Payroll software vs manual calculation
Businesses that opt to manually process their payroll are not only tying up valuable internal resources on what is a very demanding undertaking, they are also putting themselves at risk of significant consequence when errors inevitably creep into those complex calculations.
While all businesses will naturally be motivated to minimise costs where possible, the inherent dangers of manual payroll calculation mean this pathway often proves a false economy. Cloud payroll software provides a professional, seamless and cost-effective solution, that removes all risk and delivers peace of mind to ever-busier business owners.
There are many methods of performing payroll calculation these days, from software spreadsheets, hard copy PAYE books, online PAYE calculators and various other tools. These solutions can potentially produce accurate payroll data and will understandably prove enticing on the surface. However, such methods come with many risks if being employed as a firm’s permanent payroll solution.
When reviewing PAYE and payroll calculators, it soon becomes apparent how many parameters users need to be aware of and well versed in. There are never-ending links to “help” resources and additional tools as well as long lists outlining what each calculator cannot be used for. Navigating those potential minefields might prove worthwhile for individuals seeking to process their personal PAYE and payroll calculations. But few businesses will have the staffing time and patience to both attempt to process via that means for their entire payroll as well as then inevitably waiting endlessly on hold when calling the IRD with queries or to correct mistakes.
Payroll filings and record keeping
One of the main reasons that manual calculation is inferior to cloud payroll software, is that most manual options do not provide the depth of record keeping required for professional operations. Even when those manual solutions do offer such payroll filing capabilities, they are often not stored at a sufficiently secure level – a classic example being the way businesses tend to loosely treat PAYE books. A huge advantage of SmartPayroll and cloud payroll in general, is that records are kept automatically, and are stored securely off-site.
The significance of this automated and secure function cannot be overstated. Not only is the need to store years of payroll filings a legal requirement for companies, but the loss of such information would undoubtedly cause significant business disruption.
Payroll deductions and unusual Pays
Another significant risk of manual PAYE and payroll calculators is that necessary additional deductions (such as ACC levies and child support payments etc), can easily be overlooked in the process. Even if such payroll deductions are noted, a manual calculation will not always accurately assess the required lump sum payments or unusual pay cycles.
Addressing such omissions or errors can prove an onerous task. Referencing the Wages Protection Act 1983, Employment New Zealand states: “Deductions may only be made from an employee’s pay if they are required by law, agreed to by the employee or are overpayments in some circumstances.”
The Act describes a need to both consult with employees in such situations as well as that employees need to agree to exceptional deductions in writing – even having the right to withdraw their written consent if this was initially given as a clause of their employment agreement.
It is important to be clear on all of these facets of payroll, as the consequences can be serious if deductions are incorrectly calculated or not properly recorded. A dedicated cloud payroll along with the payroll support that you receive from a provider like SmartPayroll helps to ensure that any deduction a business needs to make is accounted for correctly, at the appropriate time and at the correct rates.
Keeping up to date with changes
Businesses using manual PAYE and payroll calculation tools consequently have to assume full responsibility for keeping abreast of changes in relevant payroll legislation and ensuring that consequent alterations to rates and other parameters are correctly adopted in their payrolls.
Examples of such impacts include changes to minimum wages when additional hours are worked, tax rates, child support, ACC levies and payroll filing among many others. Failure to correctly adhere to such requirements can land business owners in serious legal trouble and/or facing severe reputational damage – especially if employees end up being underpaid.
The media has been awash with prime examples of such mishaps in recent years, including repeated reports of payroll blunders related to the onerous Holidays Act.
These include very publicly-reported instances of both Police and Ministry of Business, Innovation and Employment staff being underpaid. These revelations have prompted speculation that such payroll errors might be rife both within Government agencies but also throughout the private business sector.
The Council of Trade Unions has consequently called on the Government to beef up its labour inspectorate to ensure shortchanged workers are reimbursed, with Labour Party MP David Clark adding: “They need to make sure the law is enforced. They need to make sure that working people are being paid correctly.”
The business community has even called for the Holidays Act to be scrapped and rewritten, given its complicated and time-consuming prescription for calculating annual leave, public holidays, sick days and bereavement leave. David Jenkins from the Payroll Practitioners Association was quoted as saying: “The only way to be compliant with the Act is to constantly watch, monitor and change settings in your payroll system.”
Business owners today simply do not have the time and resource to waste striving to address such issues in order to complete manual PAYE and payroll calculations. Those companies who blindly continue down the manual pathway are playing Russian roulette with the potential to incur huge trading disruptions and irrevocable reputational damage.
Manual payroll and PAYE calculators not only come with an inherent volume of business risk, but they simply take a lot more time.
Dedicated cloud payroll software requires users to enter only a minimum amount of detail for each pay run as well as the payroll software then completing the actual payments to employees, sending of payslips and actioning the correct filings.
Cloud payroll software can process all of these functions in just minutes for normal pay runs. Manually, this will take a LOT longer and expose the business to significant risks of getting it wrong.
SmartPayroll’s cloud payroll is simply the safer and easier choice for prudent business owners seeking to run a professional operation and access to on-demand payroll support from experts by phone or email can help ease any payroll worries.