Payroll is one of the most important parts of an organization’s functioning as it deals with all kinds of payments. And if this process is defunct, it can cause untimely and irregular payments. This not only amounts to employee dissatisfaction and low retention rate in extreme cases, but it can also attract payroll penalties. While processing payments is the important function of payroll, other essential functions include managing hikes, bonuses, benefits, deductions, tax payments, keeping track of vendor and contractor payments, and a lot more. So, it is important that an organization gives this aspect a lot of attention and avoid payroll mistakes as they can cost the company dearly.

While all companies, big and small, are susceptible to making payroll mistakes, it is quite easy to fix payroll errors. And one of the most effective ways of doing it is by taking help from professional payroll software providers like Carbonate, an experienced team of professionals who can deliver a complete HR services package for all your payroll needs.

But before we move forward, let’s look at some of the most common payroll errors companies make and how to correct them.

Some common payroll mistakes, penalties, and how to fix them

Wrongly classifying employees


An organization employs different kinds of professionals. Be it full-timers, freelancers, contractors, part-time employees, or other vendors, the laws of payment and deductions are different for each one of them. So, correctly classifying your employees is very important for any organization. Any failure to do that can attract penalties as you might miss out on paying overtime or submitting tax deductions.

Miscalculating the pay

How much does a company need to pay an employee after calculating paid-unpaid leave, overtime and other deductions, etc., is an important task. And if these are not calculated properly, it can result in unfair payment to employees, penalties, and payroll correction. This is one of the most pertinent payroll issues that companies should address as a high priority.

Missing payroll deadlines


The government has issued strict rules and regulations about the frequency of payment where the employees must be paid at least once a month with overtime payments to be made within 14 days. Any deviation from this can attract payroll penalties. Not just that, irregular and untimely payments also result in employee dissatisfaction and lower productivity.

Not filing the tax forms on time

This is one of the most significant payroll errors that should be avoided at any cost. Missing tax payments not only incur stiff payroll penalties, but it can also attract interest on them, making it a costly error. The best way to avoid this error is to have a dedicated member who keeps the records and has comprehensive knowledge in this aspect.

Not having proper payroll records


Most states require companies to have a comprehensive data diary that includes all payroll details of the last few years. So, failing to have proper records can land you in trouble with the law and make your internal data analysis more difficult. A properly kept payroll record helps in audits, financial data crunching, calculating cost benefits, and keeping an overall track of the amount spent on payments.

The best way to avoid payroll mistakes is to have a robust system in place. But even if you do end up making payroll errors, it is advisable to report it to state or federal entities as soon as possible. Some of the other steps you can take to fix payroll errors:

  • Cancel the payment, update and reprocess
  • Have an additional payroll process with required adjustments for affected employees
  • The adjustments can be made on the next payroll to get things back on track

Unlike many other functions of a business, payroll is quite prone to drawing unwanted attention from the government. Any irregularity can result in payroll penalties, ultimately hurting your yearly spending and tarnishing your image. In Singapore, any deviation or failure to comply with the rules and regulations laid down by EA (Employment Agencies) can attract a fine between $3000-$15000 and/or six months imprisonment for first-time offenders. And if the offenders repeat the errors, it can cost them a penalty of $6000-$30000 and/or twelve months imprisonment.

Things you can do to avoid Payroll Mistakes


Payroll is a complicated and comprehensive process that is susceptible to errors. But there are few things you can take into account so that you can minimize their frequency and their impact.

Investing in the right kind of tools

One of the best ways to avoid payroll mistakes is to invest in the right payroll and HR software to work in correlation with each other. A good HR software would update the employee information like wages, accounts, benefits, attendance, etc., and communicate it to the payroll software to avoid duplication. Your payroll software should align with your HR system so that mundane and repetitive tasks can be automated.

Keep yourself informed

Most payroll issues occur due to negligence or not having the right information. The rules and regulations keep changing, and your company’s staff should keep themselves abreast with these changes at all times. Keeping track of basics like taxes, employee classification, deadlines, and compliance can help in avoiding payroll mistakes.

Run reports before processing payroll


It is really helpful to run some basic reports like deduction summary, payroll details, and overall cash requirement before rolling out the payments. This way, you can find out if there are any errors and correct them beforehand rather than reprocessing the payments.

Have a basic checklist

The method of cross-checking never fails. So, keep a checklist of important things like all payments, deductions, pay changes, and other updates in one place so that you can go through it before payroll. This way, you will just have to go to the checklist to get all your payroll procedures right.

Payroll is one of the most important processes in a business as it deals with payments. So, it is extremely important that you use the best HR software. This is where this app comes into the picture. With an experienced staff and dedicated team members, it provides comprehensive payroll services.