What Are The 8 Most Common Pain Points Faced in Payroll Management?

March 27, 2017 1:29 pm

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Payroll management is one of the most dreaded jobs for a HR employee. It is time-consuming, burdensome, and very seemingly a dispensable task.

Most human resource management professionals know payroll management is an essential business function but would find technology applications to ease the workflow.

A proper payroll management system is essential for a well-functioning business, to avoid the pains of legal and internal issues that may forbear greater problems in the future.

Here’s a breakdown of the 8 most common pain points HR employees face in Singapore’s commercial industry.

1. Administrative Overwhelm

Larger corporations have the luxury of hiring payroll experts into their staffing that specialize in managing payrolls seamlessly. However, most SMEs and smaller businesses do not have the budget to accommodate such specialists on their team and hence, do their payroll management in-house and manually.

This is a process that is firstly, extremely overwhelming for the people handling it and secondly, very prone to human error.

Payroll processes involve heavy paperwork and each employee’s payslip is different case to case. With an unsurmountable list of factors to calculate for each payroll, be it sick leaves, overtime, tax deductions and so on, using an archaic method of manual paperwork and outdated software to handle such an intricate process is bound to slip up and result in many miscalculations and mistakes.

An incapable payroll process stems into legal issues and employee discontentment, and the HR staffs usually has to take the brunt of responsibility.

manual calculation

2. Calculation of Salaries

Every employee’s payroll slip is different, and even the same individual’s payroll slip tends to differ month to month attributing to a number of factors.

Under MOM’s Employment Practices, there are at least 9 different scenarios under ‘Salary’ alone:

  • Salary Payment
    • Singapore does not have a minimum wage. This means each employee’s salary is determined through negotiation and mutual agreement with their boss.
    • Frequency is key. Employers must pay their employees’ salaries at least ONCE a month, no more than 7 days after the end of the salary period and for overtime pay, within 14 days after the end of the salary period.
  • Itemised Payslips
    • The recent reform implemented in 2016 requires all employers to provide an itemized payslip to each employee along with their monthly pay.
    • The itemized payslip to include 12 items that essentially illustrates exactly where and how the employee’s pay arises from, ensuring he doesn’t get short-changed.
    • Storage of these data for each employee and ex-employees for up to 2 years.
  • Salary Deductions
    • There are only a few ways an employer is permitted to deduct an employee’s pay as allowed or required by the MOM.
    • A main part of which is to recover certain costs specifically incurred by the employee.
    • The constituent is that the employer is not allowed to deduct more than 50% of a total payable salary in a single pay period.
  • Monthly and Daily Salary Calculation
    • An employee may receive not only a monthly but also a daily salary, which is calculated based on the gross rate or basic rate.
    • This aspect pivots around days that employees work on public holidays and rest days, or deducting based on days they did not work in a month.
  • Variable wage components
    • This variable wage component comprises mainly of bonus incentives for the employee.
    • This includes the 13th month bonus also known as the Annual Wage Supplement (AWS), bonuses and variable payments.
    • All 3 varies and can be calculated based on the year’s business performance as a form of incentive for the employee.
  • Calculation of pay for incomplete month of work
    • Every employee’s uncompleted month of work is to be calculated using a formula that determines the monthly gross rate of pay multiplied by the number of days the employee worked that month.
  • Calculation of pay for working on a public holiday
    • The pay for a public holiday differs depending on whether it is work on a non-working public holiday, or a working day on a public holiday.
  • Overtime pay for monthly-rated employees
    • Employers have to calculate overtime pay under Part IV of the Employment Act. The core determinant being if the employee is a manual workman or a non-workman.
  • Calculation of pay for working on a rest day
    • Covered by the Employment Act, employers have to rightfully and accurately compensate employees for work done a rest day.

 

Surprised? Well, you shouldn’t be.

A HRM staffer has to manually calculate and accommodate to instances such as sick leaves, incomplete months, unpaid leaves, CPF, tax deductions and so on.

With Singapore’s National Service reservist involving all male employees, the payroll has to account for that and the relevant statutory contributions of every Singaporean.

It is no easy feat to simply calculate the payroll of one employee month to month, not to mention a large team of employees.

 

3. Compliance Issues

With the government every so often changing a policy and introducing a new term in the Employment Act, it is very easy for HRM personnel to miss a new policy update that has to do with payroll, given that this is only one of his many duties.

As such, not uncommon is the case that many small businesses’ payroll system is non-compliant to Singapore’s Ministry of Manpower standards. And if left undetected for long enough, internally there may be disputes or worse being the government steps in for non-compliance penalties and fines.

The issue of constantly being on the ball and adjusting for the latest governmental policies is a big burden for HRM teams.

Give 2 examples of the latest employment compliance update

  • The biggest employment compliance update of recent being the implementation of itemized payslips on April 2016, which requires them to be accompanied with every month’s salary. Failure upon which would result in a chargeable civil penalty.
  • Employers are also mandated to provide a written Key Employment Terms (KET) and store employment records of at least 2 years for employees.

4. Organizational Issues & Keeping Records

As is the regulation of the Employment Act, all businesses are required to keep records of all their employees’ salaries and deductions for up to 5 years.

By simply using manual paperwork measures to process payroll, storing employees’ records of up to 5 years is a cumbersome matter that will have:

  • Missing data
  • Errors in calculations
  • Inaccessibility and inefficiency to access specific documents when needed

There is little chance with how most businesses are currently managing their payroll processes that these records can be stored accurately and reliably, and most importantly accessibly.

5. Time tracking & Tracking of Absence

Employees have multiple privileges and reasons for absence throughout the year. Be it for National Service, maternity leave, incomplete months, and unpaid leaves.

This becomes a daunting concern as keeping track of all the employees’ whereabouts is a complicated matter and putting it into paper on the payroll is a bigger issue.

Keeping tabs on working hours also becomes difficult when employees have common discrepancies like forgetting to tap out for automatic readers, amongst other faults.

This accumulates to inaccurate salary calculations, sometimes overpaying, sometimes under.

Payboy’s fully integrated HRM suite provides a sleek user-interface for attendance tracking. Never reach for your calculator again as the software tags overtime and weekend rates to each employee’s base pay. It’s as easy as it sounds.

technology integration

6. Incompatible Software

With technology being so advanced in today’s world, it is truly a questionable surprise that many HR teams are still remarkably backward in managing their processes.

A significant number of businesses still use manual payroll management or outdated HRM software to handle such matters. The older software are mostly non-integrated and not compatible with each other.

For example, Twitter’s HR department ditching the old legacy human resource management systems’ transition into the new cloud-based HR systems:

Head of HR at Twitter, Renee Taormina saw the change as inevitable as it was getting impossible to keep track of all the manual data entry and international data from different unintegrated systems. She stated that the older software were just “not going to be an effective or scalable process”. Twitter has since deployed a cloud-based HRM system that fully integrates all their processes and have been many-fold more efficacious.

This means that a HR staff would not be able to combine the functions regarding payroll management, for example, leave management, payroll and other aspects would all be calculated on different software, resulting in extra effort on the staffer’s part to collate the data manually and also opening the viability for error.

7. Payroll Statutory Contributions

Singapore’s comprehensive arsenal of policies has enabled its success today. So, don’t be surprised that there are numerous statutory contributions mandated for every payslip.

  • Central Provident Fund (CPF) is a contribution that involves both employer and employee. The employer and HR team have to calculate and handle the monthly amount for contribution for each employee, which differs person to person.

 

 

cpf employee

  • Levies are another large factor that differs greatly for different employees. Foreign workers have a Foreign Worker Levy to be accounted for, different ethnic groups have certain Ethnic Levy in play, and Skill Development Levy applies to most employees.

 

These amongst other tax deductions are a substantial obstacle that human resource teams are obligated to calculate.

8. Timely Payroll Processing

Lastly, timely payroll processing is a responsibility that is commonly taken for granted, especially in larger businesses.

When it comes to remunerating employees, some SMEs have trouble punctually processing and releasing payslips. This is due to the fact that payroll management is a very intricate and complicated task that is often not prioritised until the ending hour.

As such, complications arise, especially with public holidays and crucial projects cropping up the payroll-handling schedule. This is an unwanted situation that creates many potential problems for businesses, legally and in terms of unhappy workers.

All in all, payroll management is an extremely complex process that HRM professionals have good reason to loathe. Being very taxing and yet disappointingly unfulfilling, it is no wonder that the most contemporary organisations are turning to integrated HRM SaaS that can seamlessly handle all their HR processes including payroll management.

Nonetheless with the markets and industries getting more rampant, it is timely that more businesses now find ways to streamline HRM processes and utilize the latest technology available to aid their HR teams to greater effectiveness and productivity.

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