Your employees come to work to get the job done, and they expect to get paid for it. Most of the time, they don’t consider the steps involved to get that money in their bank accounts. It’s possible to make mistakes at multiple points in the process, which could result in unhappy employees and potential tax and legal issues. For a hassle-free experience, you’ll want to avoid common payroll mistakes:
1. Poor Record KeepingTypos and misspellings in data entry after an employee fills out their information are common payroll mistakes that can quickly create setbacks. Sloppy record keeping and data entry mistakes cost companies millions of dollars every year in overpayments and government penalties. When this occurs, those companies should consider using a self-onboarding system or work with an outsourced HR company that uses a self-onboarding system. This process helps eliminate any data entry and makes sure employees are entering all of their own data correctly.
2. Falling Behind on Tax Filing/Payments
Depending on how much payroll is collected, tax deposits may be due monthly (the most common), biweekly, or the next day. Additionally, if your state or city collects taxes as well, it’s essential to check and confirm due dates. Late payments may have penalties attached, which also accrue interest. To avoid this, follow the guidelines to make the payments on time. Make sure you plan and register the business before taxes are due. It’s important to have federal, state, and local payroll tax identification numbers to pay and submit filings on time. You may want to get assistance from an outsourced HR company to handle this for you.
3. Running Payroll Late
Small businesses have many things to do, and not enough time to do them. When things get busy, it’s easy to overlook payroll. Forgetting to pay or paying late can lead to disgruntled employees, and other costly mistakes can occur when you are rushed to get employees paid. The last thing a business wants to be known as is the one that doesn’t pay its employees promptly. Keep strict deadlines regarding payroll processing to avoid these issues. Working with a company that can help manage payroll to allow you to focus on other priorities is also a good solution.
4. Losing Important Documents
Are you prepared for an audit? Do you have the I-9s, W-4s, timesheets, and payroll files (tax forms, pay stubs, etc.) for every employee? The challenge of keeping all this paperwork together and in order is real. Although this can feel overwhelming and stressful, it’s a necessary task that will save you time and money when done correctly and in compliance. Be detailed in your record keeping and have specific places where you record this information. An outsourced HR company can assist with this process.
5. Miscalculating Overtime Payments
The Fair Labor Standards Act (FLSA) establishes that you have to pay employees a premium for overtime. Calculating that overtime can be challenging once you factor in state and local wage and hour laws if they are more favorable to the employees. The Department of Labor has a guide to help understand the rules in your state. Giving this task to an outsourced HR solution provider can alleviate these types of headaches and provide the flexibility you need without worry.
There are quite a few ways that mistakes in payroll can occur: human error, issues with software, miscalculating wages, and delays in processing. A single issue can create a domino effect that takes time away from focusing on your business. It is important to work with a full service provider; not a SAAS or software as a service; so that you are always guaranteed to talk with humans for any questions you may have. When you work with a reputable outsourced HR company, you can be confident payroll will be accurate, on time and error-free.
