Whether you’re an experienced entrepreneur or an amateur business person, you’ve made some billing mistakes and new ones. Payroll issues can occur in any type of business, large or small, and the results may be costly and maybe against law. Some of the errors are due to inattention or lack of qualifications of the payroll accountant, others are due to lack of control over the parties of the leaders, and some others, simply due to the misinterpretation of the current legislation. Irrespective of the reasons behind the errors, payroll mistakes are costly to a business. Due to the diversity of forms and systems of remuneration, constantly changing legal framework, as well as a number of features of calculations with staff, there are various problems in the issuance of a payroll. Some mistakes are irreversible and may cost the company a fortune, as such, it is better to avoid them.
Ways to Avoid Payroll Issues
We have listed the six most common payroll mistakes and suggested ways to avoid them.
While looking at the scale of your business and number of staffs, you may or may not feel that your payroll can be handled by your staffs or administration only. However, with the human element the risk of error is always more than it is with software or digital tools. Digital payroll tools such as Hubstaff makes it easier to navigate a complex payroll model. By making ourselves dependent solely on the skills of staffs, we might be depriving ourselves of the benefits of digital tools in our day to day operation. Today most of the operations are performed online which is why integrating our companies with the modern payroll tools is wise to step toward an effective payroll system.
#2.Misclassification of Employees
Perhaps the most common audit issue today is misclassifying workers. There is an incentive to treat workers as an independent contractor rather than an employee because payroll taxes for employee benefits are high compared to that of an independent contractor. Also, the taxes and pay rate may differ for full-time, part-time, and seasonal employees. Finding the information about the worker from the IRS before issuing the payroll is a must. When in doubt, it is better to consult the tax advisor since knowing who to pay what and determining the taxes is always tricky. Digital payroll tools is a handy solution to avoid such mistakes.
The number of overtime hours that can be performed by an employee is usually set by collective agreement or branch agreement, and also by the government of the country. It is also important to know that over time usually occurs in a full time contract. As such, it becomes necessary to follow the guidelines in the agreement when determining overtime. The knowledge of the classification of employee is compulsory while deciding if the employee is exempt or non-exempt of overtime pay. Digital payroll software like Hubstaff makes it easier to classify employee and keep data of their working hour.
#4.Poor Record Keeping
This is one of the most common and frequent mistakes that occur in payroll cases. Poor record keeping includes mismatching of names of the workers, incorrect record of a working hour, wrong social security number, etc. These minor looking errors cost millions of dollars to companies every year. Dual verification of every record and proper maintenance is compulsory to avoid payroll mistakes. For complex or huge businesses, payroll software makes life easy for their staffs by bringing everything together.
#5.Missing Deadlines or Paying Late
Businessperson juggles several works at once. As such, it is difficult for them to keep track of deadlines. Most business owners forget the payday or miss the deadline of paying taxes. The penalties for missing the deadline of paying taxes can be impactful. If you are a new business, you wouldn’t want that to happen. Also, not paying salaries to your staff can harm the image of the business. Outsourcing a payroll company or using payroll software can help you remind such important deadlines.
#6.Missing Bank Holidays
As a business owner, you should be aware of the bank holidays. Imagine the burden you employee has to go through if the payday falls on a bank holiday and you didn’t know about it. These mistakes mostly occur in startups since the owners aren’t much aware or concerned about bank holidays. It is important to adjust the payday if it falls on a bank holiday.
It is already evident that payroll errors are more common and dangerous than we think it is. Several companies are known to lose millions every year for a minor mistake that one of their staff committed or their organizational incompetence. Using the available digital tools to cover up some human inaccuracies responsible for the payroll mistakes can save your company from losing a huge sum of money.