Payroll Audits: A Spring Cleaning Checklist for Global Teams

Spring is the traditional season for deep cleaning, and your global payroll data shouldn't be exempt. When managing multi-country payroll, outdated data, fragmented systems, and manual spreadsheet entries can quickly lead to a messy - and costly - situation.

The reality is that the average global payroll accuracy rate is just 78%. Furthermore, studies show that each payroll error costs businesses an average of $291 to fix in direct and indirect labor costs. When you are processing payroll for hundreds of employees across borders, those errors add up to a staggering financial leak.

That is why conducting a regular payroll audit is essential. Auditing payroll on a regular basis helps businesses spot payroll errors early, detect and prevent payroll fraud, and avoid trouble with tax authorities

Why are payroll audits so difficult for international organizations? The answer lies in compliance complexity. Europe remains the most challenging region for setting up and running payroll, with countries like France, Italy, and Germany topping the PwC Global Payroll Complexity Index.

When you are dealing with strict employment laws, numerous statutory requirements, and multiple social security schemes across different jurisdictions, manually auditing spreadsheets is nearly impossible.

Lano Blog

What Is the True Cost of Payroll Errors?

Read more

To ensure your global payroll is accurate and compliant, steps in a payroll audit include checking the list of employees, verifying numbers regarding salary and hours worked, analyzing tax withholdings, and comparing payroll numbers to accounting records.

Here is a 5-step checklist to spring clean your global payroll:

1. Verify Active Employees: Cross-reference your HRIS data with your payroll records to ensure terminated employees have been offboarded correctly and no "ghost employees" remain on the payroll.

2. Validate Pay Rates and Hours Worked: Ensure that any recent promotions, salary increases, or changes in working hours are accurately reflected across all local entities.

3. Review Variable Pay: Double-check off-cycle payments, commissions, and bonuses to ensure they align with local compensation laws.

4. Analyze Tax Withholdings: Verify that statutory deductions and employer contributions match the latest local tax regulations.

5. Reconcile with Accounting: Compare your final payroll numbers against your general ledger to guarantee that all financial records are in agreement and discrepancies are flagged.

While a manual audit is better than no audit, the ideal state of global payroll involves continuous, automated verification.

Lano highlights errors and changes for you from payroll inputs to payslips, eliminating the need for manual checks,.

Take Wacoal Europe, for example. Wacoal Europe relied on manual processes to collect and organize payroll data, entering information into Excel spreadsheets. This led to inefficiencies and an increased risk of errors. Lano resolved these challenges with a multi-step audit process where every payroll cycle underwent rigorous automated checks designed to validate data accuracy, identify discrepancies, and flag any issues requiring attention.

Need help tackling your next payroll audit? Lano’s detailed payroll audit checklist has got you covered.

Lano Blog

Ultimate Payroll Audit Checklist

Read more