Two-fifths of SMEs admit to payroll errors

payroll smes errors

New research from workforce management platform Rippling reveals that 39 per cent of SMEs have made a payroll error in the past two years, posing a significant compliance risk for businesses ahead of impending IR reform changes,

The most common errors include under- or over-paying an employee (57 per cent), delayed payment (27 per cent), misgrading an employee (17 per cent) and not making superannuation payments (eight per cent). Subsequently, 35 per cent of companies are actively looking to switch their existing HR and payroll systems in the next 12 months.

IR changes under the Closing the Loopholes bill may further compound the issue as the bill criminalises and substantially penalises wage theft. The research notes that this places a significant burden on HR and payroll teams, as 53 per cent of respondents believe it will add more complexity and stress to the payroll function.

Given these repercussions of the IR reforms, the research also noted that 50 per cent of companies are reassessing how they manage payroll. In addition, SMEs are also looking to avoid pain points that include keeping up with legislation and compliance obligations (40 per cent), the length of time it takes to process (34 per cent), the cost per employee (24 per cent) and complexity (23 per cent).

Aside from the IR reforms, another headache for HR teams is their company’s shift towards remote working and hiring more geographically dispersed staff, with 58 per cent agreeing that this has created an additional layer of complexity.

According to the report, the reliance of 48 per cent of small businesses on outdated and non-automated systems is contributing significantly to these issues and the high rate of error on payroll. Repeating this process across multiple siloed systems is then exacerbating the issue, with 45 per cent of SMEs employing three or more solutions, and11 per cent using five or more, further complicating the process and increasing the margin for error.

“Paying your employees is a fundamental part of operating a business, but it’s something that companies are getting wrong again and again,” Matt Loop, VP and Head of Asia at Rippling, said. “Payroll errors can be hugely detrimental to employee morale and damage company reputation, so it’s imperative that companies do all they can to limit the risk of human error taking place.”

This article was first published on Inside Small Business.