Payroll processing is the process whereby a company calculates the financial compensation owed to employees during a pay period for their services rendered. This includes calculating pay for both office hours and overtime. In addition, deductibles such as CPF contributions and insurance has to be made before net pay is determined and distributed to employees via cheques, bank transfers or GIRO.
To perform this task, businesses have three options, namely manual, software and outsourced services. Small businesses tend to shy away from payroll software and external services in order to save on upfront costs. As such, they arm themselves with spreadsheets and calculators while shifting through a mountain of paperwork. However, in doing so, cost is incurred in terms of loss time, energy and focus. Moreover, the sheer volume of work makes the environment an error prone one that may end up costing your business even more. In this article we list down three ways in which the manual payroll process is really hurting your business.
To start, manual payroll processing is highly consuming. From the moment you conduct onboarding of new employees, you need to track their hours worked. This also includes any overtime that they perform. During the end of the pay period, much reconciling of accounts, reporting and creation of payment summaries are needed. Many potential complexities can arise here, leading to errors and possible payment disputes.
Secondly, deductibles further complicate the process especially if your team has a mixture of demographics. This includes locals, foreigners, permanentresidents and other possible classifications which would have different deductibles or different percentages applied. When done manually, your finance team needs to be alert and conscious of such factors.
Thirdly, an employee’s pay is a piece of confidential information that should never be let known beyond that of the employee and the business’s owner. The confidential nature of the numbers thus makes it dangerous for firms manually processing trays of paperwork for payroll tabulation. Should any information be leaked, the firm could be liable to malpractice.
In contrast payroll outsourcing services is capable of helping your firm by reducing the time spent on payroll processing. Due to their specialisation, they have refined processes that can be applied and executed successfully in your firm. In addition, this crucially helps to reduce possible errors in the process. Another overlooked factor is the agency’s constant eyeballing of the latest practices and regulations. This helps to ensure that your firm does not violate any new regulations that may be implemented but missed by your finance department.
In conclusion, manual payroll processing is a considerable indirect expense for any small business. Outsourcing this function could help to reduce operating costs in the long run.