What are the difficulties the SMEs are facing in the payroll process?
While we have already brushed up slightly on the inconveniences faced by SMEs in managing payroll, we shall delve a little deeper to figure out to what extent these factors can disrupt the operation and in what way:
1.Manually Processing Payroll – In a modern age, where everything has been digitalized, the term manual payroll processing is as cumbersome in real-life as it sounds. Manual Payroll Process is the method whereby the companies do not resort to hiring any platforms that may ask for a steep price for the services. Instead, these companies manage the payroll internally. While it may sound like the most economical thing to do, it is also quite reckless. There is so much that could go wrong during the process, like duplication of records that may lead to paying the same worker twice or during the same payroll cycle for the company. Since it is being done manually, there is scope for a lot of errors in calculations which can prove to be counter-productive for the company, costing them a lot more in the long run. Inefficiency is the keyword here and that cannot be overlooked. Therefore, it is wise to always hire a payroll provider.
2.Time-consuming – The businesses should either focus on the strategic aspect of the business or on the operational and executive sectors. If a business is spending considerable time on juggling and finding solutions to problems like payroll management, it is considered to be inefficient and unprofessional. Apart from the humane errors, there are other calculations that must be taken into account along with their contingencies, like wage deductions, levies, etc. To sum it all up, it is a long-drawn process that a fully operational company shouldn’t have to meddle in. Instead, they should have payroll outsourcing providers because they have the expertise to do so.
3.Fraudulence in Payroll – The term SMEs connote business thriving or striving for a comfortable economic standing without the capital or the command that large enterprises have. Needless to say, any fraudulent activities can prove to be much more critical in their case than in the case of a corporate giant. In fact, a study has been conducted by The Association of Certified Fraud Examiners (ACFE) that goes on to prove that in around 27% of all businesses, fraudulent activities have been observed.
Now the tricky part is that statistics prove that smaller companies (with employees not over the 100 mark), fraud happens twice as often, when compared to business giants. In case of smaller companies, the fraud percentage is 14.2% while in the case of larger companies; the fraud percentage has been recorded as 7.6%. Fraud has been caused in many ways, namely, falsely claiming insurance by faking injuries, purposefully ensuring there is room for employees who are included in the payroll but do not have a record of working in the organization. These are called ghost employees.
4.Ever-changing Tax Laws and Regulations – The Government is the regulatory body when it comes to tax laws and thereby, directly or indirectly, they do regulate payroll regulations and laws. The owners of businesses have to ensure that their foundation is dynamic enough to ensure that all the rules and regulations of the state regulatory body or the federal body, is abided by and the necessary changes have been brought about. They need to stay updated to avoid any unnecessary hassle that they might otherwise have to face when it comes to payroll management.
These are only a few of the many issues that SMEs have to face when it comes to successful management of payroll. While these may cover the issues in a very generic manner, the main issues or the fault-lines lie within the above pointers. However, there are other issues that are much more discreet and vary from one company to another. However, these are problems that can be solved if the companies hire a reputed and well-aware payroll outsourcing service provider in India.
Things we need to consider when choosing a payroll model (Challenges SMEs will have to face)
Like all the decisions we make in life are based on some assumptions and considerations, choosing the ideal payroll model for your company requires you to do solid groundwork, research and take certain things into consideration. Below, we have highlighted some of the most important factors that a company must consider when opting for a payroll provider:
1. Accuracy – The primary concern that most companies have when it comes to payroll management is accuracy. The reason that people hire a third party to provide them payroll management services is to ensure efficiency and accuracy. So, if you are paying payroll outsourcing provider to take care of that for you, you need to ensure that they have the basic qualities to ensure that accuracy will not be an issue, because otherwise, you are wasting both time and money.
2.Changes in management and strategies – Companies can change their objectives and strategies every year and for good reason. Every year, there are changes taking place in the economic and administrative sector that drives these changes to be made internally. Things like mergers, acquisition of a brand-new IT system for the company, etc. Are some of the changes that are more common? You need to ensure that the payroll providers are ready to take on these changes and have the updated payroll solutions at hand.
3.Software – Let’s say you just signed a contract with a reputed third-party payroll outsourcing provider that has agreed to provide your company with payroll outsourcing services. Now, a well-aware and well-informed person will ensure that the contract encompasses a clause that clearly states what steps the third-party would take when newer and more efficient software updates turn their mode of equipment, obsolete. There should be some agreement that ensures that the third-party payroll providers in India will be able to keep up-to-date with the software or technological updates to maintain the rate of efficiency.
4.Legislative changes – The Government can change the legislation and your company must be well-equipped with a strong payroll policy. It must be sturdy and flexible at the same time. It might have been easier to keep the services within the organization at first, but with legislative changes, it might not be the best option to keep the services in-house. Hiring a third-party payroll provider is always a good idea.
With the current economic scenario at play, these are some of the major hurdles that SMEs will have to face with regards to payroll management and the challenges that come along with it.
Effect of COVID-19 in payroll
COVID-19 has affected the economy adversely and in almost all sectors at that. Unemployment rates have shot up and costs have started to stack up without creating an economical balance by increasing assets and cash inflow. Drechsel and Kalemli-Ozcan have successfully calculated the liquidity gap that exists in USA. Unlike the study that was conducted in Ireland, this study, requires that the payroll costs be considered as a proxy cost. As a result, it was observed that the payroll costs for firms or companies with fewer than 100 employees amounted to a whopping USD 449 billion and for companies with fewer than 500 employees, the same cost escalated to USD 678 billion.
6 most important things to do when switching payroll services/companies
There are a few key things that have to be remembered and acted upon when changing or switching payroll outsourcing providers because otherwise, you will end up facing the same consequences. These are the 6 most important things you need to do:
1. Picking the right time – Let no one tell you any different; picking the right and the most convenient time for your company to make the switch between payroll service providers India is the most important thing to get right. For example, if you want to minimize the hassle, switching at the end of the calendar year is advised. Then the past payroll data doesn’t have to be scrutinized. However, if you change mid-year, you might have to do that.
2. Determine the services you need – If you are a switching payroll outsourcing service provider, that means that the former third-party wasn’t able to fully meet your requirements. It is important to determine your needs and then pick a payroll outsourcing provider.
3. Do your research – Before you go and sign a new contract with your new Payroll Outsourcing Services in India, you need to make sure you do enough market research about the company.
Top Reasons You Should Outsource Payroll
If you ask someone who has had enough experience Payroll Outsourcing Services in India, they will tell you to always outsource payroll and for good reason. Here are some of the ways you stand to benefit if your outsource payroll:
1. Saving time – The main objective of the business is to grow not to deal with payroll issues. Payroll management is a time-consuming work and that means if it is an in-house provided service, it will take away from the bigger responsibilities and targets at hand. This will result in loss of valuable time and effort and eventually, bring down the overall efficiency. Hence, people opt for Payroll Outsourcing Services in India.
2. Maintaining hefty records – Once the overall calculations have been made, the checks need to be singed, verified and deposited. Some of the employees might have the direct deposit option available, in which case the money will need to be verified digitally. Pay stubs will have to be maintained and registered for tax purposes.
3. Errors – Ensuring that the employees get their payment on time will help keep them happy. Otherwise, there can be a lot of unwanted tension in the labour force which is ultimately bad for the work environment and productivity. Also, the employers may be fined and a heavy penalty may be levied in case of miscalculated tax obligations which can bring upon a new storm of troubles.
4. Higher security – Embezzlement and tampering of data is not uncommon when the payroll management is done in-house. However, Payroll Outsourcing Services in India will ensure that there is no foul play.These are a few of the many reasons why any smooth functioning company or organization will choose Payroll Outsourcing Services in India - minimize headache and maximize efficiency. There are plenty of efficient and competent third-party companies that are providing excellent Payroll Processing Services in India. If you want to maximize efficiency for your company, it is time to start going through the options.