Error Prevention in Payroll

Human error is one of the 3 major risks in payroll management.   Some fairly simple processes can help to reduce the risk.   And put them in writing, for easy referral.

Setting deadlines that are both realistic and practical is one of the first formal processes that should be in place. 

• It is crucial to have open discussions with all the role players when setting deadlines, so that everybody understands what the implications of not meeting the deadlines are, as well as being committed to the process. 
• A key success factor is that the contributors are aware that they need to inform the payroll department timeously if the can't hit a deadline, so that alternative arrangements can be made.

It is amazing how many people think that its OK if they miss a deadline once, not being aware that if there are 20 deadline contributors who do that once each year, well, you can do the math....

Standard formats both reduce risk, and make processing easier.   Every form should have the critical information in the same place, eg Employee Number, Name and document purpose, in order for the payroll department to easily see who and what needs to be processed.

Controls that confirm that all the data is processed correctly are also necessary.   Many companies moved from batch processing to "live" online models, but didn't carry over the controls that made batch processing low risk.   Input data should be checked by somebody other than the data capturer, too.

Back ups in a payroll department should be taken at regular intervals.   At least daily, and more often when there is a heavy capturing load.   In larger organisations, backups are often managed by the IT department, and done at regular times, but it makes sense to make additional ones in the payroll department, during salaries/wages processing.   And do check that the backups are recoverable.   While this all seems obvious, we regularly have to assist clients who are not able to recover their most recent backup, for various reasons.

Balancing monthly, quarterly, year to date, in a structured way, can also help prevent year end pressure.   One of the challenges of keeping a payroll constantly in balance goes back to the first point around deadlines.  A balanced payroll that needs to have a last minute change can create problems, because processes need to be redone, and this is when errors creep in.   In order to assist with this, we have placed a payroll shield in our software, under the control of the Payroll Administrator (PA), which allows continued processing, particularly useful in an integrated Payroll and HR system, with no impact on the completed payroll before EFTs, unless the PA unshields.   

Sign off by line management, supervisors and the Payroll Administrator/Financial Manager are also requirements, as the infrastructure of regular process goes a long way to adding a level of care and focus to the work being done.   Its just human nature to be more careful when you know you are going to be checked.

It would be interesting to know what other processes you have put in place to minimise errors.

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