As an employer, you are obliged to pay your people accurately and on time, as well as to deduct and remit PAYE for your employees each month. Failing to get this done correctly can cause poor morale in your workforce and result in fines and penalties from the tax authorities.
Here are some of the common payroll mistakes every growing business in East Africa should avoid.
Your team has worked hard, put in the hours and they rightfully expect a timely paycheque. At best, it is demotivating to have to wait to be paid, even if a valid reason is provided. At worst, you risk losing your best people.
What to do about it: Plan to ensure your accounts have enough to cover payroll. Don’t forget about the promised quarterly or year-end bonus.
Failing to automate
If you don’t have an automated system in place, you can easily make errors in calculating salaries and deductions, compiling your tax submissions, and recording employee information and transactional data. It can also be challenging to stay on top of the deductions and levies you need to cater for in your payroll calculations.
What to do about it: Shop around for a cloud-based payroll solution that is 100%-compliant with tax legislation and regulations in your country and that can grow alongside your business. Sage Business Cloud Payroll Professional is one example. If you opt for a cloud-based solution, you will benefit from paying for your software per user, per month, turning it into an operational expense. Plus, you’ll be able to get running quickly and benefit from automatic updates that ensure your software is up to date with the latest laws and regulations.
Not putting checks and balances in place
Payroll fraud is a major risk for small to medium businesses. It can take months to detect payroll fraud and it is often discovered by accident only after your company has lost a vast amount of money.
What to do about it: The simplest way to prevent most incidences of payroll fraud is to enforce segregation of duties in the payroll department. The people who calculate pay rates and accumulated hours for the payroll should ideally not be the same people who process the payments. Different people should have responsibility for capturing payroll data and for managing access to the system as well as adding and removing employees from the payroll. Yet another person could be tasked with checking that the numbers do, in fact, add up.
Poor control over leave days
You can easily lose track of leave days if an employee takes leave without proper authorisation or due process. The result can be that an employee benefits from extra paid leave or loses leave days due to errors in data capture or that their holiday leave payment may be calculated inaccurately when they leave the company. Other issues might include two critical team members applying for and getting leave approved, when at least one should remain in the office.
What to do about it: An automated payroll system allows you to take the sweat out of processing leave. It enables you to manage leave administration, enforce company-specific leave policies and ensure records are correct. You can also introduce Employee Self-Service to streamline the process of leave applications and approvals for employees and managers.
Re-evaluate your payroll processes and see if it’s time to make some changes. Look into streamlining your systems to improve employee satisfaction and increase overall productivity in your finance department. Seek expert advice if you are not familiar with the relevant tax laws and regulations.