Payroll Process Best Practices: How an Outdated Process Can Hurt Business

Though most organisations regard payroll as a back-office function and a non-strategic one, it is important to every business. Effective payroll management is vital for organisational success for the simple reason that it is responsible for one of the most important aspects of the employee experience: compensation.

When you follow payroll process best practices, it boosts employee morale; when it goes wrong, it could reflect badly on a business’s financial stability and reputation. And yet, as essential as payroll management is, many organisations do not invest sufficiently in it. Often, this happens because as long as payroll is running smoothly, the function goes unnoticed by management. Consequently, it attracts little or no investment until a process or technology fails.

Ultimately, waiting for a system or process malfunction to recognise the value that a high functioning, upskilled payroll function can provide will prove counterproductive.
And so, if your company’s method of preparing payroll is outdated in any way, it will hold you back at some point.

In this article, we share three ways in which past-their-prime payroll processes can get in the way of your progress as a business.

3 Ways an Outdated Payroll Process Can Hurt Business Progress

1. An outdated payroll system will lead to loss of time and high error margins

If your payroll management system is still largely paper-based, it’s likely outdated. The inefficiencies that arise from paper-based systems include transferring data multiple times from multiple sources, quality time lost checking and rechecking for errors, and loads of valuable time tied down in filing and organising documents. And yet, despite all the efforts that may go into this crucial process, the chances of making mistakes far outweigh the chances of getting it right the first time.

Add to this the valuable time your HR team loses to keeping up with paper files— time that they can spend having meetings with departmental heads to execute revenue-generating initiatives. The fact is that the real cost of using an outdated payroll system is somewhat unquantifiable.

Moreover, what happens if disaster should strike? For instance, a fire or flood? One thing is for sure, it would mean the loss of highly valuable financial records.

Today’s market boasts of several affordable, digital payroll solutions. The transition from a paper-based payroll system to a digital solution will not only increase the safety of your financial processes, it will completely revolutionise how your HR team gets their work done.

2. An outdated payroll system increases your compliance risks

Suppose yours is a growing business, and your employees are increasing by the day, in that case, sticking with an outdated payroll process may pose some serious compliance risks to your organisation. The reason is that when headcount increases, the volume of work for your payroll processing team increases as well. With this comes the need for more time to ensure greater accuracy in the processing of taxes and other employment regulatory deductions.

This accounts for why payroll mistakes tend to increase with the number of employees. And in a case where the payroll processing is manual, the risk of making mistakes is even higher.

3. An outdated payroll system might hinder the growth of your company

It’s a no brainer that as your company grows and improves, so should your payroll process. Consequently, the processes that worked when you were a business of 40 won’t suffice when you’re a company of 120.  

In addition to the issues of non-compliance that an outdated payroll system exposes your business to, there’s a much greater problem associated with using a clunky payroll system: It has the potential to hinder the growth of your organisation. 

For instance, if you spend valuable time working out payroll and fixing the issues that result from using an outdated process, you’ll end up losing ground to competitors that automate their payroll and properly channel the energies of their HR team. And in a business world where innovation and continuous improvement makes the difference between success and failure, your organisation may have a hard time keeping up. 

Herein lies the difference between strategic and tactical HR. When your HR team spends all their time working in your business, instead of working on it, you may unwittingly set up your business to struggle.

Payroll Process Best Practices for Your Business

The way out is rather simple: upgrade your payroll process by engaging a digital payroll solution to enable your people to drive your objectives. There are three options available to your business to get this done.  

You may either: 

  • Invest in tools to facilitate your payroll process 
  • Outsource your payroll process to third-party services providers, such as a professional employer organisation.  
  • Assign payroll to a bookkeeper or a certified public accountant (CPA) 

The pros and cons of hiring a bookkeeper or CPA

Pros Cons
If your organisation has an in-house bookkeeper or CPA, including payroll in their responsibilities is cost-effective.
Without proper checks and balances, mistakes can still happen during payroll processing.
It’s also convenient to keep multiple financial functions in a single location.

The pros and cons of using payroll software

Pros Cons
There is a wide array of payroll solutions available on the market. You get to pick solutions that fit with your budget.
You and your employees will have to commit time to learn how the software works.
Payroll software is a cost-effective solution for small businesses.
Not only will you have continuous access to your payroll, calculations done virtually are mostly accurate and error-free.
If you choose an on-premise software solution instead of a cloud-based one, you’ll be responsible for ensuring maintenance and software upgrades.
If you decide on a cloud-based solution, the necessary software upgrades won’t disrupt business.
Professional payroll providers will provide you access to a dedicated payroll consultant.
The quality of service you get and the level of support you enjoy will depend upon the payroll vendor you select.
If you purchase a comprehensive and integrated HR technology platform, it will facilitate your payroll and streamline your HR operations in a single system.

The pros and cons of using a professional employer organization (PEO)

Pros Cons
Partnering with a PEO will ensure that you have access to payroll services and a full array of specialised HR services. In addition, your employees will also have access to robust health and retirement benefits.
Some organisations may consider a PEO as a more expensive option. However, at a strategic level. Considering how many tasks a PEO will take off your hands, the support they provide will free you and your team from time-consuming HR administrative tasks and allow you to focus your energies on growing your business.
A PEO will take care of most of your payroll-related tasks, and this includes submitting your tax documents, helping you stay compliant with payroll tax changes, and handling your payroll tax deposits and filings.
A PEO is the most cost-effective choice for organisations with as few as nine employees.
All PEOs are not equal. Some will offer more comprehensive and specialised services than others.

In Conclusion

If your payroll process is constantly fraught with errors, it may affect your talent retention efforts. Sticking with an outdated process is not worth whatever costs you save by doing so. In the end, a high-powered and robust payroll solution will save your business time and money, which you can reinvest in other aspects of your company.

Workforce is the leading payroll outsourcing company in Nigeria, focus on the business needs that matter most while we help you tackle your payroll needs

If you need further clarifications or require the help of our senior and experienced payroll, management consultants please reach out to us at

Nneka Eneli

Nneka Eneli

Director, Workforce Outsourcing