6 Payroll Mistakes You Should Avoid in 2021
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A business owner must have an excellent system to handle every payroll-related activity, from paying employees to filing tax forms. These are the six of the most common payroll mistakes in Malaysia, but you can avoid them with the right system in place.
1. Not paying employees on time
A big mistake in payroll is failing to commit to a regular payroll schedule. If you don't pay your staff on time, your employees will have difficulty adjusting their finance. Therefore, employers should always set a fixed date for salary payout and put in policies such as early salary release before the weekend or public holidays.
Payroll affects the company and operations more than we think; we mustn't take it lightly. It is also why many companies settle on payroll software to help them automate payroll functions while focusing on other business activities.
2. Mistakes in keying employee data
Employers should pay attention to employees' information, such as salary, job title and level, entitlement, tax rates and deductions. All of this information can change every month. If your company hires more than two people, there's still a chance you would commit an error in your payroll process without the updated information.
Employers can minimise this risk by ensuring the HR department monitors all information and sees that they are updated. The HR department should always keep in touch with the department's head and employees to get the newest updates and avoid mistakes.
3. Error in calculating income tax and other deductions.
The payroll staff are responsible for ensuring that income tax, Socso, Employee Insurance Scheme (EIS) and Employee Provident Fund (EPF) deduction calculations are correct.
Generally, almost every HR department has record-keeping and practices for the monthly payroll. Yet, most of them are calculating these deductions manually, leading to a higher risk of making mistakes.
They can avoid these mistakes by using reliable tools such as IRBM's PCB Calculator. Some payroll software also allows the user to quickly find out net salary and individual income tax deduction for their employees.
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You have a lot of things to think about, the last thing you need is making payroll mistakes.
4. Forgetting deadlines
Employers have the responsibility of submitting the monthly contribution to Socso or EPF before the deadline. If an employer misses the deadline (usually on the 15th of every month), they should be ready for a penalty.
It would be best if the employer always prepares their payroll process in advance. This way, they will create a buffer period in case they need to make some changes.
5. Bad record-keeping practices
Many HR departments are still using Microsoft Excel to monitor payroll data. After all, it is the easiest way for SMEs to use manual methods to keep payroll records.
But, there are risks of record mismanagement that can lead to undesirable situations. For instance, a former employee argues that they were not paid according to their contract a year ago, and the HR department did not have the payroll record or misplaced it.
Nobody wants that big of a headache, especially if the Labour Department hears about it.
Therefore, employers should start using better methods to keep their records, which is easier and safer nowadays, thanks to cloud technology. Now there is software that enables you to store data online securely. Even if an employee accidentally deletes their copy, they can easily retain the file through cloud storage.
6. Overtime payment calculation issues
If you need a guide on calculating overtime based on Employment Act 1955 (EA), you can check it out here. There is no room for error when it comes to overtime pay. If you miscalculate overtime pay, your employees won't trust you, and worst-case scenario, you'll have a lawsuit heading your way.
You can also use the EA to serve as a guideline for other employees who are not under EA. Usually, different rates apply if the overtime is during or outside regular working hours and during workdays, rest days or public holidays.
Though some payroll mistakes are easy to solve, others take time and are expensive to fix. As employers, mistakes happen from time to time, but keeping an eye on common mistakes will help you in the long run. Even HR payroll software is becoming more affordable these days, and even if they are pricey, they can save you from even costlier penalties.
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