How often do you sit back and think about your payroll process? If everything is running smoothly, you won’t have to think about it much, if at all—but if it’s riddled with payroll mistakes, it will affect everything else in your day-to-day operations. To protect your company from legal liability, and keep your staff happy, it’s important to be educated on payroll processes. Learning more about common errors will ensure that your payroll process is easy and smooth.
Here are some of the most common payroll mistakes, and how to avoid making them yourself:
- Missing deadlines: Payroll is a deadline-based process, and it’s all too easy to miss one here and there. If you don’t offer a reliable payroll process, you’ll lose your employees’ trust—they’re counting on you to pay them on time, so they can fulfill their own obligations. When you miss a payroll deadline, you’re not only jeopardizing your company’s reputation, but you might also be running afoul of state law. It’s crucial that you stay on top of deadlines.
- Miscalculating pay: It’s easy to miscalculate pay, especially if overtime, paid time off, commissions and deductions are in play. If you don’t have a reliable way to track employee payment, time off and other variables, you’re setting yourself up to make even more payroll mistakes. Make sure your payment system is up to date and is working properly. If you do make an error and underpay an employee, you need to fix it promptly. Every state has different rules about how long you have to fix a payroll error, but it almost always results in penalties to your business. It’s best to avoid these types of payroll mistakes altogether.
- Misclassifying employees: If you have W-2 employees, independent contractors and exempt/non-exempt employees, calculating payroll properly can get messy. A single misclassification error can deny your employees their benefits and full wages. It can also mess up your tax records, which means you might be stuck with a hefty tax bill once the error is discovered.
- Failing to keep appropriate records: The federal government requires companies to keep at least three years’ worth of payroll records, in the event that there are issues later on down the line. This includes information like their hours worked, benefits used, wages and more. Failing to keep thorough records exposes you to more audit liability.
- Missing or skipping tax forms: Your company has an obligation to mail out tax forms by a certain deadline so your employees can file their income taxes as soon as possible. You’ll also need to ensure you’re paying the appropriate tax rate for every employee, regardless of type.
To avoid these common payroll mistakes, consider outsourcing your payroll tasks to a company like Windsor HR Services, Inc. We have over 20 years of experience helping businesses stay on top of payroll and other important tasks. When you work with us, you’ll never have to worry that you missed an important deadline. Get in touch with us today to get started with a consultation.