Payroll is one of the more complicated elements of business finance and accounting. We’re going to go over a few of the common challenges you might experience when dealing with payroll, and how to tackle those challenges:
Is the person working for you an employee or a contractor? You have very different responsibilities to the two. When you have an employee, you need to make payroll deductions – this isn’t true of contractors. There are a lot of factors you can evaluate to determine how an employee is defined in Canada – check out the employee classification guide from the CRA.
Under and Overpayments
When an employee is paid too little, it can affect their ability to pay for expenses, and can cause them all kinds of physical and emotional stress. Conversely, when they’re paid too much, you’re losing money – and you may have to go through hoops to get it back. We all remember the Phoenix fiasco the Government of Canada went through – choosing the right payroll software is essential.
Privacy breaches are becoming all too common in the digital age. They’re always scary, but they’re particularly bad with payroll information – which includes banking information, SINs, and other personal and financial identifiers. Make sure you have strong IT security measures in place, and choose a secure payroll software.
Businesses using traditional pen and paper payroll methods suffer from this challenge the most. You have to keep payroll records for years, even after an employee has left the company – you never know when the CRA is going to need those records. Again, here, the solution is to transition to payroll software so you have electronic backups of all your paper records, accessible when needed.
Keeping Up with Changes
Whether it’s a change to the minimum wage, a new pension or ESOP scheme, or the unionization of employees, things can change, and you may suddenly have to make deductions or increase the pay of multiple employees simultaneously. You can probably guess where this is going – the whole process becomes a lot easier when an automated program allows you to make changes across the board simultaneously for large groups of employees.
Do you have an employee on a temporary work visa? Did you get an extension to file your taxes? Deadlines for payroll-related accounting can move and shift rapidly, so it’s important to find payroll software that enables you to keep track of and move dates – as well as to remind you of when important deadlines are approaching.
Choosing the Right Payroll Software
Picking a payroll service isn’t the easiest thing – there are so many options to choose from, and when you pick one, you want it to stick with it – transferring data can be a bit of a headache. You want to make sure it’s compatible with any accounting or bookkeeping software you already have, too. A reliable accounting firm can help you choose the right software, and that can make all of the above challenges that much easier to manage.