In an organization, a payroll cycle comprises of all the steps from beginning of a pay period till end. In this process the organization calculate rate of pay, number of hours, benefits accumulation or any withholdings of all the employees. Every business is ought to have proper procedures instead of risk errors, fraud or regulatory penalties. Let’s have a look at some of the risks regarding payroll.
When it comes to payroll accounting having incorrect records can be one of the greatest risks a company can face. These differences can be a result of manual entry errors, from faults within the computer system or calculation mistakes. These inaccuracies may end up with single incorrect paycheck or an insufficient accumulation of wages for all employees.
- Information Access
An organization should maintain a segregation of duties in order to ensure that no single person can create and approve payroll transactions. This way risk of misuse of company funds will be prevented. If there is no proper control then, creation of ‘ghost’ employees or unapproved changes to payroll master data could take place.
By implementing controls risks can be moderate in the payroll cycle. Employees need to get opportunities to review their own hours, pay rate and time entry. Additionally, they also require a manager to provide a secondary review and approval prior to payment. A two-tiered level of review reduces incidences of overcompensation. These overpayments could result from employees swiping ID cards in and out for each other, or from individuals claiming work during hours they were absent.
- Adhere to Regulations
According to income tax rules employers need to compensate their workers accurately and according to schedule. In order to ensure acquiescence all the companies with employees in multiple locations should review local regulations. Businesses must also make sure to calculate taxes and other deductions while preparing payroll. Companies are obligatory to withhold employment taxes and make deposits based on a schedule determined by the size of the return. Any failure to make deposits on time can result in penalties from the IRS.
Any booming businesses and their success largely depend on the number of their satisfied employees. This indeed calls for a systematic payroll software management to manage the intricate payroll process. Comprehensive payroll automation software can help serve a great payroll deal. In order to cope up with the complexities of payroll, salary processing and employee management there always need emerges for organizations to incorporate comprehensive, automated payroll software system. PayWheel is a one-stop shop that provides end-to-end payroll software for small business as well as medium business requirements.