Payroll for hourly paid or shift workers seems like it should be simple. Multiply hours worked by the rate of pay, send the numbers to finance, and you’re done.
But the payroll process is much more complicated. Especially for businesses operating multiple locations. It has to work consistently each and every time, and this makes businesses terrified of doing anything that may break the system, no matter how imperfect it may be.
Read on for the top five problems many businesses face with payroll — and see if you’ve been impacted by any of them.
Payroll problem #1: Capturing time
Payroll starts with capturing the amount of time that employees have worked. And for many businesses, this is a manual process. In fact, some still use paper to capture working time.
For businesses with multiple sites, like retail or hospitality, the inefficiency multiplies quickly. Not only might you or your employees make a mistake tracking the time, different locations often use different time and attendance systems.
So, as in most stages of the payroll process, businesses tend to put up with inefficient time-capture systems that “work well enough.” Fixing them is either too expensive, too complicated in terms of changing entrenched working practices, or both.
Payroll problem #2: Collecting data
When time has been captured in different formats, bringing it all together so it’s ready for the next stage leads to another inefficient, manual process. And if you have casual workers who only come in a few hours a week, getting their sign off can be a struggle.
Inputting or transferring data from timesheets into spreadsheets not only introduces more potential for error: it also ties up administrative staff with time-consuming and tedious work.
Payroll problem #3: Authorization and sending to payroll
At both the time capture and collection stages, the other important consideration is: who’s authorizing and how? The harder it is for supervisors and managers to see and sign off timesheets, the longer the process takes.
Payroll problem #4: Calculation
Here’s where inefficient payroll practices can start to clog up the process. If everyone on your staff made the same hourly rate, it might be possible for a manual system to run efficiently.
But this isn’t the case for the majority of businesses with hourly paid or shift workers. Most have overtime rates, standard rates, rates that vary according to age or grade, as well as rates that vary depending on location.
And when one person has to know all of the exceptions — and how to manually apply them — more delays and errors occur. Some organizes reconcile this manual process by hard-coding exceptions into legacy payroll systems, but updating the exceptions becomes even more tedious.
Payroll problem #5: Processing gross pay
Gross pay should be simple. Time worked x rates x rules (standard rate, overtime, bonuses etc.) = gross pay. And as long as you push the payroll processing button and people get paid on time, everything’s OK. Right?
The problems arise when people find issues with their paycheck: for example, not having been paid the right rate for the weekend shift they worked six weeks ago. Tracing errors back to their source is a huge hassle, especially within manual systems.
How to fix a broken payroll
Every business starts small. But administrative overheads often grow as organizations scale up. And if you’re constantly on the defensive dealing trying to solve different issues, how are you supposed to reach the next level? Check out this ebook to learn how you can fix your common payroll woes.