A small error in payroll processing can cause financial embarrassment for the organisation or can lead to employee grievances and in a worst case, invite legal actions. Here is a quick validation list to bring down chances of payroll errors.
1. Integrity of payroll input
Payroll inputs include both earnings and deduction data of employees:
- Input providers can be finance team (recoveries/payment data), employees (data such as tax saving investment declarations, allocation of funds for tax-free allowance) etc
- To avoid omissions and errors in data, you can give standard templates to input providers and obtain all information in set format
If you are using a software, make sure you feed inputs in acceptable format/syntax in the system. Ideally a smart payroll automated system should be able to throw errors when the input values don't match predefined format.
2. Input v/s Output validation
Post the preliminary payroll process, match the total number of line items in the source file (the one received from input provider) with the payroll results, by each payroll element. This will ensure you have not missed out data of any employee. Additionally, match the total values of such inputs with the payroll results to ensure the values are entered correctly too.
For example: You have received an input file from the sales department with instruction to pay incentives worth Rs.250,000/- to 200 employees. Once you complete the entry of this data in the payroll system, it should provide a report showing the number of line items as 200 (number of impacted employees) under the wage type “Incentives” & also the total value of the line items should amount to Rs 250,000. This exercise of matching a source data with payroll results is called ‘input v/s output validation’
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3. Validations while posting accounting entries
Your accounting system needs to capture every financial transaction. Gaps in information needs to be explained. Use statements to find differences at granular level & fix the mistakes.
If your payroll system is integrated with your accounting system, the errors can be avoided.
greytHR provides you JV or Journal Voucher feature to get accounting entriess for all the payroll related transaction. This way your accounting system can be updated without any data loss.
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4. Head count validation
Apart from the input validation, a headcount validation in your payroll results is also very important.
Formula :
Current month’s active employees headcount = Last month’s closing active employees headcount + new hires this month (-) separations during the month
In case of any mismatch, investigate for any employee on ‘payroll hold’ or ‘full month loss of pay’, etc.
Cross check the HC numbers with your HR department or Recruitment teams to be sure.
5. Month-to-Month; Year-to-Year cost validation
Compare the total gross salary amount with the previous month’s payroll. Usually, payroll variation between two months could be caused by:
- new hires
- separations
- salary changes
- variable components
- statutory changes
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Smart payroll systems like greytHR provide reconciliation reports by employee or by component to help you analyze data & highlight any such variations.
Variance will be self-explanatory if totals of variance reports is equal to overall difference in salary costs between two months.
RELATED: The top 5 payroll mistakes that you can avoid
6. Eyeballing & System checks
Over time with your years of experience, you should be able to detect/suspect anomalies or at least, inquisitively look into large payments or absurd deductions that do not look right.
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You can also leverage on intelligent payroll software solution with in-built validation engine to do the job effectively.
Did you know? Payroll software with in-built validation engine can reduce your payroll errors by 40%.
Introducing greytHR- India’s largest payroll software with in-built validation engine that will make you a ‘Payroll Hero’ every organisation wants.
