Exempt vs. non-exempt status
  • Paid time off (PTO) accrual
  • Wage garnishments
  • Child support
Pitfall number 2: Not keeping up with legal requirements

Managing payroll requires diligence maintaining awareness of changing regulations and the capacity to field employee questions in an accurate and time-sensitive manner. Employment laws change regularly on a regional, state, and federal level. Legal updates that are related to payroll usually fall under the umbrellas of record keeping requirements, wage and hour compliance, and regulatory reporting.

Pitfall number 3: Underestimating needed resources

An accounting and/or administrative team requires people, time, and the technology. Make sure you have the right people and systems in place to handle both day-to-day tasks and escalated responsibilities near pay day. Processing payroll can become hectic when you catch last minute mistakes or run into technical problems such as system glitches and bugs. Having the proper resources in place goes a long way when issues arise.

Is payroll administration outsourcing right for my company?

Simply put, if you don’t have the expertise or resources in-house, it’s best to outsource the payroll function. By doing this, you will save time, contain costs, free up employees to focus on revenue generating tasks, and reduce the risks associated with inaccuracies and compliance failures.