5 Reasons Why Spreadsheets are not Useful for Managing Payroll

Payroll management is a demanding job, requiring dedicated efforts from the HR department and the Finance department. Using spreadsheets to manage payroll may seem simple and cost-effective when a company is in its infancy.

But spreadsheets are hard to scale as the company expands, the employee base grows, and payroll data increases in volume.

It is wise to invest in payroll software that will eliminate the disadvantages of using spreadsheets, such as manual errors, compliance difficulties, data security issues, risk of fraud, and lack of integration with other business applications.

Let’s look at how payroll management through spreadsheets can hurt your company:

1. Accuracy issues

Even with all the functionality of Excel spreadsheets (pivot tables, formulae, v-lookups, split fields), there’s a lot of manual work to be done. Human errors can have serious repercussions such as incorrect or delayed payments.

It is time-consuming to keep documentation straight and cross-check to maintain payroll accuracy. Spreadsheets are not suited for complex calculations when employee salary structures are not straightforward.

It also becomes tedious to generate and distribute payslips from various files.

2. Compliance Challenges

Following from the first point, a lot of manual effort is required to keep up with tax laws to maintain compliance.

The Indian payroll system has several components like TDS deductions, PF contribution to gratuity, ESI and so on. Filing accurate tax returns periodically is difficult and time-consuming when done manually via spreadsheets.

Errors in adhering to tax laws can attract fines and penalties, which could hurt smaller companies badly.

3. Data security issues

Manually entering data into spreadsheets leaves room for risk of data corruption, data loss, or data theft. These spreadsheets will also have to be shared with many people for data input and processing, thus risking data integrity and confidentiality.

Spreadsheets do not have role-based access controls, so multiple copies have to be made with appropriate information. This is a waste of time and an inefficient way of working.

4. Risk of fraud

Deloitte’s India Corporate Fraud Perception Survey, Edition III (2018) reported that companies have lost more than INR 10 lakhs in fraud losses.

The lack of data security and confidentiality with spreadsheets increases the risk of payroll fraud. Employees can access payroll information in an unauthorised manner, passwords to critical information can get leaked, or disgruntled employees may leave the company with sensitive information.

5. Lack of integration

Spreadsheets cannot be easily integrated with other business applications, making it a complicated task to compute payroll from multiple spreadsheets. Payroll and HR staff also use up valuable time entering the same information into several spreadsheets and collaborating with multiple departments to compile data.

Again, the manual aspect of payroll processing makes errors likely.

Conclusion

A comprehensive payroll management system like Perk Payroll can transform your business by automating your payroll functions. It allows managers and employees greater control over their payroll records, guarantees data security and confidentiality, and reduces the responsibilities and liabilities of a company.