Tag: Payroll Outsourcing

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Managing Processes

7 Payroll Mistakes that Could Cost Your Business  

Stephen Adewumi  

Running payroll might seem like a routine task, but even the smallest mistakes can have a huge impact on your business. As a business owner in Nigeria or across Africa, you are responsible for ensuring your employees are paid correctly, taxes and all statutory deductions are made and remitted on time. Neglecting these responsibilities, no matter how unintentional, can result in hefty penalties, loss of employee trust, and even litigation. 

Here are seven payroll mistakes that could cost your business; 

1. Incorrect Employee Classification 

One of the most common payroll mistakes is misclassifying employees. You need to clearly distinguish between permanent employees, contractors, and part-time staff. In Nigeria, this is especially important because contractors and permanent employees are subject to different tax and benefit rules. 

I recall a story about a small logistics business in Lagos that classified its riders as contractors to avoid paying pension and health benefits. The employees took the case to the National Industrial Court, arguing that they were full-time staff. The company ended up paying a huge settlement for backdated pension contributions and penalties. 

2. Incorrect Pay Calculations 

Miscalculating wages, overtime, or bonuses can result in underpayment or overpayment, both of which can have legal and financial repercussions. Regular audits and leveraging the features of a reliable payroll software can help ensure accuracy. 

3. Delayed Salary Payments 

Late remittances of salaries break trust and damage relationships with employees. Delays in payroll are often caused by cash flow issues, inefficiencies in payroll processing, or even technical errors. This hurt morale, especially of staff, and might lead to the loss of key talents.

4. Failing to Remit PAYE and Statutory Deductions on Time 

In Nigeria, businesses are required to remit Pay-As-You-Earn (PAYE) taxes to the government as well as other statutory deductions like pension, NHF (National Housing Fund) contributions, and Health Insurance to relevant authorities or bodies. Defaults in these obligations attract penalties, audits, and back payments. Staying updated with regulatory bodies and their guidelines in the country where the business is domiciled is critical while utilizing a tax-compliant payroll management system makes this a “walk in the park”. 

5. Inaccurate or Incomplete Employee Records 

Having inaccurate or incomplete employee information creates various payroll errors, including wrong pay amounts or missed deductions. This can result in problems during audits and your employees are likely to become disgruntled due to the frustration caused by these kinds of issues. Maintaining precise employee records is essential and implementing automated HR systems can enhance accuracy and efficiency. 

6. Manual Payroll Processing 

Manual payroll processing is highly prone to errors, and it becomes increasingly inefficient as your business grows. Not only does it waste time, but mistakes in calculations, or salary payments which are common with manual processes can have costly consequences. As a business owner, if you still rely on a spreadsheet to calculate salaries, taxes and deductions, your process is prone to errors in formula or mistaken edits which could result in either underpayment or overpayment of your employees. Adopting automation in payroll management will streamline processes, reduce errors, and save time. 

7. Non-Compliance with Local Labor Laws 

Not adhering to labor laws, whether it’s due to ignorance or neglect, can have severe consequences. Laws around minimum wage, employee benefits, and leave policies must be followed to avoid disputes or penalties. An example is a manufacturing company in Kano which once defaulted on minimum wage guidelines introduced in Nigeria in 2019. After an employee reported the violation to labor authorities, the company was fined and had to settle significant arrears in compliance with the law.  

In conclusion, payroll mistakes, no matter how small, can have a cascading effect on your business—financial penalties, employee dissatisfaction, and loss of trust can result in reputational damage. The best way to avoid these issues is by automating your payroll processes, regularly auditing your payroll, and staying up to date with local labor laws and regulations. 

By leveraging a reliable payroll solution like HumanManager, you can have all these pitfalls avoided, ensure accuracy, efficiency, and compliance in one solution. You can focus on growing your business while keeping your employees happy and paid on time.

 

Categories
Managing Processes

7 Key Reasons You Should Outsource Your Payroll

Payroll processing can be time-consuming, complex and repetitive, yet essential. This process includes prompt payment of employees’ salary, calculation of paid and unpaid leave, employee benefits, bonuses, tax deductions and remittances and much more.

While some businesses chose to manage their payroll operations in-house through manual book-keeping or do-it-yourself payroll solutions, others prefer to trust the expertise of a professional HR and payroll firm to manage on a regular basis at pre-determined or agreed rates.

Whichever method you choose to adopt has its merits, but the latter outweighs the former. Read on to find out why you should outsource your Payroll:

1. It Saves Time & Money

From managing staff salary and other benefits, to maintaining payroll departments and/or software solutions, the time and financial cost to any company can be significant over time. Outsourcing payroll to a reputable provider gives you more time and resources to focus on other critical business priorities, such as increasing revenue or retaining existing customers.

2. Helps to Avoid Statutory Penalty

The need to compute taxes correctly, document, and remit same to the Board of Internal Revenue and other statutory agencies of government within the time stipulated can be a major hurdle for businesses of any size. Regulatory compliance is a key outcome of engaging a reputable payroll provider.

When payroll is outsourced correctly, employee taxes and associated schedules are streamlined and made available on time and in the proper formats or order. Also, having an expert on hand helps keep track and stay up-to-date on regulations.

3. Heightens Data Security & Privacy

How safe and secure is your payroll data? Where and how is it stored? Who has access to it and what level of access do they have? What processes are in place to mitigate staff data breaches, particularly for sensitive payroll information? Trying to answer these questions can really break a sweat as data breaches, identity theft and fraud expose the organisation to untold heartaches.

Outsourcing your payroll to a trusted and experienced provider will help de-risk and allow in-house teams focus on monitoring or controlling the process while passing the burden of data security/confidentiality to your preferred provider.

4. Helps Businesses to be Globally Competitive

A manually-driven workforce is like driving a car with square wheels, indeed a very daunting task.

Having a functional Human Resource Information Systems (HRIS) to manage both HR and Payroll operations can greatly improve organisation of any size, as it helps structure and scale operations in a seamless way. Automated outsourced payroll service also comes with a modern, easy to use HRIS platform, Employee Self Service (ESS) capabilities, and mobile friendly technology at subsidised or reduced cost.

5. Increases Employee Satisfaction

Prompt salary and benefit payment remains a proven way to keep your employees motivated. A certified outsourcing firm ensures that salary payment is done on time, and the correct deductions and bonuses calculated. It also offers a holistic process that eliminates human error to the barest minimum making reporting and comparisons easier.

6. Allows for 24/7 Access to Payroll Experts

Payroll experts are conversant with evolving regulations and structured to manage complex as well as mundane payroll processes. While some large enterprises often have dedicated teams or departments handling their payroll process and compliance related documentations or timelines, many small businesses don’t have such luxury.

It is important you engage a qualified team of experts with a track record of delivering quality payroll results in a functionally compliant way.

7. Provides Accurate Payroll Reports for in-house Decision Making

Depending on the size and structure of the business, payroll reporting must be securely maintained to aid evaluation of previous reports for hiring and staffing projections, financial auditing in a fiscal year and tax and reporting purposes.

You enjoy access to accurate, timely and comprehensive report when you outsource your payroll to a reliable firm. They ensure that your payroll data is organised and easily accessible for future reporting.

If you can relate to any of the above benefits, it will be a good time to consider outsourcing your payroll or some other processes to your preferred provider.

We have the expertise needed to help you save cost while enabling your team focus on core functions and operations geared towards achieving organisational goals. Learn more at here,  or contact us at [email protected] to get started.