Regularly auditing your payroll processing is a good practice to implement in your overall operational strategy. Firstly, it’s a compliance issue and it’s essential that your business is carrying out the correct and most accurate payroll processes – any weaknesses can leave your business liable to costs and payroll risks.
Reliable processes and regular checks mean that active employee information, their pay rates, wages, and general taxes will all be correct and ensures that they’re paid on time and accurately for good employee relationships.
Human errors can always occur so investing in payroll risk auditing and assessment should be part of your risk mitigation strategy.
It’s a useful idea to do a payroll walkthrough, where you go through the process of a new employee from their start at the company all the way through to a hypothetical leaving date and all of the payroll processes in between. This can give you a holistic idea of everything that needs to be done and keep your accountable.
Also, it’s worth asking some questions about the delivery of this payroll process:
- How often is your company processing its payroll?
- Who is doing this and how are they doing it?
- How and when are your payroll budgets approved?
- Who is controlling your payroll and the reporting?
- Who is monitoring the payroll and any activity?
Ensure that you know the answers to all these questions and have processes in place.
Having a named authority for risk detection and assessment in your company is good practice. Someone that has overall responsibility for compliance matters helps you to be able to flag up and assess risk when it occurs. Corrections and amendments can be easily made when mistakes are spotted, which can end up avoiding costly penalties for the company, reputational damage and souring employee relations.
Putting controls in place to limit exposure to payroll risk and having a designated authority that can manage the process is important and can prevent long-term damage to your company.
The biggest risk to a company from bad payroll practice is fraud. This can cause reputational and financial damage to a company. It’s of upmost importance that your financial reporting is accurate. Payroll fraud can occur in many different ways, it’s essentially a theft from your company’s payroll function e.g if an employee is accessing more funds than have been allocated.
Being alert to this kind of suspicious activity allows the threat of fraud to be minimized.
Of course, as mentioned, human error occurs and it’s realistic to plan for payroll mistakes when unintentional errors have occurred. Outdated records, misinformation, insufficient training are all examples of this but if left unchecked can lead to bigger issues.
Outsourced Payroll Solution
One of the best ways to ensure compliance and limited payroll risk is to regularly audit. A third-party payroll solution such as APS Global can easily and compliantly detect payroll issues and mistakes, ensure a company payroll is accurate and enable your company to mitigate payroll risks and confidently run your business.