7 Common Mistakes in Payroll Management – and How to Avoid Them
Administering payroll can be a complex task. From incorrect payments to a lack of knowledge about laws and regulations, several mistakes can complicate payroll management. Let’s delve into these common pitfalls and explore how to avoid them. We’ve asked Ingela Åberg, HR & Payroll Consultant at Administer Group, for insights.
Mistake #1: Incorrect Payments
Double payments or payments to individuals no longer employed can be costly, and recovering funds from former employees might be challenging. Such mistakes can also harm the company’s reputation, affecting employees’ trust in you as an employer.
To avoid this mistake, you should:
Establish clear procedures for calculating and disbursing salaries. Conduct regular audits of payroll data. Ensure accurate updates to the employee registry.
Mistake #2: Irregular Payroll Disbursements
Errors in payroll calculations, mistakes in the employer’s banking processes, or errors in transferring salaries to employees’ bank accounts can result in delays or irregular payments.
To avoid this mistake, you should:
Have a clear schedule for salary disbursements. Ensure sufficient resources to manage payroll administration. Regularly test and review your payroll processes.
Mistake #3: Mishandling of Information
In the digital age, safeguarding payroll information is more critical than ever. With an increasing risk of identity theft and data breaches, using secure and encrypted systems for data storage and transmission is essential. Strict data protection policies for both consultants and clients should be maintained.
To avoid this mistake, you should:
Utilize secure payroll administration systems. Establish clear procedures for handling and protecting payroll information. Educate your employees on the importance of data security.
Mistake #4: Lack of Knowledge about Laws and Agreements
Without sufficient knowledge of laws, such as the vacation law, and any collective agreements in place, there’s a risk of errors in areas like holiday pay and overtime compensation, or miscalculations in salary, both upwards and downwards.
To avoid this mistake, you should:
Stay informed about current legislation and agreements. Seek assistance from a professional payroll consultant or legal expert when needed.
Mistake #5: Incomplete Use of System Support
A simplified rule is that the more manual the work, the greater the risk of errors due to human factors.
To avoid this mistake, you should:
Invest in a modern payroll system that can automate as much of the payroll administration as possible. Train your employees on how the payroll system operates.
Mistake #6: Failing to Follow Collective Agreements
Many larger workplaces in Sweden have collective agreements containing specific rules on aspects like salary, working hours, vacation, and sick pay. Non-compliance with these rules can lead to serious consequences, including penalties and legal disputes.
To avoid this mistake, you should:
Be aware of the collective agreements applicable to your business. Stay updated on any changes in collective agreements.
Mistake #7: Mishandling Sick Pay
Errors in sick pay disbursements can result from misunderstandings about waiting days, incorrect calculation of sick pay, lack of follow-up, incomplete documentation, and misunderstandings about rules. This leads to additional work and extra administration but can also cause inconvenience for the affected employee.
To avoid this mistake, you should:
Establish clear procedures for handling sick pay.
If you need support, please contact us: Jens Rönnholm, jens.ronnholm@administer.se, +46 70 47 46 0 41.