9 Effective Measures to Solve Payroll Problems and Reduce Errors

Gone are the days when it was assumed that the company HR only deals with the evaluation of the employees and celebrating festivals in the firm. With a more diversified workforce and far more different specifications that have become part of our daily work life, Human Resources are having a challenging time managing it all.

Human resources, conventionally, are about making sure that there is a good relationship between the employees and their work. Resultantly, that also includes their relationship with the subordinates and managers as well. Apart from conducting performance appraisals and giving raises to the people, human resources also take care of various other things like the wellbeing of the employees, their job satisfaction and their career development as well.

One more important area that is handled by human resources is assessing and granting payrolls. Every employee works for a specific period and is then granted a salary for that work. Overtly, it looks like an easy task to do but it has a lot more specifications in it. It needs careful analysis of the leaves of employees, in which one of them would be considered as paid leaves. It also takes into account any inclusions and exclusions and if their employees have to be compensated for company expenses or pay any fines.

This one is a sensitive area where one small mistake can cost a lot for the company. But no area is entirely free of error. What we can do is identify the problematic areas that are prone to errors and work on them to reduce their chances.


Here is a list of payroll problems and effective measures for solving them.

Possible payroll errors and how to prevent them:

1. Employee classification

The classification of people who are going to be paid by the company needs to be very clear because payment differs based on that. There are different types of people who work for the company. Some are regular employees while some are part-time workers. Some people might be informal employees while some others could be contractual employees. Some may be hired only for their expertise and on a project basis while some may be hired for a pre-decided limited time. Some are paid in a lump sum while some are paid for the number of hours they dedicate to the company. Based on this data, the payment of the employees will differ. There might be errors in payroll while dealing with such diversified payrolls.

To avoid that, the payment policy of each employee has to be checked and only then should the payment process be initiated.

2. Timesheet of employees

Corporates prefer hiring employees all over the world for their expertise. They might be working in different time zones as well. But companies with stringent laws and policies regarding the number of hours put in for the work, have their payroll process based on that. If there is an error in the calculation of the number of hours of a particular employee, it is going to lead to an error in processing the payroll. To avoid that the timesheet of employees along with their logging in time and logging out time has to be maintained and the number of hours that they have worked for should be calculated daily or weekly.

3. Absence of employees

Depending on the classification of the employees, there are different policies for granting leaves. Permanent employees have more number of leaves compared to private employees, who are contractual employees. Many companies have different policies in terms of granting maternity and paternity leaves, periods leaves, etc. This area is prone to payroll errors.

To avoid such mishaps, proper documentation is required along with the number of leaves taken and how many of them are actually paid.

4. Lack of documentation

As mentioned earlier, there are various policy returns followed by different employees. While running a company of so many people, an employer cannot deny customising thousands of things for them. But customisation brings confusion which can result in payroll problems.

The best way to deal with that is to make sure that the documentation is intact and that there are no flaws in it. For smaller companies, the documentation can be done manually by the administrative staff but for larger companies, this has to be managed with technological help which would bring accuracy and efficiency in the work.

5. Lawful deductions

Deductions from the salaries of employees for extra leaves and other expenses like a fine is another error-prone area. In the case of these, the reason has to be stated to the employees. The key to avoiding any confusion at the time of deduction is to make timely documentation of these deductions when they happen and not keep it pending till it is time to manage the payrolls. This documentation can also be maintained in a dedicated payroll software and the copy of that can be saved on the cloud.

6. Overtime payments

When employees are working overtime, there are different ways of managing those payments. Some payments are managed by reducing the directions while some get calculated as additional payments. This policy depends on company to company. The rate of overtime pay is also different. Some companies calculate the number of hours that the employees have overtime within that month.

So to reduce payroll problems in these areas, understanding the company’s policies and then considering them while calculating the payroll is important.

7. Technological errors in software and storage

While small companies manage payroll processes manually, large companies have software to do that. If the software is loaded directly on the day of payroll processing for thousands of employees, there are chances of the software crashing. Hence, it becomes important to schedule the calculations and deductions well in advance and start processing those.

8. Personal files of employees

There could be personal files of employees where there might be some additions and some deductions. There could be compensation and some deductions which might be possible in certain special circumstances. At such times, managing a clear record of these is necessary.

9. Taxation and other deductions

Depending on the taxation policy of the country the company is in and the taxes that are deducted beforehand, calculations have to be made and the payroll has to be processed accordingly. The taxes would include general taxes that apply to everyone and additional duties that might be specific to geographical regions you process the payment in. Full consideration of all of this will save payroll mistakes from happening and increase the efficiency of work in the company.

Payroll mistakes are a little difficult to reverse as the company is spending a certain amount for processing transactions as well. Handling pay rules should be done extremely diligently and responsibly. That is why you should tie-up with a recruitment and staffing partner well-versed in handling payroll, such as BetterPlace.