Home : Business : payroll mistakes and how to avoid them : 9 Common Payroll Mistakes And How To Avoid Them
9 common payroll mistakes and how to avoid them

9 common payroll mistakes and how to avoid them

  Managing payroll can be a complex affair that demands a lot of effort, documentation, and tracking. The ever-changing rules and guidelines have made the modern payroll management landscape more complicated than ever. As a result, errors arise that could result in delays in payments for employees, which may hurt businesses and prove costly for owners. To manage payroll processes more effectively, take a look at some common payroll mistakes and simple ways to avoid them. 

  • Misclassifying employees and contractors 

Every business must carefully categorize its employees (as employees or independent contractors) to dock the right pay. Errors while doing this result in having to look through old payment records to make adjustments to employee pay. It could lead to dissent among the team and cost the business.

Moreover, according to the Fair Labor Standards Act (FLSA), all employees must get overtime pay for any hours worked over 40 hours per week unless they are explicitly classified as exempt. Making errors here could lead to FLSA-related fines for employers.

To manage this, hire reputed payroll service providers and avoid listing freelancers as employees. Only hire contractors and freelancers through leasing companies to avoid any penalties for misclassification.

  • Making calculation errors

Making errors in payroll calculations can also cost businesses money and labor. These generally include overpaying or underpaying employees, making faulty retroactive payments, missing the first paycheck for new hires, deducting the wrong amount for benefits, etc. According to a study by the American Productivity & Quality Center, these errors take anywhere between two to ten days to be resolved. This can add to the team’s stress, as well as to the employee’s frustration. If this happens, ensure that an employee payroll error letter is sent with complete transparency regarding what happened and the measures taken to rectify the error.

To avoid this from happening, ensure that the HR managers and payroll management team are up to date with the current guidelines. Using a reputed payroll software may further help streamline the process.

  • Failing to track employee hours and overtime  

Incorrect logging of overtime hours could also result in issues with payroll management. It could snowball into corrections that span across multiple tax years. These issues may arise because of missed payments in the following scenarios-

  1. When employees work during break time
  2. When employees spend time traveling between work sites
  3. When the team is expected to participate in activities outside of work hours

One of the most effective ways to cope with this is to separate overtime pay from regular pay. Maintain strict adherence to overtime guidelines for the company to manage the process easily.

  • Not reporting all taxable employee compensation  

Compensation extends beyond money. Businesses must also report any taxable compensation to the IRS, such as stock options, equity awards, employee rewards such as gift cards, personal use of company cars, etc. While these may not be perceived as compensation, they make up a significant part of one’s payroll. Failure to report these could result in heavy tax penalties.

  • Having incomplete or disorganized records 

Businesses must properly maintain and organize their payroll records. Errors here could result in missed employee payments, delayed action on urgent tasks, etc.

Instead of relying on manual data entry and paper processes, use an automated payroll system for better efficiency. Modern payroll systems are equipped to automate calculations, tax deductions, and generate payslips. These can be integrated into one’s accounting system to ensure tax compliance and make reporting easier.

  • Missing deadlines  

All employees expect timely payment of salaries and benefits. It helps them stay up to date with their bills and other payments. Missing these deadlines or making late payments could spell trouble for one’s team.

Businesses must also follow strict deadlines when filing taxes and returns. Overlooking these deadlines could lead to late filing fees and regulatory penalties. To avoid this, set up a payroll calendar with reminders for important deadlines such as payroll processing, submission of tax forms, remitting tax forms, filing reports, etc.

  • Sending incorrect W-2s  

A W-2 is one of the two payroll documents that employees receive from the company. It contains details regarding the employee’s gross and taxable wages, payroll withholdings for benefits, health spending accounts, and 401k. Employees use this document to file their taxes. Mistakes made in this document could lead to significant delays, reissues, and penalties. Therefore, special attention must be paid to these documents so the tax filing process can seamlessly happen.

  • Having an inadequate backup system  

In today’s business environment, data is everything. Companies must have access to all data, even during a system crash or employee resignation. All companies must keep a payroll data backup using cloud-based or traditional payroll management systems. Records used for pay computation, such as timecards, work and time schedules, and other records, must be kept for two years. Having multiple back-ups of the same can reduce the risk of data loss. Please note that some states also have specific record-keeping requirements that businesses must adhere to.

  • Non-compliance with wage garnishment 

The Department of Labor has certain strict rules regarding wage garnishment. According to this procedure, court orders may mandate employers to withhold a person’s earnings for the payment of certain debts such as child support. Compliance with this rule can vary by state and debt, so businesses must pay special attention to these guidelines. Here, the employer is held responsible for calculating the garnishment amount, withholding it, and forwarding the money to the relevant agencies. Discrepancies in doing so could bring on penalties for the employer.

To ensure compliance, companies must stay updated with payroll and garnishment guidelines, use reliable payroll software, train their payroll staff, and double-check all calculations.

Top Reads

Top Tags

Popular Reads

4 easy tips to keep dogs free of ticks and fleas
health

4 easy tips to keep dogs free of ticks and fleas

A pet’s fur can be the perfect breeding ground for fleas and ticks. These pests can annoy your pet throughout the day. Such parasites can also cause several health problems like Lyme disease and skin infections in dogs and humans. Fortunately, pet care experts have developed several ways to rid these critters of your furry friend. Here are four handy tips that help with managing flea and tick infestations in dogs: Initiate a treatment plan If your pet develops a pest infestation, the first and foremost thing to do is get them on a treatment plan. Here are a few prescriptions that can be helpful: Bravecto® (Fluralaner) This prescription for dogs comes in two types: a chewable option or a topical solution. Bravecto is approved by the FDA and works on dogs and puppies at least six months of age who weigh at least 4.4 pounds. If you pick the chewable option for your pet, it must be given with their food once a month. Alternately, the topical solution must be applied once every 12 weeks. You can also check out special offers on Bravecto’s website for attractive discounts on their products. Simparica Another recommended treatment for fleas and ticks is the FDA-approved chewable from Simparica.
Read More

5 mistakes to avoid while using vacuum cleaners

Vacuum cleaners are one of the most reliable home cleaning appliances. With the help of the machine, cordless or corded, one can get rid of dirt, cobwebs, and allergens found around the house. The device is used for cleaning purposes, therefore, it is vital to handle the vacuum cleaner correctly for optimal usage. That said, not everyone knows how to use a vacuum cleaner efficiently. Below are the common mistakes made while using them: Failing to empty or clean dust bags and filters It is important to empty and clean vacuum dust bags regularly. Failing to do so can affect the efficiency of the vacuum cleaner. Despite vacuuming, if you still notice dust stains on the carpet or the floor, it’s an indicator to empty the dust bag. Another tell-tale sign for the removal of dust bag is when your vacuum cleaner seems to be losing its suction power. The frequency of emptying the vacuum bags will depend on how often you use the device. A full vacuum dust bag will lead to an accumulation of dust and the breeding of bacteria and germs in the bag. Many latest models are equipped with disposable bags that are much more convenient.
Home

Eczema – 3 methods to manage its symptoms

Eczema has many different stages and types. Unfortunately, about 10.1 percent of people in the country have some or the other form of this condition. Such a disease is a combination of conditions that make the skin irritated or inflamed. With proper treatment, one can manage symptoms. Red, dry, cracked, and leathery skin are the common eczema signs. Here are three useful methods that help deal with eczema and manage its symptoms: Getting the right treatment options Here are some treatments associated with eczema. Dupixent Dupixent is prescribed for children six or older and adults; for those who cannot control symptoms with other treatment measures, alternate treatments are not recommended. This monoclonal antibody works on a targeted area in the immune system. Dupixent comes in pre-filled single-dose pens and syringes, given as a subcutaneous injection. One can find this treatment option in two strengths: 300-mg/2-mL and 200 mg/1.14-mL solutions. Cibinqo This once-daily oral treatment helps manage symptoms for adults who have not seen relief with prevailing treatment options. Cibinqo is an FDA-approved treatment for adults with moderate to severe atopic dermatitis. Doses that can be taken are either 100 or 200 mg. Alternately, a 50 mg dosage is for patients with moderate renal impairment.
health

5 mistakes to avoid before bed for better sleep

Have you ever woken up feeling tired and lethargic despite sleeping for seven to eight hours at night? It could be due to poor sleep quality. Disturbed sleep influences the rest of your day: how you think, your performance at work, and other tasks. The causes of poor sleep are many, including a faulty mattress, distractions in your room, or a heavy dinner. Avoiding the following mistakes before bed can help you sleep better: Staring at a screen Using gadgets close to bedtime is probably the most common mistake in the digital age. The blue light emitted from screens affects the production of a specific hormone responsible for inducing sleep and regulating the circadian rhythm. Apart from the blue light emission, the television or mobile phone sound can be a distraction that keeps you awake. High noise levels create lots of mental stimulation and disturbance, preventing the brain from shutting down. Hence, it is advisable to avoid using phones, televisions, and laptops for at least an hour before bed. Exercising Exercise is among the best solutions for good health, but you must do it at the right time. Physical activity late in the evening or at night hampers sleep patterns by increasing stress and raising body temperature.
health

Migraine – Ways to manage the condition

Migraine headaches are a devitalizing experience. It completely saps the person of energy and prevents them from being productive during these episodes. There is usually a build-up to a migraine attack which is different for every individual. The phase before the actual migraine attack is known as the aura, and people may report seeing flashes of light or experiencing a tingling sensation. Below are some options for treating migraine headaches: Treatment options Nurtec Nurtec is a treatment option that helps relieve some symptoms of migraines. It reduces the severity of headaches and sensitivity to light. Nurtec is usually taken on alternate days to prevent migraines and other pain associated with the condition. Ubrelvy Ubrelvy, a fast pain-relief, is a treatment option that blocks calcitonin gene-related peptide (CGRP) in the body. CGRP is associated with migraine attacks, and suppressing it goes a long way in treating the condition.  Excedrin This pain reliever does not just treat migraine headaches but also pain in other parts of the body. Excedrin provides fast pain relief to the patient. Qulipta Qulipta is a treatment option that helps prevent migraines over a more extended period. However, medical professionals do not recommend this treatment option to people suffering from kidney or liver problems.
health