Have you ever had to deal with an error in your paycheck? If so, you’re not alone. Payroll errors are more common than you think.
And…they are a bigger problem for those who live paycheck to paycheck. 56 million Americans reported having to pay a bill passed the due date because of a mistake in their paycheck.
On the other side of the coin, when you are the person in charge of payroll, payroll, and wage mistakes lead to a legal and financial nightmare for the company. Keep reading to learn the 3 payroll mistakes to avoid making in your small business!
Payroll Deadlines
One of the most common payroll errors is accompanied by a hefty late payment penalty. Missing the payroll deadline is a costly mistake.
Besides the threat of penalty, the fact that your employees are counting on their earnings is enough pressure to be on time with payroll. If your employees can’t count on getting paid on time, they may lose faith in you and your company.
Being even a day late may spiral into delays at the bank and a delay with the direct deposit. Employees depend on a consistent paycheck schedule to pay their bills on time.
To prevent high employee turnover and possible legal trouble, keep a consistent calendar and process payroll on the same day each pay period. Payroll should be processed 4 business days ahead of payday via direct deposit.
Classifying Employees
Part-time? Full-time? Consultant? Independent contractor? Classifying your employees is important because the categories each have a certain method of payment and a way to calculate the relevant taxes.
When setting up your payroll, educate yourself so that you understand the difference between each type of employment.
Independent contractors are a special case. The employer does not withhold taxes from their wages.
If you misclassify employees, the responsibility to pay the taxes, penalties, and interest fall on the employer. In the case of independent contractors, if you make an error, it may cause problems when they file their tax returns.
On the flip side, if you misclassify a full- or part-time employee as an independent contractor, you will have to pay back wages.
Keeping it Confidential
Payroll files are confidential. No one should have access to this information other than the payroll and upper management departments.
Employees expect the payroll department to protect their information. Payroll software should be secure and payroll personnel should be trained in dealing with confidential data and data breaches.
Don’t Get Fined for Payroll Mistakes
Now that you know the payroll mistakes to avoid, you are better prepared and have a good understanding of the things that can potentially go wrong. You will learn and grow from past mistakes.
Are you considering outsourcing your payroll or other bookkeeping services? We at the Accfin Group provide a variety of services on many different levels from simple bookkeeping to CFO services to long-range financial planning to HR and outsourced payroll.
Contact us for a free business analysis today.
