These 8 Payroll Errors Cost You Money; How To Fix Them?
It is understandable for businesses to get wrapped up in things and get distracted, but payroll mistakes will only cost them more time and money if they do not do what they are supposed. At the end of the day, your goal is to operate your business, and compensate your employees accurately and in a timely manner. You can accomplish this by doing your best to avoid common payroll mistakes.
For most businesses and payroll staff, processing employee payroll deductions is probably one of the most complex parts of the payroll process. Because of the sheer number of both state and federal laws that apply to deductions, it’s easy for smaller businesses and HR departments to make errors.
#4 Neglecting To Send Out Tax Forms
Maybe you give an employee a bonus gift card and forget to record it on payroll. That well-intentioned award can actually negatively impact your employee if not listed in their pay. Being aware of the most common payroll mistakes is a great first step to avoiding them in your own organization and maintaining a smooth payroll process. And while running a seamless payroll may sometimes feel like a thankless job, it affects many other elements of the larger organization, like employee satisfaction and even company culture.
- While the above payroll mistakes are common, the good news is that employers don’t have to go it alone!
- They can easily be avoided, but people have to pay close to what they are doing and what the laws are pertaining to paying employees.
- Failure to setup and maintain payroll properly can lead to a company having to pay fines and face penalties.
- Not setting up state, federal and local taxes, registering the business and checking wage calculations are often what leads to these fines.
- Enlisting the help of a PEO to automate and manage payroll helps ensure employees are always paid on time.
All businesses have to report and deposit their payroll taxes. There is going to be certain times that this will need to be done, so figuring out when this information should be submitted and submitting it on time is crucial. Not only can this lead to businesses being charged interest, but they can lose employees as well because they may not want to work for an employer who doesn’t pay them in a timely manner. And retail businesses certainly aren’t immune to the consequences of payroll errors.
Not Paying Payroll Taxes
However, should you make an error, take Mr. Battista’s advice and fix the error so that it doesn’t become a bigger problem. Finally, if you feel payroll is just too much for you to handle, remember that a qualified payroll professional will be happy to take on the task. There is no reason to let payroll mistakes define you or your business.
How do I fix payroll mistakes?
How to Fix Payroll Errors 1. Cancel the payroll immediately, make updates, and reprocess it.
2. Run an additional, manual payroll with the necessary adjustments for only the affected employees.
3. Make adjustments on the next payroll to counteract previous mistakes and get things back in balance.
Invest now in perfecting the payroll process so your company doesn’t pay for it later. The end of the year is a hectic time for payroll professionals. After a year of processing payments and taxes, organizations must send out all the necessary tax forms to employees.
Not Checking Timecards For Mistakes
Failure to setup and maintain payroll properly can lead to a company having to pay fines and face penalties. Not setting up state, federal and local taxes, registering the business and checking wage calculations are often what leads to these fines.
However, because of the varying statutes and exceptions that overtime laws provide for, this is a payroll process that is prone to mistakes. Common payroll mistakes are just human errors that any business owner can.
How long does an employer have to correct a payroll mistake?
So if you failed to pay an employee actual wages due (as opposed to vacation time), you would want to correct the problem within 13 days of wage payment.
Employees need W-2 forms while independent contractors who earned $600 or more need 1099s. Failing to get the right forms to the right people in a timely manner isn’t just inconvenient for employees—it can also spell trouble for your company. A smooth payroll process in your organization is like oxygen—when it’s there, you hardly notice it; when it’s missing, you can’t think about anything else.
As a retailer, chances are, you employ both part-time and full-time employees—and, if you’re a larger business, you may employ workers in a variety of locations. That’s a lot of opportunities for common payroll errors to happen—and a lot of opportunities for you to find yourself facing penalties for those payroll errors. Both federal and state laws require most employers to pay employees overtime for hours worked above the normal 40 hour work week. While the specifics can differ depending on the state and even the locale, overtime generally consists of an additional 50 percent of the employee’s typical hourly wage.
In addition to being a complex task, it also one of the common areas for mistakes during payroll processing. Mismatching Social Security numbers and employee names is such a common occurrence that the Social Security Administration even provides Social Security number verification services. Other data entry errors, such as keeping inaccurate employee hours, can cost businesses millions of dollars every year and can also result in those pesky fines and penalties. If you’re processing your payroll manually, using payroll software can help, but you’ve still got to watch your entries.
Not Maintaining Proper Payroll Records
That makes payroll one of the least appreciated yet most important functions within a business. Payroll, when done well, can keep employees satisfied and help your organization stay safe from legal consequences. On the other hand, when payroll mistakes crop up, their impact can ripple across an entire company. If you aren’t aware of these changes and fail to pay the correct amount of payroll taxes, you’ll owe the missed amounts plus interest and penalties. To avoid this outcome, start each new year by confirming the required taxes for your business at the local, state, and federal levels.
This payroll error is so common, it makes me wonder where the idea originated. Non-exempt employees earn overtime for all time worked over 40 in a week. Any ideas that hours can be diluted over a pay period is just wrong.
They can easily be avoided, but people have to pay close to what they are doing and what the laws are pertaining to paying employees. While the above payroll mistakes are common, the good news is that employers don’t have to go it alone! Enlisting the help of a PEO to automate and manage payroll helps ensure employees are always paid on time. Integration between time and labor tracking with payroll and HR eliminates manual processing, avoids keying errors which cause incorrect data, and saves time. PEOs also stay up-to-date on employment regulations and can provide the resources employers need to stay compliant. Small business owners striving for cost-efficiencies may choose to do payroll themselves.
However, this seemingly straightforward task of processing payroll holds many potential pitfalls. No one enjoys being fined or paying penalties for the mistakes they have made, especially when they could have easily been avoided.