The Singapore Government regulates all aspects of employment tightly to offer citizens the best job opportunities. Payroll rules often change with employment trends. If your business makes a mistake in levies or taxes, you not only pay the missing amount, plus interest, but undergo a government audit that could lead to a fine and/or jail time.
“If you aren’t keeping accurate payroll records, this is a major problem,” says Mr. Jason Lim, managing director at StarVision Information Technology, an enterprise solutions provider.
Automated payroll, he adds, works best for compliance as it gets updated with changes in regulations.
Your manual payroll systems, on the other hand, may be putting your business at risk as rules, tax codes and legislation change. Small mistakes can be costly. Costs of remedying them, on top of opportunity costs, can be as damaging as the penalties for compliance failure.
Manual payroll systems often make four common mistakes:
1. Skills Development Levy (SDL) not contributed, or computed wrongly: SDL, based on salary range, is compulsory for all employees of Singaporean companies, including those paid outside Singapore. A manual system easily overlooks this payment or calculates it wrongly.
2. Community development donations not contributed, or computed incorrectly: Contributions to the Singapore Indian Development Association (SINDA), Mosque Building & Mendaki Fund (MBMF), Eurasian Community Fund (ECF) and Chinese Development Assistance Council (CDAC) are also calculated using a fund contribution table subject to change. These contributions are compulsory unless individual employees opt out.
3. Central Provident Fund (CPF) computations incorrect: The complicated nature of calculating what’s allowable trips up many manual practitioners. Lim says he has never seen a manual system that calculates CPF perfectly.
4. Rounding method not standardised: Inconsistency is a big factor in manual payroll calculations. Manual rounding often lacks the use of a consistent rule, such as a computerised rounding formula.
Accuracy and compliance are the two biggest and most visible benefits of an automated payroll system. Additionally, businesses can expect better productivity as the payroll department can focus on other areas more productive than keeping abreast of changes. Equally important is the impression the business conveys to young talents, says Lim. “Having an automated system gives staff the image that you’re a company that belongs to the 21st century.”
Consider these pointers first:
Humans don’t like change, especially if they think their jobs are at risk. Have a change-management process to educate key employees using the system.
Keep things simple. Apply the steps in your manual payroll system to your new automated process to get the basics right before exploring what else to do with the system.
Most automated systems do more than payroll. Choose a system that allows you to automate other HR areas, such as claims and leave management in future.