Payroll is a vital function for any business, but it can also be a minefield of errors and compliance issues if not handled correctly. In this article, we will list 8 common payroll mistakes that businesses make, and how to avoid them. By understanding these mistakes and taking steps to prevent them, businesses can ensure that their payroll processes run smoothly, without costly errors.
Mistake 1: Not having clear monthly payroll deadlines
Having the following deadlines are critical to ensure on time and accurate payments of employees:
- Deadlines for Managers and staff to submit overtime, claims, leave etc. – NOT accepting further changes
- Deadlines when payroll should be finalised and authorised
- Deadlines for payment release so that employees are paid ON TIME
Mistake 2: Lack of system knowledge
A payroll system expert is not essential, however a basic understanding of the payroll system you are using is beneficial to ensure:
- That the user understands the impact that a setup change might have on an employee’s payslip calculations, and personal information.
- That the user knows what requirements there are for full system backups so that data is not lost
Mistake 3: Lack of Basic payroll legislation knowledge:
A payroll administrator should have a basic understanding of the following, to ensure that potential errors and issues are identified proactively:
- Which payroll transactions should attract tax, and which don’t.
- BCEA legislation changes that might impact payslip calculations.
- BCEA legislation regarding leave.
Mistake 4: Not understanding Company benefits:
Internal policies on each type of company benefit are critical for accurate processing of payroll. The polices should include some of the following items:
- Who is eligible for the benefit: Example – your sales force will receive a travel allowance; no other department qualifies.
- Clearly state terms and conditions: Example – Medical aid: The company will pay 40% of the total medical aid amount and the employee will pay the remaining 60%
(This includes spouse and child dependants)
- Clearly state the contribution portions amounts or criteria.
Mistake 5: Inacurate capturing of work hours on employee’s payslips
- Incorrectly capturing an employee’s working hours as 8 or 9 hours per week will influence an employee’s hourly/daily rate of pay which will be an incorrect value.
- Among other things, this will result in the overtime calculation being incorrect.
- Scrutinize the employee contracts to ensure that accurate hours per day/week/month are recorded on the payroll.
Mistake 6: Reporting negligence
SARS (The South African Revenue Service) requires retention of financial records for at least 5 years:
- Remember to re-print reports after changes are made on the payroll.
- Safely store and backup all monthly payroll reports and have easy access to it.
Mistake 7: Submission deadlines
To remain compliant with SARS and the Department of Labour, there are monthly, bi-annual, and annual submissions that need to be submitted on time during the course of a year:
- Emp201 Submission (Tax, UIF and SDL)
- UIF Submission
- Emp501 Bi-annual Submission
- EMP501 Annual Submission
- Workman’s compensation/OID Submission
Failure to submit in time, will result in penalties and fines, as well as a non-compliant status.
Mistake 8: Expense not shown on the payroll
A company’s payroll processing must reflect any re-imbursed expenses. This is required by law.
Summary
By understanding and avoiding the common payroll mistakes outlined in this article, businesses can save time, money, and avoid non-compliance issues. However, working with a payroll service provider like Profound Solutions can negate these errors altogether.
Profound Solutions provides expert compliance and regulatory expertise and can save your business time and money. Contact us today to learn how we can assist with your payroll.
