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5 Biggest Challenges of Manual Payroll Enterprises Face

6 min read

Payroll Is One Of The Most Crucial And Critical Functions Of Any Company.

One thing common to all organizations, irrespective of size or business – Payroll.

And we know it can be a pain to HR and Finance teams in enterprises. It requires a lot of work, time and dedicated effort to make payroll a success every month. And this is true for organizations who are still following the manual route in 2017. Transitioning from a paper based manual payroll processing system to a cloud based payroll system is still being debated at top levels of various organisations.

“Today, the business needs are to have payroll integrate with their existing HR systems, enabling a better employee experience without compromising on payroll compliance and risks.”

~ Aju Murjani, MD, ASEAN, Excelity Global, human capital management

However, the shift is happening at a slow and gradual level. A manual approach to payroll is not just cumbersome, but also poses the biggest threat of human error. The issue of security is also most critical here as payroll involves critical information, which becomes a challenge if outsourced to third party service providers. The current market for business is extremely competitive and organizations need to stay ahead of their game in order to have an edge over others. Their search for excellence in business can be possible with a centralized and standardized payroll process. An efficient payroll software in place enables HR or the payroll administrator to manage payroll operations smoothly and without errors, thereby eliminating risks related to payroll processing.

Here are some of the major challenges of manual payroll processing, which can cost businesses heavily:

1. Human Error

For all those enterprises that carry out their payroll process manually, they have to undergo a great deal of frustration that is accompanied by manual interventions. A manual payroll processing system overburdens HR and Finance teams with mundane activities like documentation and repetitive cross checking. It is also highly prone to human error that can create untimely or incorrect payments. There are employees who can have complicated salary structures that require gross up calculations to ensure accuracy. Another scope for human error comes up in incorrect calculation of leaves.

2. Non-Compliance

Manual payroll processing needs extra attention to make important legislative updates. Faltering on abiding by any of the statutory laws can make you face severe fines or penalties for non compliance. The statutory compliances required for Indian payroll are many such as minimum wages, TDS deduction, ESI finds, PF deduction, gratuity, EDLI and more. Each of these require special attention. Staying up-to-date on all the rules and regulations is time consuming but critical and a task mostly left to he bottom of the pile.

3. Time And Attendance

Managing and calculating leaves manually every month for each and every employee is a part of payroll. This is prone to large errors and takes up a lot of time. Piles of documents comprising of manual recording of attendance and time tracking of employees is inefficient and frustrating to keep track of. Miscalculation can lead to employees getting less or more than they are actually entitled to. This can be unfair and contribute to lowering employee satisfaction levels.

4. Employee Productivity

With legacy payroll systems, employee data such as leaves, reimbursements, overtime submissions and the like are typically entered or uploaded manually. Excel spreadsheets with exhaustive data requires a lot of management. Even a tiny change in a formula can disrupt complex calculations, resulting in incorrect payments. Such a repetitive system is tedious and leads to inefficient use of resources. Employees end up spending their valuable time in carrying out mundane tasks over and over again which can lower their productivity and morale.

5. Security

Maintaining critical employee data in hard copies or in excel sheets is not at all secure. Employees expect a lot from their organizations and ensuring security of critical employee information is key in achieving this. Manual processing of payroll makes the scope of information getting into the hands of the wrong person high. Such leakage of information can end up hurting businesses.

All the above challenges can be met by switching to a could based payroll software solution that is secure, easy to use and ensures strict compliance. It also saves a lot of time and cost otherwise spent on manual processing.

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    Meet the author

    Keka Editorial Team

    A bunch of inspired, creative and ambitious youngsters- that’s Keka’s editorial team for you. We have a thirst to learn new subjects and curate diverse pieces for our readers. Our deep understanding and knowledge of Human Resources has enabled us to answer almost every question pertaining to this department. If not seen finding ways to simplify the HR world, they can be found striking conversations with anyone and everyone , petting dogs, obsessing over gadgets, or baking cakes.


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