Flawed Payroll Systems: A Disruptor for Businesses and Employees
Discover what disruption is in store for employees and businesses without a resilient payroll system.
An undervalued benefit of using integrated payroll includes eliminating unnecessary costs, not to mention regaining lost time. Without a resilient payroll system, what disruption is in store for employees and businesses alike? And what is the future of payroll management? Keith Tully, partner at Real Business Rescue, explains.
An integrated payroll system intelligently connects your core payroll software with various collaborative platforms to streamline the payroll process and save time and money. You must meticulously consider the resilience of a payroll system before committing to it, as payroll mistakes can prove to be fatal for the financial future of organizations and employees alike.
The Costly Mistake of Using Flawed Payroll Systems
MHR Global’s Payroll Problems Report highlights the cost of getting payroll wrong and all too common payroll truths. Over 70% of organizations still use manual methods to calculate and input payroll, which exposes the process to human error, inaccuracy, and miscalculations.
In the event of such a setback, the follow-up clean-up mission will be at the expense of the business as it will require an emergency responder to diagnose the problem manually and put measures into place to prevent a repeat of the event.
A financially efficient solution would be integrating innovative technology and automating key components to minimize risk and close the door to human error. This can eliminate the need for manual input and increase resilience in the face of change, such as legislative changes or working from home.
Payroll Mishaps: A Look Into Employee Disruption
Payroll mistakes can have a serious knock-on effect on the lives of employees.
If there is a wage shortfall or payment arrives late, employees and contractors could fall behind on essential payments. This can put financial affairs into disarray and derail professional and personal relationships. Emotional, mental, and financial repercussions are part and parcel of such an incident and can create a permanent bad taste in the mouths of staff. This can trigger a spate of negative reviews, drive down client referrals and fuel employee turnover if left unresolved.
Glassdoor provides employees with a transparent channel through which they can leave a genuine review about their experience, including the cons. This can be a deterrent when recruiting new staff and encouraging them to come on board. Trustpilot and Reviews.io are similar customer-facing websites on which customers are invited to leave a review. These can be filtered based on keywords, such as ‘payments,’ so if the problem is chronic, there is no hiding from it.
See More: Transforming HR With Off-Cycle Payroll Solutions
Sleepless Nights and Money Worries
New research conducted by the Yorkshire Building Society (YBS) covers financial well-being’s impact on mental health.
- More than 20% of people have sleepless nights due to money worries
- 40% are feeling stressed about their finances
- More than 35% of people feel the COVID-19 pandemic has increased their stress levels when it comes to money
If late payment is persistent, this could domino effect on your ability to keep up with payments or fulfill repayments. Creditor pressure is often the first sign of financial difficulty. A warning letter can quickly escalate to late payment fees, interest, and threats of further action, such as repossession if you cannot pay.
Late payments can also harm your credit score as you will likely be rejected for further borrowing, or the interest rates may be higher.
Around a fifth of U.K. adults have less than £100 in savings, according to YBS. This marks a savings crisis, as in the event of late payment due to a payroll mishap, individuals with long-term financial commitments, such as mortgages or rent, would struggle to survive. This will likely paint a black mark on your credit score if you are not eligible for a mortgage holiday.
The decision to engage with a cheap and what appears to be a fit-for-purpose payroll provider may hinge on the possibility of significant cost savings. However, in reality, the costs incurred to rectify payroll mistakes could outweigh any forecasted savings, creating cash flow problems in the business. This includes the time spent managing the payroll crisis, performing payroll reruns, amending HMRC records, and compensating employees.
Cashflow is the lifeblood of a business, as, without it, the business will have no funds to maintain day-to-day affairs and pay essential bills, such as rent, staff wages, and utility bills. Unexpected expenses or mishaps can sometimes bite into company cash flow and push company finances into disarray.
This is where cash reserves can prove valuable and protect the business from declining. A war chest is a pot of cash dedicated for rainy days, so if the business nosedives as it is out of cash, a war chest can pull the business back from the plunge. Many self-employed professionals often exercise this tactic without the reassurance of a bailout or protection from employment rights.
The Future of Payroll Management
Now that more businesses are embracing flexible working following the coronavirus pandemic, an integrated payroll system makes it feasible for payroll to be managed entirely remotely as it is paperless and a standardized process for all users. Flexible working is here to stay. While systems will need an upgrade, if not already implemented during the pandemic, it is an opportunistic time to invest in new technology.
Making Tax Digital is a testament to the modernization of the tax system in the U.K. as it seeks to go fully online. HMRC’s ambition is to become one of the world’s most digitally advanced tax administrations, which they hope to achieve by making fundamental changes to how the tax system works and transforming tax administration so that it is more effective and efficient.
Follow suit in operating your payroll to bring your business into modern times.
Purpose-built payroll systems can help your organization respond to legislative changes implemented by HMRC without overhauling manual processes, formulas, and calculations. The user experience is sweetened by features that employees can easily navigate, elevating the payroll management journey.
Do you have an integrated payroll system in your organization? What benefits have you seen? Share with us on Facebook, Twitter, and LinkedIn.
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