Each small business has to satisfy a number of obligations when maintaining payroll records about their employees. According to the Fair Labor Standards Act (FLA) employers must keep the payroll records of their employees for three years. In addition, employers must also keep all records including wage rates, job evaluations, seniority and collective bargaining agreements for two years which explain the basis of paying different wages to employees of opposite sexes in the same establishment.
At the same time, they must ensure all employee data is kept safe and they satisfy all data protection regulations. These include ensuring data is kept securely and that all reasonable precautions have been taken to protect against data loss and that the employees and former employees are informed about what data is held about them by the company and how this will be used.
Keeping everything in order can be difficult. Indeed, according to the IRS, 40% of small businesses end up paying a payroll related penalty every year. Most of these are related to filing errors or not depositing withholdings on time.
Meanwhile the pandemic has created its own set of demands. Lockdown restrictions were imposed but work went on. Everything from large to small businesses still had to ensure its staff were paid on time. This has prompted a need for online technologies which allow accessibility of payroll systems from any location and at any time.
In this instance, technology can be a benefit and a hazard.
First, let’s look at the benefits. Advanced, automated and online technologies can help in a number of ways. Here are just a few:
- Enhanced accessibility: Online portals mean HR administrators no longer need to be on site to access their company’s systems, they can do it remotely. Flexible solutions can be implemented so that the payroll service can continue to be managed on the go from any secure device.
- Improved compliance: As a business owner, you need to stay up to date with the latest payroll regulations. Failure to do so could result in costly fines. Easy to use payroll systems can automate tasks and obligations and can provide more visibility of data. This helps managers monitor the existing situation in their payroll system and demonstrate compliance to any regulators who come looking.
- Eliminates repetitive tasks: Just ask any Human Resources manager what their least favourite tasks are and the chances are managing payroll will be close to the top. This involves many tedious and repetitive tasks. It takes time and requires high levels of accuracy. Automating these reduces the burden on staff, speeds up processing time and avoids the risk of costly human error.
- Highlights fraud: Having all your data in front of you can highlight instances of fraud – such as ensuring employees are doing the work they are billing for and spotting any inconsistencies which might previously have been missed.
- Managing holidays and expenses: The system can manage all aspects of the human resource pipeline including tracking hours and worker entitlements. The system can streamline the payroll process of tracking and approving holidays and managing expenses. A manager can see all expense claims, approve them before making a direct deposit into the employee’s bank account.
However, alongside these come risks and complexity. Using an online system – indeed any digital solution – can put sensitive data at risk. An HR manager accessing central systems online via remote locations creates the potential for cyber risk by introducing more endpoints – not all of which will necessarily be fully secure.
When choosing new technologies, users will have to ensure they understand what the technology can do and that it satisfies all security requirements.