What are the Challenges of Running Payroll Manually?



Running a payroll in an organization with irrespective of their size or business plays a crucial role. Processing the payroll manually for employees can be a tedious and complex task. Manually processing the payroll is an error-prone activity. There are huge chances for the occurrence of an issue of security, loss of data, no proper back-up and identification of errors etc. Below are the points mentioning the challenges in payroll processing:

Security & Safety : – It is crucial that payroll data is protected from any possible data leaks. Breaches of payroll confidentiality can have adverse effects on any business. Maintaining employee data in hard copies is not at all secure. Manual methods of payroll processing make the data getting into the wrong hands which results in alteration or loss of data.

Ineffective Time Records: – Usually the complications in tracking attendance and recording of time will not be accurate if the processing of payroll is done manually. Errors or improper interpretations during data entry can result in underpaying or overpaying an employee. An employee’s handwriting might be indecipherable, or a supervisor might mishear and write down their recording time wrong.

Higher Costs: – A manual payroll system means doing everything by hand, which in turn gives rise to non-productivity activity and also takes up a lot of research time, resources and money. It might seem like managing the payroll manually is less costly, but eventually, it leads to higher costs because it becomes a burden to the finance team to handle the data.

Taxation-Related Issues: – Manual Calculations are not easy and accurate for calculating taxes and penalties. This is because tax rules are dynamic and keep changing to calculate all earning heads and statutory applicable deductions (i.e. ESI, PF, and Income Tax etc.). To ensure that employee’s salaries are taxed correctly regular updates are required. Incorrect tax calculations can lead to penalties, inconvenience, and additional work.

These problems that arise from manual payroll processing could potentially lead to severe negative consequences for the organization. An computerized payroll system can manage time and efficiency easily compared to the manual payroll process.