The Top 5 Payroll Errors to Avoid
TABLE OF CONTENTS
Payroll is what keeps your business running. Keeping everyone paid accurately and on time is a crucial process that no one notices – until it does go wrong.
When a payroll error occurs, it can disrupt operations until it is resolved. It affects employee morale and exposes the company to legal penalties. Thus, as much as is possible, such mistakes need to be avoided.
Here are five of the most common and avoidable payroll errors.
1. Paying Employees Late
According to the Employment Act 1955, employers are required to pay monthly salaries no later than the seventh day of the following month. Most companies have pay day on the last day of the month.
Despite this, missing pay day can result in HR having to field questions from dissatisfied employees, since many employees plan their finances around their scheduled pay.
2. Overpayment or Underpayment of Salary
Paying the wrong amount of salary can result in an unending headache for HR. Correcting the situation will entail tracking down the amount that was over- or underpaid, notifying the employee concerned, and acting accordingly. Either way, it will be a messy situation for both employer and employee.
This is an especially important consideration when it comes to calculating overtime pay. The overtime calculation formula is provided for in the Employment Act 1955, but employers still make mistakes, especially if overtime pay is calculated manually. Such errors can result in employee dissatisfaction at best, or an incoming legal suit if it happens repeatedly.
3. Miscalculating Statutory Deductions, e.g. EPF, SOCSO, PCB Etc
Generally, there are set formulas for calculating the various statutory deductions, which payroll processors already implement. However, calculating the various statutory deductions can become very complex, particularly for multiple employees.
Another common error is only including salary in the EPF calculation. In general, most types of employee remuneration are subject to EPF contribution, such as allowances, commission, as well as bonus payments.
4. Missing Deadlines for Statutory Deductions
Employers are responsible for paying their statutory contribution to EPF, SOCSO etc before the stipulated deadline (usually the 15th day of the month). If they miss this deadline, they will be liable for a penalty.
5. Keeping Incomplete or Disorganized Payroll Records
Having messy payroll records can lead to errors that take weeks or months to uncover. This is especially common if the business relies on paper records or even Excel sheets. Such unstructured data makes it hard to do any meaningful analysis and make proper, informed workforce decisions.
What’s more, the business may even be penalized for this. Malaysian tax authorities require businesses to keep at least seven years of tax records, whether in digital or paper form. Since payroll data includes employee tax deductions, this falls under the records retention rule.
Eliminate Payroll Errors with BrioHR
When working with something as crucial as payroll, you need fast, reliable software to get the job done.
BrioHR’s LHDN-approved payroll software automates payroll, eliminating human error and saving time calculating complex deductions. Data from expense claims and timesheets can also be transferred over, ensuring your employees are always paid correctly and on time.
With 9 powerful modules, BrioHR’s software covers the entire employee journey from recruitment to onboarding, payroll and claims, to performance and analytics, and more.
This enables business owners and HR teams to truly focus on what matters most – people.
Visit briohr.com and get a free demo now.
Payroll is what keeps your business running. Keeping everyone paid accurately and on time is a crucial process that no one notices – until it does go wrong.
When a payroll error occurs, it can disrupt operations until it is resolved. It affects employee morale and exposes the company to legal penalties. Thus, as much as is possible, such mistakes need to be avoided.
Here are five of the most common and avoidable payroll errors.
1. Paying Employees Late
According to the Employment Act 1955, employers are required to pay monthly salaries no later than the seventh day of the following month. Most companies have pay day on the last day of the month.
Despite this, missing pay day can result in HR having to field questions from dissatisfied employees, since many employees plan their finances around their scheduled pay.
2. Overpayment or Underpayment of Salary
Paying the wrong amount of salary can result in an unending headache for HR. Correcting the situation will entail tracking down the amount that was over- or underpaid, notifying the employee concerned, and acting accordingly. Either way, it will be a messy situation for both employer and employee.
This is an especially important consideration when it comes to calculating overtime pay. The overtime calculation formula is provided for in the Employment Act 1955, but employers still make mistakes, especially if overtime pay is calculated manually. Such errors can result in employee dissatisfaction at best, or an incoming legal suit if it happens repeatedly.
3. Miscalculating Statutory Deductions, e.g. EPF, SOCSO, PCB Etc
Generally, there are set formulas for calculating the various statutory deductions, which payroll processors already implement. However, calculating the various statutory deductions can become very complex, particularly for multiple employees.
Another common error is only including salary in the EPF calculation. In general, most types of employee remuneration are subject to EPF contribution, such as allowances, commission, as well as bonus payments.
4. Missing Deadlines for Statutory Deductions
Employers are responsible for paying their statutory contribution to EPF, SOCSO etc before the stipulated deadline (usually the 15th day of the month). If they miss this deadline, they will be liable for a penalty.
5. Keeping Incomplete or Disorganized Payroll Records
Having messy payroll records can lead to errors that take weeks or months to uncover. This is especially common if the business relies on paper records or even Excel sheets. Such unstructured data makes it hard to do any meaningful analysis and make proper, informed workforce decisions.
What’s more, the business may even be penalized for this. Malaysian tax authorities require businesses to keep at least seven years of tax records, whether in digital or paper form. Since payroll data includes employee tax deductions, this falls under the records retention rule.
Eliminate Payroll Errors with BrioHR
When working with something as crucial as payroll, you need fast, reliable software to get the job done.
BrioHR’s LHDN-approved payroll software automates payroll, eliminating human error and saving time calculating complex deductions. Data from expense claims and timesheets can also be transferred over, ensuring your employees are always paid correctly and on time.
With 9 powerful modules, BrioHR’s software covers the entire employee journey from recruitment to onboarding, payroll and claims, to performance and analytics, and more.
This enables business owners and HR teams to truly focus on what matters most – people.
Visit briohr.com and get a free demo now.
