4 Dangers on Manual Payroll Processing & Its Solution

Manual payroll processing and its dangers

With the massive growth of information technology, software and apps have now come into scene and disrupt all business operations. As a result, payroll manual processing has now become an outdated process in modern business operations.

The complacent notion of ‘being outdated is okay’, as held by many, is dangerously threatening businesses. Business owners just don’t realize that this archaic manual payroll method can result in serious consequences, among others the reduced output efficiency, unnecessary manpower investment and costly government penalties. These drawbacks stem from ineffective human capital practices, where in addition, organizations are highly susceptible to employee fraud cases due to a lack of control.

  1. ADMINISTRATIVE

Tons of paperwork. Manual recording of spreadsheets consumes a large proportion of productive time. Moreover, sending regular reminders to employees, managing leave and claim approvals, as well as frequent reporting of employee updates to superiors can be immensely monotonous. Hence, organizations are increasingly grappling with administrative overload. That said, the help of automated software allows staff to conveniently skip all these dullness as they can allocate their time in productivity-boosting and revenue-generating activities.

High room of data entry errors. Organic input on manual payroll can often result costly mistakes. Wrong data entry will result in garbage in, garbage out situations. As such, manual recording of employee timesheets can easily create confusion in employee’s over-time records.

Over or under payment of salary. If an employee is entitled for spot bonus on a particular month, there is a chance that the human resources (HR) department overlooks and fails to amend the salary payout on the following month. Thus resulting in over-payment to employee.

  1. ORGANISATIONAL PROCESS

Tedious keeping of manual records. Book-keeping and document filing on manual payroll system can be extremely time consuming, especially where it is necessary to uphold certain protocol. Newcomers will surely require time to review documentations and adapt to existing protocol.

Not eco-friendly, space consuming. Printing of manual payroll slips and paper documents consume a considerable storage space. Especially in a land-scarce Singapore, a larger used space means high rental expenses that negatively impacts companies’ bottom-line. In addition, this confers damaging effects to the environment.

Prone to leaking of salary information. There is a likelihood that misplaced information can fall into the hands of competitors. If confidential client details or company information are involved, the company may potentially suffer great losses.

Lack of security. Via a cloud based software, documents are encrypted and password protected. On the contrary, hard copy documents of manual payroll system may be accessed and retrieved easily.

  1. TRACKING EMPLOYEE ABSENCE

Lack of visibility. Tons of hard copy records are difficult to duplicate. Therefore, searching for organic employee’s detail upon error requires hard work. For companies with few branches, it would be impossible for the headquarters (HQ) to locate all hard copy documentation in the main branch. Thus, the HQ will lack full visibility of employee time-sheets from other branches, and this creates obstacles for a complete synchronisation of the organisation.

Erroneous recording of time-sheets. Manual recording of time-sheets—as part of the manual payroll system—results in potential losses to the company, especially when individual employees themselves handle it. As certain company will have their employees mark their own over-time schedule, the payroll manager may compute it incorrectly into the salary spreadsheet. This results an over compensation of over-time pay, which carries indirect losses to the organisation.

  1. COMPLIANCE ISSUES

Non-compliance of ever changing CPF, MOM laws. Human Resource managers must be continuously updated on any legal changes. This is simply because a single flaw will result in a breach of law. However, it is impossible for a person to remain compliant to all the rules and regulations simply by relying on memory alone.

Prone to hefty penalties and fraud. As long as it happens rather infrequently, companies tend to close an eye to penalties due to human carelessness. Nevertheless, we have to recognize that carelessness may lead to a fraud case. There used to be an employer who didn’t know that there’s SDL donation for his employees for years. In the end, he became entangled in a fraud case and was required to pay all the donations along with its incurred interest. This is such a massive disaster to small and medium sized enterprises.

SOLUTION PROVIDED:

After knowing the potential pitfalls of manual HR & payroll processing, you can read the 5 Advantages of Online HR Automation where the benefits of Human Resources Information Software (HRIS)

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