Payroll is a part of the business’ operation process that needs to be done every month. For a small business, payroll might not be handled by the HR department but rather by a person in charge of finance. Because the employees of the small business are not as big as the corporation, small business owners tend to do it manually without realizing the common payroll mistakes that they might make.
We all know that payroll plays a significant role in staff retention and workforce morale. Employees are the most valuable assets for business owners, so they can’t make any mistakes in managing the payroll. If there is any mistake on payroll, not only that the employees’ morale will decrease, but business can get into trouble with the government and in extreme cases, they have to pay fines or penalties.
Here are some common payroll mistakes made by small business owners:
Miscalculation and Human Error
Miscalculation can be overpayment or underpayment. It might be hard for HR staff to stay accurate on employees’ payroll, especially when dealing with different worker classifications and work schedules. It doesn’t matter whether the business size is still a small business, miscalculation can still happen anyway.
Payroll is a complex process because it’s containing a lot of factors such as attendance, overtime, leave, benefit, and expense. This miscalculation can be prevented with the help of payroll software that will help small business to calculate employees’ payroll without miscalculation.
Employer need to keep updated with employees’ data such as age, nationality, date of commencement, immigration status, and bank account number. This might cause stress to the one who’s in charge of payroll and employee data because they need to check manually with the employee. Employees who once hold an Employment Pass but now get Permanent Residency status, their CPF deductions and contributions will change too. If done manually, human error might occur and can result in penalties.
Fail to Comply Government Regulations
In Singapore, apart from CPF contributions, businesses also obliged to make Skills Development Levy (SDL) for all employees. CPF Board will collect SDL contributions on behalf of the SkillsFuture Singapore Agency (SSG). Under the SDL Act, employers are required to contribute SDL for all employees up to the first $4,500 of each employee’s total monthly wages at a levy rate of 0.25% or a minimum of $2 (for total wages of $800 or less), whichever is higher. For complete information about SDL, you can go to this link.
Also, employers need to issue a customized payslip for each employee. This regulation has been in effect since 2016 under Employment Act. Failure to comply with this regulation can result in a penalty. In Singapore, there is some deadline on tax reporting. You can check the deadline for tax reporting on this link.
Messy Payroll Records
Another common payroll mistakes are that the employer thinks payroll records sound like no big deal, especially for small business. But what if there is a dispute regarding employees’ payment? Business need to show the proper records of employees’ payment if asked by the government regulators.
In Singapore, business need to submit their tax submission forms to the Inland Revenue Authority of Singapore (IRAS) annually before March 1. Business need to start changing their payroll records from paper-based to a more modern way. With the right payroll software, businesses can keep their employees’ payroll records digitally and the data will be stored safely on the cloud server. So when requested by government regulators, business can easily get the data.
Those are some of the common payroll mistakes that small business tend to make. If your business still manually calculates payroll each month, consider a software payroll that can help you with the payroll. HRMLabs can help you with this. Also, business can claim up funding from Productivity Solutions Grant (PSG)! Book your free demo with our team now.