Managing payroll is one of the most complex and important procedures that an organization has to follow. Even a small error could cost expensive damages hence you must be aware of problems occurring in payroll management. If you are managing payroll in-house and thinking that by increasing people you would be able to handle the process well. That’s not possible. The best option would be to look for payroll management services in India. Let’s first see the problems faced by HR in payroll management and how to tackle these problems. What are the common problems that HR faces in payroll management and how to tackle these problems?

Here are the 5 common problems faced by HR in payroll management.

1. Management of timesheets

Managing employee's daily presence is a difficult task for the HR department, especially when dealing with employees working in different locations, all around the city, district, or country. Any error or misinterpretations during data entry can result in underpaying or overpaying an employee.

It’s also difficult to track who is not available due to leave which hampers effective planning and optimum productivity. In addition to that, if some employees work for additional hours or on weekends or on official holidays, it becomes impossible to process the timesheets with 100% accuracy.

This type of problem occurring in payroll management can lead to complicated legal issues if an employee feels they were underpaid.

Solution to this problem:

The best option to streamline all of these activities is to outsource payroll to a company that has access to document management technology, which can be customized according to the client’s specific conditions. Thus, you will not have to support the high costs of implementation and maintenance of your own internal IT solution. Instead of renting it out through the outsourcing company will deal with the setup and upgrades.

Employees will create online requests for any kind of absences that will automatically be added to an integrated approval workflow system. This system will notify the supervisors, payroll, or HR departments for approving certain requests and update the approval status to each user.

This system will provide a consistent timesheet report at the end of every month that is properly documented according to the law and can be imported in the payroll module. Thus all aspects of timesheet verification and validation can be done by each employee or manager and hence timesheet will be 100% accurate.

The best part is this system is available online from any mobile, tablet, or desktop device.

2. Misclassification of Employees

Treating everyone who works as an employee makes payroll handling difficult. You can’t treat independent contractors, temporary employees, or freelancers as employees when it comes to payroll.

Misclassification of employees can result in hefty fines and other administrative headaches.

Solution to this problem:

When you hire an employee, categorize them as per the law so it will be easy for you to know who to pay what, who are eligible for payroll benefits, and for which employees to withhold taxes.

3. Managing personal files

Managing documents like labor agreements, addendums, personal deduction declarations, and employee’s healthcare insurance or personal statements in an efficient and easy to access manner are challenging. Payroll processing is based on all these documents

Solution to this problem:

The best option is to outsource the HR services as they manage the personal files with specialized software. This software has all your human resources and payroll functions integrated. It stores the scanned copy online enabling the HR consultant to keep a virtual employee file that includes all employee's documents, plus an interactive checklist for them.

Thus the consultant has permanent access to the audit files. He can set up automatic e-mail or SMS alerts notifying the employees about their incomplete file or expiring documents at an appropriate time chosen by the client.

4. Processing payroll on time

With the challenges of the incorrect timesheet, improper record of documents, and non-categorization of employees, processing payroll on time is one of the biggest challenges in payroll management. Accurate and on-time payment is the need for payroll management but when employees don’t receive payment on time they become unhappy and may leave the organization.

If an organization is small and managing payroll in-house it is one of the most common challenges in payroll processing.

Solution to this problem:

Instead of hiring expert resources looking for best payroll management services in India and outsourcing the payroll is the best payroll solution for small businesses as well as for payroll activities of an organization.

5. Reconciling the payment

Reconciling the payment data between the employer and the employees is one of the biggest challenges in payroll. Employers usually claim that it is more convenient for them to send the payments through a third party such as a payroll processor. However, the reality is that many companies cannot afford to pay their employees via payroll processors.

Solution to this problem:

The best option is to outsource the payroll activities as they use the payroll software in preparing a pay chart and reconciling your payroll reports.

How do you avoid payroll related errors?

Payroll related errors are the critical aspect of your business and can have an adverse effect on the bottom line of your business. Thus avoiding or preventing payroll-related errors will make payroll faster, easier and more accurate.

Incorporate these elements into your payroll process that will help in catching errors before they happen and save time for the company.

1. Invest in the right tools

The best way to keep payroll mistakes from disrupting an organization is to invest in payroll management software. This software has many advantages for the payroll system.

    • This software will sync with the HR system and automate the most time-consuming tasks of payroll management and give you overall control.
    • This software makes it easy to run reports, file taxes, distribute pay stubs and more
    • This software will allow you to determine whether a job is done properly or not.
    • This software reduces the number of checks that need to be printed out for payroll and makes them automatically by the software. Thus it keeps the cost down and ensures that employees get paid on time.
    • This software increase your profitability by having a top to bottom accuracy of the pay and tracking of your employee's earnings
    • This software provides the ability to track everything that goes on in the office. It tracks the employee hour’s working and the individual paychecks of each employee. It will reduce the amount of paper used, allowing you to print more checks with less time and even reduces your insurance expenses.

2. Outsourcing

Look for the best payroll management services in India and outsource the payroll tasks. By outsourcing the payroll activities to a payroll management firm you can avoid the payroll errors as the experts will handle the complete payroll that is well aware of the payroll process and there will be no risk of non-compliances.

3. Know your stuff

Many payroll errors occur due to payroll admins having incomplete or incorrect information. Laws or policies keep on changing continuously and vary from one state to another. It is crucial for your payroll team to keep them up to date with the current rules and regulations so they can implement it correctly in payroll.

4. Run reports prior to payroll

If you are using payroll management software then before processing payroll generates a few key reports to avoid mistakes. Run the following reports to make sure all your check amounts are correct:

    • Deductions summary: As the name indicates, this report will provide a summary of all deductions on every employee, so you can check the amounts.
    • Payroll register: This report will allow seeing all payroll information in a summary format.
    • Cash Requirement: This report shows the cash required to process payroll categorizing into wages, taxes, deductions, etc.

5. Keep a checklist

Even though payroll software is used but having a checklist ensures that every step has been gone through and checked.

You also keep a list of all new hires, pay changes, deduction changes and other updates in one central location, organized by pay period. Then when you are working on the payroll for that specific period, you can review each list and ensure that all the changes made into your system are accurate.


Having awareness of the problems occurring in payroll management is a great first step to avoid them in your organization to maintain a smooth payroll process.

Later prepare a strategy for avoiding the payroll errors so your organization doesn’t pay it for later.

To come out from most of the problems in payroll management, the best option is to look for an outsourcing partner and outsource the payroll task so it will relieve you from complex accounting burden.

If you want to invest in perfecting the payroll process then contact paysquare at Pune. Paysquare is the leader in payroll outsourcing services in India and can handle any payroll needs you may have.

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