Payroll Processing Challenges in the Manufacturing Industry

Few industries of the economy play as paramount a role in creating new valuable job opportunities as the manufacturing sector, and fewer even can successfully embody the rapidly evolving workplace following the pandemic. Yet, the manufacturing industry was one of the few sectors that performed an expert pivot and managed to, at times, even profitably, hold the fort.

While this rapid growth is, as many will bear witness, a good problem to have, a manufacturing business must fill several roles to ensure smooth functioning, for example, machine operators, management, packers, shippers, and many others with varying pay scales. The sheer volume of employee and payroll management that manufacturing industries need is a definite HR nightmare. One must also consider aspects of the administration process, such as different pay cycles, different rate calculations, and the breakdown of various labor when handling payroll for businesses in the manufacturing industry. To summarize, dealing with the intricacies of payroll for the manufacturing industry should be efficient and adaptable. To establish a working payroll system in the manufacturing industry, one must first understand the industry’s main challenges or payroll issues.

Payroll processing challenges in the manufacturing industry

  • Compliance

    Compliance is one of the foremost issues organizations face today, especially in manufacturing. Different countries and states have their own set of labor laws and regulations. Such laws concerning employee rights, worker unions, and business authorization must also be considered when dealing with payroll processing. Global payroll processing units must be up-to-date with the changes in laws to keep up with the edicts of the land. Organizations must establish a payroll process incorporating any major or minor change in the legislation to ensure compliance.

  • Taxation

    Most companies are responsible for deducting applicable taxes before making payments and managing employee expenses. The tax department makes modifications on a regular basis to ensure the country’s economic health. To prevent penalties and additional effort, such changes must be put into the payroll system within the timeframe to maintain compliance. In the manufacturing industry, this is even more complicated due to the substantial volume of levels and tax brackets that employees and staff fall under.

  • Accuracy

    Several factors influence an employee's pay scale. If you are processing payroll manually with spreadsheets and basic tools, your calculations are at risk of human errors, not to mention time-consuming. According to a survey, half of the analyzed small manufacturing companies stated manual data entry to be one of their biggest challenges. With an increasing number of employees, the level of complexity also upturns. Moreover, if the tax organizations notice inconsistencies in your tax returns or if there is a substantial understatement of the taxes owed, your organization can even face penalties. Furthermore, you might also get a penalty for submitting incorrect amounts. In a nutshell, any small error in payroll can cost you a fortune – and only automation can save you from this.

  • Privacy and security

    In today’s ever-evolving business world, privacy and data protection concerns are more significant than ever. The frequency of data breaches and cyber-attacks is increasing by folds. Today, businesses have access to sensitive data that cannot be misplaced or misused. A payroll system also deals with highly sensitive data like bank account numbers, addresses, etc., making it even more crucial for organizations to add security and confidentiality to the payroll records. A leak at this stage can wreak havoc on your reputation, negatively impact production, and even cost you a fortune. So, ensure your payroll records are handled, maintained confidentially, and stored in a secure environment. In the case of the absence of privacy legislation, employers are encouraged to put together a detailed privacy policy to minimize the risk of security breaches.

Also Read: 5 Trends that are Like to Shape the Future of Payroll Processing

  • Technology integration

    Technology can be your savior in any kind of job by eliminating manual tasks, integrating automation, and streamlining processes. While we understand how the manufacturing industry works, most processes are still manual and follow traditional work cultures. Small companies work under stringent budgets and higher pressures, restricting them from transforming or automating processes. In such cases, it can get really overwhelming to do tasks such as data transfers, calculating wages, hiring new employees, keeping records of every transaction, managing work hours, and more. This is where you can bring technology into the picture – technology integration not only helps streamline these tasks but also helps you stay ahead of the curve. In addition, it can benefit your payroll processing tremendously, eliminating errors, reducing time and effort, and increasing efficiency.

  • Misclassification

    Irrespective of the size, manufacturing businesses today have a mix of full-time employees, part-time employees, independent contractors, seasonal contractors, or gig workers. Classifying the type of employees correctly is a crucial part of the payroll process. Misclassification, such as incorrectly categorizing employees, can cause serious issues for the business and the employees. For instance, contractors or gig workers are entitled to weekly or monthly payments, while employees are entitled to monthly payouts. In addition, certain employment benefits or unemployment compensation only apply to full-time employees. Even if you, as an organization or small business, do not take misclassification seriously, tax authorities definitely will. In a nutshell, correctly classifying your workforce is beneficial and critical for companies.

Recruitment process outsourcing (RPO)

The skills gap, privacy and security concerns, or other payroll challenges affecting the manufacturing industry make it imperative to attract talent, fill jobs, and retain them. Manufacturing RPO (Recruitment Process Outsourcing) provides recruitment expertise and scalability from requisition to onboarding, completely aligned with your organizational goals and culture. Recruitment Process Outsourcing arms the manufacturing industry with the tools and technologies they need to ensure robust HR processes. If your organization struggles to keep up with payroll processing and accelerating recruitment efforts, consider a recruitment partner that manages your recruitment processes end-to-end, from hiring to payroll. Here’s what you get when you outsource HR services:

  • Instant Access to a larger talent pool
  • Lower labor costs
  • Reduced hiring TATs
  • 100% accuracy in processes
  • Zero security or privacy concerns.

Why Exela HRO?

The future of manufacturing faces numerous challenges due to accelerated technological advancements, consumer expectations, and emerging markets. As the obstacles intensify, the need for the right talent also upsurges. Pretty soon, it will be imperative to have a talent partner who can promptly mobilize in response to your organizational requirements. At Exela, our human resource experts provide an agile solution tailored to your company’s needs.

Our experts help clients align their priorities, performance, business values, and human resources with in-depth industrial expertise, robust data analysis, and powerful insights. Exela HRO can help you build technology-driven HR strategies to fuel business growth. If you struggle to get through your payroll or streamline other HR processes, get help from Exela HR solutions offering world-class global payroll processing, recruitment, HRBP services, and compensation and benefits. Talk to our experts today to know more!

DISCLAIMER: The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly, and Exela cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a licensed attorney in your area.