Payroll leakage relates to everything leading loss of income or unexpected costs in the field of labor. The cause of this may be different factors, such as badly organized personnel management systems, inefficient business processes, and inadequate accounting policies in relation to reality.
From our experience in this field, we came to know the general tendency. For companies slow in adoption of new personnel management technology, payroll leak is greater. Companies actively utilizing technology and process automation are in a much better position to minimize loss from payroll leakage.
How can failure to employ technology can lead to payroll leakage?Let us name a few examples which occur most often.
- Human error. Simple table editors, such as Microsoft Excel are still being widely used to manage the payroll. As a person operates such software, one inputs data and checks it manually. This process requires a lot of time, and does not exclude human error. It is difficult to uncover such errors without some very specific software.
- Outdated software. In order to minimize business losses it is important to continuously analyze and plan the employee payroll. Lots of usual yet outdated pieces of software cannot associate a large number of data units and create forecasts in form of diagrams. This process is vital for making decisions to plan the payroll.
- Timekeeping, accounting, and attendance monitoring errors. For example, as in when an employee keeps track of one’s overtime. Whether in error, or intentionally, responsible employees may add additional hours when working overtime, which then leads to increased expenditure.
- Non-compliance of software with the requirements of law. International companies must work in accordance with their country of operation. Non-compliance may lead to considerable financial loss as fines, employee compensation, legal expenses and attorney fees.
- Absence of instrumentation for accounting for foreign exchange movement. When executing payment of salary in different currencies, there is a possibility for unplanned loss and payment errors.