Home » Top 8 Payroll Challenges in SMEs and How to Overcome Them

Top 8 Payroll Challenges in SMEs and How to Overcome Them

Uncover solutions to the top 8 payroll challenges faced by SMEs. From automation and talent acquisition to confidentiality and tax compliance, learn how innovative solutions like Maya Disbursements can streamline processes and enhance data security. Navigate payroll complexities, even with limited resources, to secure your SME’s future success.

Managers in small- and medium-sized enterprises (SMEs) are almost always wearing multiple hats. Given that, it’s not surprising that the SME environment is one in which people tend to be good at many things, but aren’t necessarily perfect at executing them. 

However, it’s one thing to do a “good enough” job in areas like recruitment and marketing, and another thing entirely to make mistakes in something like your payroll. Unlike most other areas of business, the stakes for payroll administration are quite high, given that the performance of your entire staff rests on it. The only way to be “good enough” at your payroll administration is to do it flawlessly.

The bar for high-performing payroll systems may seem high, but thanks to the growth of SME-focused payroll solutions, achieving excellence in payroll management is doable for most businesses. Let’s explore some of the most urgent challenges faced by SMEs, as well as some solutions for overcoming them:

 1) Payroll Automation

Wherever you’re operating from, your employees expect their payouts to consistently be available at a certain time. The customary Philippine payroll system, for example, has twice-monthly payouts that can exert serious time pressure on payroll teams. Processing payrolls manually in such a tight framework tends to invite errors and compliance issues that may cost an SME dearly later on.

Fortunately, automating payrolls for typical SME needs is simpler than ever. A simple online bulk payment system like Maya Disbursements can provide your business with simple, but flexible automation for regular payments. As a bonus, these solutions can easily be adapted to manage allowances, supplier and beneficiary payments, or other bulk cash disbursements.

2) Finding Talent to Perform Payroll Functions

There is currently an ongoing shortage of qualified payroll specialists, putting SMEs with limited resources at a serious disadvantage. If you’re having problems finding the right people for your payroll team, it may be time to consider outsourcing this function. 

Look for reputable third-party providers or freelancers who specialize in the payroll functions your SME needs the most. Alternatively, you can also consider investing in training for existing employees so that they can better handle your business’s payroll needs.

3) Confidentiality

Securing the confidentiality of your employee payroll information is key to building trust. More importantly, taking the appropriate steps to keep your payroll safe will also prevent your business from becoming liable under your local data privacy laws. 

Choose payroll software that offers industry-standard data security, and educate your employees about the importance of data privacy. These are important first steps in maintaining your SME’s reputation and legal compliance.

4) Diversity in Payment Needs

SMEs often have diverse employee demographics with varying payment preferences, particularly if they engage with freelancers. Regardless of the solutions you pick, you must offer flexible payment options to accommodate diverse payment needs, such as direct deposits or digital wallets.

5) Tax and Compliance

Keeping up with tax and labor regulations can be challenging for SMEs, particularly if they maintain cross-border operations. Payroll solutions need to be sensitive to these needs, particularly concerning changes in regulations. 

Some payroll solutions come with country-specific compliance features, and these should be your first picks. However, regardless of your software, the best way to avoid regulatory risks is to seek guidance from experts who specialize in the compliance issues your SME is likely to face.

6) Benefits Administration

SMEs may find it difficult to compete with larger organizations for great employees based on salaries alone. For that reason, these businesses will often offer benefits like healthcare, retirement plans, and loans, which can help close the gap with larger companies but at the cost of added complexity to payroll systems. 

Fortunately, some payroll solutions designed for smaller businesses now offer integrated benefits administration as a feature, doing away with the need for software modifications or extra manual processes.

7) Attendance Tracking

As a business grows into an SME, legacy systems like manual punch cards can become more prone to abuse, especially if the culture is not particularly close-knit, as is the case with many modern organizations. Implementing an automated timekeeping system that integrates with your payroll software should make it far easier to calculate both billable hours and pay in an accurate manner.

8) Convincing Stakeholders of the Need to Upgrade Payroll Systems

All the solutions so far will incur a cost in cash and other resources. SMEs tend to operate with limited margins, so it’s easy for decision-makers to veto solutions that may seem too costly. This is especially true if the benefits of the payroll solutions are not clearly communicated.

To overcome this critical hurdle, you may have to “sell” the ideas underpinning payroll improvements in a way that makes sense to stakeholders. Break down the specific benefits of upgrading your payroll system—such as improved efficiency, reduced costs, and enhanced data security—using approaches that appeal to specific decision-makers. 

If necessary, arrange for demonstrations or present case studies showcasing the positive impact of payroll upgrades on business operations similar to your own.

Securing Payroll Excellence in Your SME

Developing an effective payroll system that adequately meets these challenges is as much a matter of management as it is of technology. Without a serious commitment to improvement, SME managers can easily fall into the trap of believing that a less accurate and less flexible legacy system is somehow “good enough” for a quickly globalizing landscape. As difficult as these payroll challenges are to overcome, investing in the right people and technologies will ultimately be key to securing your SME’s future.

*This is a collaborative post. All views and texts are my own. 

Jocelyn Brown

A former school teacher, Jocelyn Brown created Hip Mama’s Place in 2007. Her motto for this blog is: get inspired, create and share! Jocelyn loves sharing about food and recipes, crafts, DIY projects and her random travels with her family. She also loves all things social media, but her latest obsession is Instagram.

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