How To Avoid Payroll Leakage

November 26, 2019

As a business owner, how often do you review your bonus and overtime pay programs? While these may be expected expenses, they are often the source of payroll leakage that unless examined regularly, can lead to a loss in revenue and productivity.


What businesses are susceptible to payroll leakage?

Organizations that have fallen behind where workforce technology is concerned and on developments that could curb such leakage, are the most at risk. Payroll leakage is often deeply ingrained in the payroll process, and is difficult, if not impossible to spot during audits. However, as time passes, these leaks can mount up and cause serious problems, especially if they go on to trigger legal, compliance or regulatory complications such as fines and investigations.


As a company grows, it becomes even more susceptible to such leakage as independent contractors, seasonal workers and remote and virtual employees with hourly, fixed and variable pay schedules, come into the picture.


What can a company do about payroll leakage?

Organizations can undertake cost-benefit analyses on the effects of overtime and bonuses to help give them a better understanding of whether these types of payments are effective when it comes to their bottom line. In doing so, the ways in which overtime and bonuses are inextricably linked to output and efficiency will also be revealed, and all sources of leakage should become clearer.


Data analytics give businesses a chance to define, identify and quantify payroll leaks and make the context in which they occurred, much clearer. As the costs of such leakage are quantified and the root causes are identified, businesses can begin to integrate labor cost optimization, or LCO, programs to mend the problems at their source.


What are LCO’s and how can they help?

These programs are designed to focus on root problems and eliminate the symptoms and may involve structural repairs that integrate process and policy changes, and which give businesses the ability to monitor a maintenance schedule to optimize outcomes.


Businesses would of course need to look closely at whether they can afford to invest in an LCO program, but chances are that doing so would lead to benefits that far outweigh the initial costs and disruptions.


If you’re concerned about payroll leakage at your own company, then it might be worth talking to a payroll specialist who can give you the guidance you need. Outsourcing your payroll may be one way of killing two birds with one stone; you get an expert team to run payroll, which will save you time and money, and you get their advice and guidance on any other payroll issues which might be affecting your company.

Back to List