These days, payroll security fraud has turned out to be a serious issue in the entire world. However, it is one of the biggest and many payroll risks a number of global companies deal with. Are you interested in providing the best protection from risks associated with the payroll process? If yes, then there are a number of things you need to come across. More and more businesses are putting a focus on payroll risk management. The process of payroll risk management is defined as the identification, assessment, and mitigation of the potential risks linked to payroll operations in the construction industry.
Hiring the best payroll service for contractors can provide you with a way to manage your payroll tasks on your behalf. But it may also come with some risks. Let’s understand those risks:
Payroll security fraud
Security fraud related to your payroll refers to any illegal activity, which includes the manipulation of a company’s payroll system. Frauds mainly tend to financial gain. It can involve a wide range of frauds like identity theft, embezzlement, and false claims.
With holding taxes at the incorrect rate
When you with hold taxes inappropriately, it may result in non-compliance with tax laws. Of course, it may lead to legal expenses, fines and expenses, audits from government agencies, and harm to the reputation of a company.
Misclassification of employees
When you are classifying the employees or contractors, if you do not execute it properly, then it may lead to wrong decisions. Misclassification of employees is the illegal method of labeling workers as independent contractors. This practice is usually done to decrease labor costs. But if it is executed wrongly, then it can show outcomes like penalties and fines for an employer.
Not maintaining sufficient payroll records
Without any doubt, most countries have some labor laws, which require employers to maintain records of employee pay, how many hours an employee has worked, and other payroll information. If the construction industry does not succeed in keeping these records, then it may go out of compliance with the law. This way, a company can be subject to penalties, fines, and other legal action.
Out-fashioned security software
If your security software is outdated, then it can render the efficiency of your payroll software. This is how a software tool can become vulnerable to cyber-attack. If you have hired a payroll service for contractors, then it is their duty to provide protection from such illegal things. If you have installed payroll accounting software in your system, then it becomes important for you to enhance the protection. Otherwise, it can lead to data breaches, which result in the misuse of employee personal data like Social security numbers, addresses, and bank account numbers.
Over and underpayments
Under and over payments are defined as the error in the amount of money workers are paid according to their work. It can take place because of a number of reasons like incorrect pay rate, failure to include overtime pay, wrong calculation of hours worked, or withholding taxes at an incorrect rate. Make sure you understand that both over and underpayments can develop issues for you as well as employees and also contractors. If you are underpaying contractors, then it can cause financial strain for them. In the case of over payments, it may cause you a huge amount of loss as an employer. Both mistakes can lead to different legal issues in case they are not corrected.
Access (Centered and controlled) of one employee to payroll software
If you consider centered and controlled access, then it means a system of giving access to payroll software to some employees. Centralized access means that only a designed team of employees will get access to the payroll software. These are those employees, who are responsible for handling payroll-related tasks. On the other hand, controlled access is defined as the assignment of different levels of access and permissions to many different users according to their roles and duties in the payroll process. With centered and controlled access to many employees, it will reduce the chances of data breaches.
But if you give centered and controlled access to payroll software to only one employee, then it will create a single point of failure, increase the chance of data breaches, etc. moreover, there will be more mistakes or frauds that go unnoticed because of a lack of oversight.
If you do not want to experience such risks related to your payroll process, then you should start using payroll services for contractors from a reputed company. They will provide the best payroll management software, which will be up-to-date as per the latest features. Payroll4Construction can give the best suggestions on how to control payroll-related risks. You can consider their services and stay protected in terms of payroll process management with the help of a software solution.