Automation can help Kenyan firms keep up with payroll law changes  

A robust payroll solution puts tight financial controls in place. PHOTO | FOTOSEARCH

What you need to know:

  • Kenyan payroll environment is becoming more complex as income tax regulations change and tax authorities place employers under more scrutiny.
  • Automation makes it simpler to keep track of annual changes to tax regulations that impact on payroll tax calculations and various changes in legislation.
  • A robust payroll solution puts tight financial controls in place and can helps reduce these risks by giving managers better visibility into transactions.

Payroll has traditionally been rather simple — pay your employees the right amount of money on the right day of the week or month and issue accurate payslips.

However, the Kenyan payroll environment is becoming more complex as income tax regulations change and tax authorities place employers under more scrutiny.

Failure to comply — whether through deliberate evasion, late payment of payroll taxes or underpayment as a result of a miscalculation — is emerging as a major business risk.

If you make a mistake when calculating statutory deductions such as income tax, National Hospital Insurance Fund, and National Social Security Fund, you may be subject to stiff fines and penalties. Your business’s reputation may also suffer.

Given that the tax environment is changing faster than ever before, that it is becoming more complicated and that the risks of non-compliance are so high, more and more Kenyan businesses are rightly concluding that spreadsheets and other manual methods are no longer sufficient to meet their payroll needs. Instead, they are looking to automated solutions to keep records and do payroll calculations.

An automated solution — such as Sage One Payroll, launched in Kenya on April 1 — will take care of calculating the complex formulas for the various deductions, generating compliance reports, and keeping accurate records.

Without automating it, most businesses will find it difficult to perform accurate calculations and file submissions on time. These solutions save hours of manual work for the person in your business responsible for payroll administration.

Automation also makes it simpler to keep track of annual changes to tax regulations that impact on payroll tax calculations and various changes in legislation, such as any outcomes of the pending New Income Tax Act that may affect the payroll.

The software is constantly updated to align with the latest tax laws and tables, so you don’t need to update your spreadsheet formulas or learn to make new manual calculations every year.

This also reduces the risk of human error.

Automation also ensures that your employees receive accurate, on-time payments and payslips, which helps keep your workforce happy.

Payroll fraud is one of the most common white-collar crimes in the business world; what’s more, erroneous payments can cost your business.

A robust payroll solution puts tight financial controls in place. It helps to reduce these risks by giving managers better visibility into transactions.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.