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Main Challenges for Payroll Professionals

Handling payroll is an extremely meticulous task. Even experienced payroll professionals can occasionally make mistakes due to ever-changing payroll regulations and a large volume of employee data. However, ensuring the accuracy of payroll is crucial, as even the slightest error can lead to costly losses for an organization.

Some organizations believe that the best way to manage payroll effectively is by handling it internally to have complete control over the payroll process. However, processing payroll is often not as simple as it may seem, especially when dealing with a large amount of data from different regions.

Here are the three main challenges that most payroll professionals face on a daily basis and how to effectively address them:

1. Compliance with constantly changing regional payroll regulations

Payroll regulations vary constantly across different countries, making payroll processing more complex. According to TMF Group's Global Business Complexity Index (GBCI) in 2020, there is significant variation in the complexity of HR and payroll-related regulations across different jurisdictions. Therefore, HR departments are responsible for staying up-to-date with changes in regional payroll regulations to ensure compliance with relevant laws and regulations. Non-compliance can often result in significant fines for organizations.

To tackle the challenge of constantly evolving regulations and maintain up-to-date knowledge, many payroll professionals opt for outsourcing payroll functions. By hiring a third-party payroll provider, there is no need to continuously monitor payroll regulation changes in each country. Most payroll providers stay updated with any significant or minor payroll changes and incorporate them into their payroll systems. This helps ensure that organizations using their payroll systems comply with the ever-changing payroll or tax regulations.

2. Managing payroll for a large number of employees

Payroll processing consumes a significant amount of time, even when using a payroll system. This is because there are certain pre-processing tasks, such as organizing employees' timesheets and data changes, that need to be done before running payroll. Dealing with payroll for a large number of employees further increases the time required. Time is spent checking the accuracy of payroll records, employees' timesheets, payroll calculations and deductions, as well as compliance with statutory laws and regulations. All this time could be utilized to support business growth and expansion.

By hiring an outsourced payroll provider, these administrative tasks can be delegated to the provider, who will be responsible for ensuring accuracy and compliance. Companies using Human Capital Management (HCM) systems may face the challenge of synchronizing employee data in their global HCM system with payroll data in local payroll systems. Maintaining accurate employee data across multiple systems often requires manual re-entry or uploads of the same employee data. This can result in losing several days of HR productivity each month and manual errors. Some companies outsource this process to payroll providers to ensure accurate input of employee and payroll data into internal systems. Through advanced data integration technology, some payroll providers can integrate their payroll systems with HCM systems, facilitating seamless data transfer between platforms.

3. Poorly managed payroll workflows

Payroll is a time-sensitive process, and even slight delays can lead to inaccurate payroll and employee dissatisfaction. If payroll workflows are poorly managed, similar to having inexperienced staff and inadequate payroll systems, it can create serious chaos. This can result in payroll errors and create opportunities for fraudulent activities. Establishing standardized payroll workflows ensures that appropriate control measures are in place. Additionally, requiring employees to adhere to these standardized operating procedures reduces the risk of payroll errors.

Leveraging an outsourced payroll provider can help automate these administrative tasks while ensuring accurate input of payroll and employee records into systems. Payroll system providers also use cloud-based platforms that provide an additional layer of data security to protect sensitive information.

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