3 Sins You're Making with a Manual Payroll System That's Losing Your Business Money

Author Image Written by Garth Belic

Despite living in a digital age, thousands of Australian businesses are still using paper timesheets as part of a manual payroll system.

In a study released by the Australian Federal Police, employee theft accounts for $1.5 billion a year for businesses. The culprit? Manual payroll systems.

These businesses are potentially bleeding tens of thousands of dollars due to time theft.

Besides this, clerical errors and a lack of accountability in employee attendance are contributing factors that are often unknown to employers until they've been made aware of this.

However, many savvy Australian business owners are starting to adopt cloud payroll and attendance software that not only mitigates any of the risk factors of paper timesheets but also improves the productivity of the entire business' payroll process.

A recent study found that on average, employees steal up to 4.5 hours per week from their employers in Australia - the equivalent of 234 hours per year per employee.

For example, if you pay your employee $20 per hour, they're potentially stealing $4,680 from you for each employee you have by not addressing wage theft practices that are not picked up because of a manual payroll system.

Wage theft comes in various forms but most commonly involve schemes such as:

  • Buddy punching of timesheets
  • Early starts
  • Late finishes
  • Completing personal activities during the shift
  • Longer than allocated breaks
  • Unauthorised overtime
  • Rounding up of start and finishing times

One of the most significant contributing factors with this is the use of manual timesheets usually on paper or in a poorly constructed timesheet where there's poor accountability.

Additionally, a lack of engagement from the workforce is a significant reason where employees feel they are a cog in the machine rather than a valuable contributor to the workplace.

While most employers have grounds to terminate employees for wage theft as it's considered in the same category of theft as stealing workplace items, a discussion with the employee is usually a better avenue while not having a negative impact on the business.

By identifying the cultural issues, there can be processes and adjustments made to help improve workplace culture and engagement to enhance workforce integrity.

A better solution would be to implement a centralised cloud payroll and software system instead of a manual payroll system. Adopting this type of technology proves to offer the best outcomes for businesses in keeping employees honest and mitigates wage theft practices.

Using solutions such as no-touch facial recognition technology and a live attendance system will be able to eliminate bad habits of employees and alert employers in realtime to address any shortcomings.

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Unlike cloud payroll and rostering software, there's usually only one copy of a timesheet per employee in a manual payroll system and can be susceptible to being misplaced, damaged, lousy handwriting or easily changed without authorisation by erasing or writing over existing times.

To compound this, businesses in Australia are required to maintain records for a minimum of five years.

Most employers are guilty of not keeping these records on hand when they have a manual payroll system and leave their businesses vulnerable to legal action with many lawyers suing just before the end of the five-year record-keeping requirement to maximise the chances of winning the case.

By implementing a cloud payroll system, you can rest assure that your timesheet records are backed up and kept in a secure cloud server that is free from being tampered or misplaced.

Cloud payroll systems also afford the added benefit of automating record-keeping, which proves to be a significant time-saving measure that improves productivity and efficiency in the payroll department.

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On average, businesses using a manual payroll system have a 4% error rate that is usually associated with poor handwriting or inaccurate data entry - an issue that can be easily circumvented with a cloud rostering and payroll solution.

For example, incorrectly interpreting a poorly written number "8" as "9" might result in additional pay for an employee if not checked properly.

Again, it's argued that not only are the errors costly if the data is entered incorrectly, but can waste a severe amount of time trying to double-check work and to interpret poor handwriting on timesheets every week if you're running a manual payroll system. 

Introducing a cloud payroll and attendance software can eliminate all vectors of risk that are associated with maintaining and using paper timesheets. Using these solutions means that employers can track employee attendance against rosters with accuracy.

Payroll approval processes will be significantly reduced as little time is spent on reviewing poor handwriting, and more time can be focused on addressing any attendance issues if employee attendance is not aligning with rostered shift times.

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As profit margins grow tighter and competition increases, the room for error becomes smaller for business owners.

While it may not be possible always to increase sales, finding ways to reduce costs such as mitigating wage theft, avoiding potential legal action and removing clerical error are easy ways for employers to improve their bottom line.

This can be eliminated by migrating from a manual payroll system to a cloud payroll solution. 

So if you can save money and reduce payroll processing time, why wouldn't you consider a cloud payroll system that can potentially pay itself off in the long run?

At Pay Cat, we understand businesses are time poor. The time it takes to research the right cloud payroll solution is time-consuming and fraught with danger. That's why we help organisations match their needs with the most suitable cloud payroll solution. Being agnostic to any particular service provider ensures that we serve the best interests of our clients.

If you're interested in seeing how we can help your business save thousands of dollars in payroll time and costs, talk to us today. 

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