Payroll leakage describes any unintended or unexpected spend as a result of mishandling employee data. Financial losses can be due to incorrect time tracking, outdated technology, non-adherence to compliance laws, manual data entry, or other causes.
What are the main payroll leakage sources?
- Manual errors – such as when relying on spreadsheets for payroll
- Misclassification of employees – consequences include government fees, reimbursing the cost of benefits, and expensive civil lawsuits
- Fraud – either through money embezzlement or time fraud
- Not tracking expenses – neglecting to set limits on what is reimbursed
- Foreign exchange payroll leakage – losses from currency fluctuations, commissions, or admin work due to exchange and payment errors
How can you avoid payroll leakage?
One way to avoid payroll leakage is by utilizing automation. Automation helps businesses:
- Quickly uncover and fix errors that generate costs
- Create data reports for stronger decision-making that minimizes future leakage
- Flag any data inconsistencies
- Ensure spending protocols are rigorously enforced to avoid overspending
- Simplify data storage and make it easier to collect reports whenever required
- Adhere to country-specific employment laws and avoid any legal, financial or reputational damage caused by noncompliance