Ensuring payroll accuracy: common payroll mistakes that are costing you in Africa

The standards for good payroll are high:

Accurate. On time. Resource-efficient.

Error-free payroll in Africa is imperative to avoid heavy fines, employee dissatisfaction and a damaged employer reputation.

But how exactly can you get there?

A good place to start would be to identify common errors that you could be making with your payroll, and rectifying them wherever possible:

1.     Employee misclassification errors in payroll

Employee or independent contractor? That is the question when you take on new workers in an African country. Do the workers you’ve onboarded actually fulfil all the requirements to be considered as an independent contractor? Or are they instead owed the full benefits of a salaried employee?

Consider these criteria to help you determine the status of a worker:

Hierarchy

To what extent does the worker operate independently, and what authority do they have in making decisions? A defining feature of a contract worker is the lack of internal hierarchy. They are responsible solely for fulfilling the terms of their contract and do not report to anyone within the organisation.

Exclusivity

Does the agreement restrict the individual from working with other clients or companies? Such limitations are more characteristic of an employer-employee relationship.

Termination

How can the working relationship be ended, and is the worker allowed to withdraw their services without prior notice?

Benefits

Are provisions made for benefits such as sick leave, health insurance, bonuses, or social security contributions?

Why is correct employee classification so important for payroll?

Employees and independent contractors are within the fold of payroll. The status difference determines the calculation of payments, especially with regards to benefits – something independent contractors aren’t typically entitled to, but which employees are owed by law.

Risks for your company:

If found guilty of misclassification, your company would face:

• Heavy fines
• Employee dissatisfaction
• Reputational damage

2.     Outdated contributions information

Regulatory compliance in Africa is a journey, not a destination.

What this means is that laws are not set in stone. They are always evolving. The same regulations and contributions information you complied with 6 months or even 6 days ago may change suddenly, leaving you non-compliant without your noticing. Importantly, this also impacts payroll, as non-compliant information trickles down to salary payments and benefits administration in the African country you’ve expanded to.

Viewing compliance as a proactive process is the best way forward.

But it can be too time-consuming to keep track of these changes across the labour law in one African country. This task becomes even more difficult if you are active in multiple African countries and have a considerable number of employees.

In this case, outsourcing your payroll in Africa is an alternative worth considering to achieve accurate and error-free payroll in Africa.

3.     No payroll records

By law, in most African countries, payroll records must be stored for a set amount of time. 3 years in Nigeria, for instance, and 4 years in Cameroon.

These records must be organised in specific ways, compiled in specific formats, and must contain certain information to be considered valid. Failure to keep:

1. Properly filled payroll records
2. Properly organised payroll records
3. Payroll records for the required number of years
4. Payroll records even after an employee has left the company, where required

…could land your company in trouble with the relevant authorities, leading to heavy fines.

4.     Missing deadlines

Tax deadlines and other legislative deadlines can occur on a weekly, monthly, biannual or annual basis. If you are unaware of them or cannot keep track of these legislative requirements, you run the risk of being fined and having your employer reputation damaged. Besides, you also risk upsetting your employees. Payroll errors are notorious for driving up employee dissatisfaction, affecting employee turnover further down the line.

5.     Outdated payroll system

An outdated payroll system in Africa can cost you in the following ways:

Not adapting to local regulations

Africa is not a monolithic market.

Each of its 54 countries has its own labour laws, tax codes, and reporting requirements. If you are using an outdated payroll system, you will find that they lack the required flexibility to adapt to these highly localised regulations, leading to fines, employee dissatisfaction and a damaged employer reputation.

Inaccurate payments

Older payroll systems may not be equipped to handle complex or variable compensation structures. This can lead to:

1. Late or inaccurate salary payments, causing frustration among staff
2. Inaccurate payment of allowances or deductions
3. Lower employee morale and higher turnover rates, particularly in regions where financial stability is a key concern for workers

Resource-inefficient processes

Manual processes require extensive administrative work, especially when adapting to new markets:

1. Your teams may spend excessive time on data entry or error correction
2. An outdated payroll system cannot properly integrate with HR or finance systems, leading to redundant systems and reduced productivity

Currency & exchange rate issues

Many African countries operate in different currencies, and exchange rate changes can complicate payroll processing. Outdated systems often:

1. Lack real-time currency conversion capabilities, leading to payment discrepancies.
2. Fail to accommodate multi-currency payroll efficiently, increasing errors and manual calculations.

Security & data privacy risks

Older payroll systems may not meet evolving cybersecurity standards or local data protection laws, such as Ghana’s Data Protection Act or Nigeria’s NDPR, which require secure storage and processing of employee data.

Being ISO 27001 certified, Africa HR Solutions is prepared to help you uphold the highest national and international data security standards across Africa – helping you prevent heavy fines and employee dissatisfaction.

To find out how our award-winning payroll team can streamline accurate payroll for you across more than 46 African countries, chat with one of our consultants today.