Payroll is an important aspect of your company. Many Employees feel like a hassle-free payroll process, and any mistakes or miscalculations can contribute to employee unhappiness. It also puts your company in danger of non-compliance, financial fines, and loss of confidence.

How to prevent these 5 common payroll errors

how to check payroll mistakes
“Don’t let payroll mistakes cost you money – here’s how to avoid them”

1. Tax Calculation Mistakes:

Income tax deductions at source (TDS) and professional tax deductions apply to employee pay. The tax slabs and rates are subject to change. Furthermore, the payroll team must appropriately compute the tax based on the employee’s regular income tax exemptions, investment receipts, and other income disclosures.

Incorrect payouts, late fees, fines, and interest payments might arise if this is not done correctly.

How to Avoid:

A domain expert payroll outsourcing provider offers payroll mistake correction, onboarding support, and dedicative Extended Solutions to Everyone! This kind of service provider automatically updates the most recent tax slabs and rates, as well as calculates payroll tax liabilities. Employees can use a self-service site provided by the HR department to upload investment paperwork and other income proofs on time.

2. Employee Misclassification:

The gig economy is growing in popularity. To fill the talent gap, agile businesses hire freelancers, contractors, and part-timers for short-term tasks. TDS rates, tax deductions, and benefits eligibility for contractors, on the other hand, varied dramatically from those for full-time workers.

Similarly, tax rates change for partners who operate on a commission basis. Incorrect worker categorization, particularly in the context of tax-exempt and non-tax-exempt personnel, can result in non-compliance and fines for your company.

How to Avoid:

The data acquired from workers throughout the onboarding process must be accurate and reflected consistently in all enterprise systems. A consolidated worker database offering a single source of truth and coupled with the payroll system helps reduce misclassification problems.

3. Skipping Labour Compliance:

Different labour law compliances apply depending on the nation or state of business and the size of your firm. It is the obligation of business owners to secure their inclusion in payroll procedures.

Employee Provident Fund (EPF), Pension programmes, ESI (Employees’ State Insurance), Gratuity, Labor Welfare, Superannuation, and other labour regulations exist in India. Any omission can result in statutory fines.

How to Avoid:

As businesses develop in size, they may become unaware of all labour requirements that apply to them. Employ labour law specialists to create payroll rules that comply with all applicable laws and policies. Most payroll service providers ensure that labour rules are incorporated into the programme architecture and are frequently updated.

4. Incorrect Pay calculations:

Every individual has a wage structure that includes things like base pay, allowances, incentives, provident fund payments, and much more. Each component must compute in keeping with the structure offered to employees when they were hired or promoted.

Variable pay scales and increments must be computed according to performance assessment data for each employee. Any errors in updating these data or computations might result in overpayments or underpayments that must be resolved through out-of-cycle payment adjustments. It leads to a negative employee experience and decreased productivity.

How to Fix It:

Avoid using different manual processes for job offers, performance evaluations, and payroll. Choose the right payroll solution partner for all your  HRMS needs. Our SBS Support payroll processing for each new hire and employee. and for payroll calculations, we take care of them completely.

Employees face delays in receiving tax forms:

To allow employees to file their individual tax returns, every company must supply tax forms (Form 16, in India) to salaried people within deadlines. These forms detail the breakdown of all pay components given out over the calendar year.

They also keep track of the TDS placed on behalf of the employees by the business. Penalties apply if these forms are not obtained from the tax department portal and sent to employees on time.

Tips on how to prevent it:

Utilise self-service portals to allow employees to download digitally signed tax forms. Set up automatic emailers to send out tax forms. You must schedule these communications well in advance of the individual return filing dates.


Payroll processing now faces a whole new set of difficulties as a result of the epidemic and world economic crisis situation.