Avoid Payroll Mistakes to Keep Your Employees Happy and Company Trouble-free!

Running payroll involves multiple calculations to ensure everyone gets accurate wages, salaries, and other timely payments. To arrive at the correct figure, a person must track work hours, taxes, deductions, earnings, net pay, and other variables. Processing payrolls every week or month is essential to comply with the systems. While it seems like mechanical work, every business must pay due attention to this. It can save companies a lot of legal troubles and make employees satisfied. Otherwise, its impact can be felt in every nook and corner of the organization.

Interestingly, a 2022 Ernst & Young report revealed that businesses commit about 15 payroll errors every payroll period, each costing them about USD $291 on average. That means the total cost of these mistakes amounts to USD $4,365 per payroll processing. Do you want to avoid them? Hire bookkeeping services. Sites like Sound Advice Bookkeeping can help in this area. Professionals can prevent mistakes while conducting payroll runs. Let’s learn about those common payroll gaffes for an idea.

• Improper classification of employees

Minimum wage, overtime pay, and other such protections and benefits are provided to many employees under the Fair Labor Standards Act (FLSA). Then, there are categories like nonexempt and exempt employees who also enjoy some legal rights. However, independent contractors don’t qualify for the same privileges. Some companies mistake employees as exempt employees or independent contractors during their classification. Due to this, eligible employees miss appropriate wages and benefits. The same also impacts the government’s tax collection, inviting heavy fines.

• Payment miscalculation

‍A payroll administrator must consider commissions, PTO, overtime, deductions, and others during payment calculation. Overtime wages are 1.5 times an employee’s regular wage for extra work during a workweek. American states may follow distinct overtime policies, and one should be aware of them. Failing to monitor paid leaves or employee hours can lead to underpayment or overpayment issues requiring payroll correction. It involves adjusting the amounts that have been paid. Suppose the payroll administrator forgets to consider vacation days. Due to this, the professional may have to add or deduct the amount from the original payment.

• Missed payroll deadline

Payroll processing is an elaborate system of various steps, which can lead to missed payment deadlines. Your workers wait for timely wage disbursal. If you don’t pay them on time, their trust and opinion about you can be affected. Sticking to the deadline is also crucial for payroll taxes. Otherwise, your company will be charged hefty penalties, late fees, etc. Legal woes can also start. Hence, it’s better to adhere to internal and external payroll deadlines.

• Consequences of failing to distribute tax forms

Financial year end and beginning can be hectic for payroll administrators. After managing payments and taxes, businesses must distribute the relevant tax forms to employees and independent contractors. Otherwise, things become difficult at every end.

These are examples of payroll errors that frequently occur in any company. Since your internal team already has plenty to manage, you can hire a professional bookkeeping service for this functional job. It will allow your team to attend to the core areas.