Although it may seem easy to pay your employees, costly mistakes can be made.
Payroll errors can not only cost companies money but can also damage their reputation and land them in trouble with the IRS.
These are the most common errors in payroll software for small businesses and how to avoid them.
1. Paying the Incorrect Amount
Although this may sound like common sense, you’d be amazed at how easily it can happen.
Double-check that the correct amount of payment was entered into your payroll system. Also, verify that the employee correctly reported the hours.
All employee information, payments, and tax withholdings must be correctly entered into the payroll system. Otherwise, every paycheck could be incorrect.
2. Neglecting To Plan For Bank Holidays
It is important to determine when your bank closes for the holidays, as they are not considered business days for payroll processing.
3. Payroll taxes not paid
You may be subject to several local, federal, and state taxes.
4. Not paying enough often
Most states have a minimum wage law.
Employers can pay more often, but not less, but you can still make more.
Remember that your payroll schedule will have an impact on both your cash flow and operations as well as the lives of your employees.
Pick a schedule and follow it.
5. Paying late…or not at all
These should be avoided.
Small businesses often have a small number of employees who can do many things.
For employees, however, it can be a huge problem if they forget to process their Payroll or wait too long.
6. Incorrectly identifying employees vs contractors
Small businesses often hire contractors to do temporary work.
It is not the business owner’s choice to make someone an employee or contractor. But it is a legal classification.
If a company misclassifies employees to be independent contractors, they must pay retroactive payroll taxes.
7. Gross vs net Payroll
It is difficult to calculate gross or net Payroll Software due to the taxes mentioned in 3.
Your employee’s true cost could be greater than the salary or wages you offer.
Incorrectly calculating these numbers can result in unnecessary fees to IRS.
8. Don’t Pay Overtime
This frustrates employees and is why it is illegal not to pay Overtime.
Nonexempt employees must be paid 1.5x their hourly wages for any hours worked beyond 40 in a workweek.
Failure to pay training expenses to nonexempt employees Fair Labor Standards Act (FLSA) states that lectures, meetings, and training programs are not considered working time if they meet the following criteria:
- They are voluntary.
- It is not concurrent with any other work.
- If these criteria are not met, it is considered working time.
10. Nonexempt employees not paid for time spent at required functions
You can think of office parties.
Nonexempt employees must attend an office party. They should be paid for their time, whether during normal office hours or not.
11. Maintaining Payroll Records
An audit could be initiated if a business owner does not maintain accurate payroll records.
You should keep copies of W-2 forms, pay slips, time sheets, and other records.
Each state is unique, but you should keep your payroll records and associated documents for at least 4 years.
Are you unsure of what documents to keep? Talk to your state’s labour office.
12. Employers are not required to pay employees for time spent recovering from a work injury
The FLSA requires that employees are paid for time spent waiting for and getting treatment for work-related injuries. The treatment must be received during normal work hours.
13. Keep up-to-date on Payroll Laws, Laws, and Regulations
Payroll rules and laws don’t always stay the same. You will need to correct mistakes if you do not comply with the new payroll law.
Our suggestion: Create a calendar to remind you to review the law and pay attention to payroll regulations.
14. Disregard Or Miss A Garnish Request
Wage garnishment refers to an order by a court requiring an employer to withhold a specified amount from an employee’s pay.
Instead, the money is sent to the person or institution to which the employee owes money until the debt is settled.
Garnish requests should be filed immediately if you are given one. Add it to your calendar, so it doesn’t slip through the cracks.