Four Common Errors in Payroll Processing

Payroll is one of the most vital parts of any business. It’s also a process that can be prone to errors if people are not careful. Even a minor mistake can result in lots of headaches. Errors can cost companies and staff time, money, and energy. It can even affect a company’s relationship with its workers. It may even affect a company’s standing.

Some of the most common errors in payroll include:

1. Not tracking employee hours properly

Incorrectly logging overtime hours or undertimes can result in corrections that can take years. Staff also needs to be honest and precise when they log in their hours. Failure to do so can lead to overpayment or underpayment. Overtime can take place in work outside office hours like trainings or workshops. These events need to be logged.

2. Misclassifying employees and pay

Knowing the status of employees is crucial in payroll. Whether they are full-time, salaried, part-time or contractors, the classification needs to be clear in order to prevent errors.

Some miscalculations include:

  • Overpayment or underpayment of employees
  • Missed first paychecks of new hires
  • Improper payment of employees who are on leaves
  • Wrong calculation of benefits and taxes

3. Miscalculation of withholding taxes

Mistakes with withholding tax and other tax violations can lead to sanctions and other legal issues. Even failing to refund any excess amount can lead to legal trouble. As it is the employer’s responsibility to deal with these taxations, accuracy a must.

4. Disorganized record-keeping

The root of most payroll problems is wrong data. Also, being overly reliant on the payroll system or software without checking the data can cause issues. Keeping an organized system is key to preventing any mistakes. Being active in checking the data can also go a long way in ensuring accuracy.

While mistakes can happen, minimizing errors needs to be the first concern. There can be monetary and even legal issues when mistakes occur. To help reduce errors, the HR team has to be well informed about Philippine payroll and tax laws. Another way is to conduct timely audits which can be helpful in identifying issues.

Another way to help an already overworked HR department is to outsource payroll functions to a reputable firm. Payroll can take up a lot of time. It also requires expertise. This is why looking for a helping hand can be worth looking into.

Payroll is one of the most common functions that are outsourced. Outsourcing to experts can help reduce mistakes. It can also save your HR team a lot of time. BPOs like Optimum Source can handle different tasks part of the payroll process, such as:

  • Distribution of pay slips
  • Leave credits monitoring
  • Monthly and quarterly reports (Withholding Tax on Compensation)
  • Annual Report to the tax bureau
  • Preparation of certifications and other taxations
  • Liaise in payment of government contributions and loans


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