The 9 Big Problems Your Business Might Face if You Ignore Payroll

by Zaara 27, Feb 2020

Employees are the most important of all the resources available to a company, and companies spend a lot of time finding, training, and deploying people to carry out essential tasks. The next most important task is to ensure that these employees are paid regularly, without any delays. Payroll is critical to maintaining employee morale and a company’s financial stability.

Payroll processing is not just complicated but also time-consuming. While there are options for payroll processing – in-house or outsourced, it is an essential task for every organization. An efficient payroll department is key to running a successful company and avoiding related penalties.

What Happens If You Ignore Payroll Processing?

If the payroll process breaks down, the results can be disastrous. Missed deadlines, disgruntled employees, financial penalties, and a bad reputation are what a company faces. The occasional payroll-related issues happen in every organization and get fixed.

With many issues to tackle, companies must look at ways to have a streamlined payroll process and look for constant improvement. Here is a look at some avoid payroll-related mistakes that might happen if you are not paying attention to it.

The 10 Big Problems Your Business Might Face If You Ignore Payroll

  1. Delay in salary payment: If you are a small business owner, you may have many tasks on hand, and therefore, the salaries of your employees might get delayed due to a lack of time. For big companies, inadequate staffing could result in the same problem. One option is to outsource payroll to a specialist firm.
  2. Penalties due to non-payment of taxes: This is one major issue companies must take very seriously. Taxes have to be deposited at specific times during a year, and if you miss them, the fines for late payment can be very high. Making checklists and automating tasks will help you meet such requirements quickly.
  3. Incorrect salary payment: If the information on the HR and payroll databases is not right, you could end up paying employees far less or more than they are owed. Payroll systems should have checks and balances in place to ensure that such errors don’t happen. And when they do, they must be addressed immediately. With checks in place, it is easy to go through a payslip and ensure that the right amount is being transferred to an employee.
  4. Incorrect employee classification: If your business employs different categories of employees like part-time, hourly wage workers, contractors, freelancers, and full-time employees, they must be entered into the right category. Make sure that these options exist in the tools you use to manage payroll and set it up to include the taxes and withholdings based on the employee's classification. This setting will help you avoid mistakes during processing.
  5. Hacking of confidential data: Since payroll processing includes a lot of sensitive and personal information, you should ensure that a team is in charge of securing the data. Ensure that your company’s networks are protected to prevent loss of information and take regular backup to ensure that you are able to recover the data if something goes wrong.
  6. Wrong overtime payments: One more oversight related issue is overtime payments. Specific categories of employees are entitled to overtime. In these cases, you must go through their contracts and understand what they are entitled to and make the provisions accordingly. Doing this every year when the deals are renewed will help in streamlining the payroll process.
  7. No sync between payroll & accounting: If you are planning to get the software to carry out payroll tasks, ensure that it is integrated with your accounting system. A significant reason to do so is that it impacts cash flow and how much is needed to pay employees.
  8. Payroll frauds: If you are not checking payroll regularly, chances are you will not be able to detect frauds committed by your employees or agencies in payroll. Regular payroll audit can immediately bring such fraud to your notice, and you address them immediately. Carry out regular checks for issues and train payroll administrators when needed. Verification helps in reducing payroll errors and fraud.
  9. Last-minute failures: At the start of each year, you should check when paydays fall on public holidays. You can then arrange for the transfers to be made a day early so that employees have their salaries. Bank and public holidays are usually not counted as working days, and an administrator must be aware of this factor.


There are reports of many businesses paying millions of dollars in penalties due to calculation errors because they didn’t pay enough attention to payroll.

Payroll processing does not have to be a burden to a company – with the right tools and professional staff to manage it; it can be very streamlined. If you don’t have enough time to pay attention to payroll, you can consider outsourcing it. Many companies specialize in payroll processing, and they are quite affordable.