The answer to that question is simple: the further the data is from the source – that is, the employee and their immediate manager – and the more manual processes there are in the payroll process, the more errors occur.
Paying salaries is basically about getting the correct pay to employees at the right time – preferably as simply and efficiently for the company as possible.
In my book, there's no doubt that you get the most efficient payroll process of the highest possible quality by automating as many of the processes as possible. That way, employees are spared the hassle and dissatisfaction of incorrect payments, and companies avoid annoying mistakes that increase their payroll costs unnecessarily and waste administrative payroll money on good old-fashioned “hassle”.
One of the prerequisites for this is that up-to-date, correct input to the payroll is available. I'd like to highlight five areas that often lead to errors in the pay and can mean lost income for the employee or higher costs for the company:
1 Incorrect master data
Employees' master data must always be correct and up to date. This applies to basic information such as name, address, account number, next of kin, if any, and so on.
All too often, for example, errors occur in paying salaries because a wrong account number has been entered, and afterwards a lot of resources have to be spent getting the money back and then paid into the right account. With the resulting hassle for the company and frustration for the employee, whose money is delayed.
It's therefore always an advantage for the data to be updated as close to the source as possible and, ideally, to let employees update and change their master data themselves directly in the system.
2 Incomplete holiday registration
Holiday pay makes up a large part of the total payroll, which makes it really important that it is registered on an ongoing basis and that you keep track of how much holiday employees have taken – and so how much of the holiday pay the company still owes.
When an employee leaves, the company must make sure to pay holiday pay for holiday not taken. It can cost the company a lot of money if the holiday the employee has taken hasn't been kept correctly up to date, so that too much holiday pay is settled for the employee.
So it's a big advantage if employees can register and update their holiday themselves directly in the payroll system, so the information is kept up to date and ends up in the right place.
3 Missing absence registration
Sickness is never convenient – neither for the employee who is ill, nor for the employer who needs the labour. That's why it's important that it's quick and simple for employees to report sick and quick and simple for the company to follow up.
When it's made easy for everyone, the data is correct and the employer can follow up – to the benefit of both employee and employer. It's also important for the employer to be aware of situations involving long-term absence. Here it's about giving the employee the best possible follow-up and chance of returning to the workplace, but also about making sure the company claims reimbursement for the absence – it can be a lot of money the company can get back.
Employees should therefore have an easy, simple way of registering absence, and it should be easy for the company to follow up on.
4 Errors in hours worked
The number of hours the pay is based on is of course a prerequisite for correct pay. For employees with a fixed number of hours each month there often aren't big challenges, but for employees with varying hours it's crucial to get the right number of hours into the payroll system and approved before payroll is run. It's always a hassle if, after the pay run, you have to make a payment on account because not all the hours were included.
In my experience, this is best done by letting employees register their hours themselves directly in the system, followed by a clear and simple approval flow.
5 Registering mileage too late
It's also important that employees report their own driving for the employer on an ongoing basis, where they can get a mileage allowance. It should be done right after the journey – not, as is unfortunately sometimes the case, saved up for several months or half a year.
So it's ideal for employees to have access to the system to request mileage – which then goes straight to payment with the pay once it has been approved.
And in general, you could say…
…that it pays to make it as simple as possible to contribute to correct salary payments with data straight from the source – that is, the employees – for example when it comes to master data, holiday, absence, hours and mileage. At the same time, it's of course important that both managers and payroll administrators have simple access to this data and built-in approval flows, and the right checks and follow-up must be defined.
