Imagine a world where payroll is easy to understand and navigate. Imagine never having to worry about missing data or calculations because your system does it all for you. When this happens, your entire organization benefits, from happier employees to reduced risk from legal consequences due to tax preparation errors. The payroll process can be a minefield for errors, but it does not have to be.
Here are the five most common errors and how to avoid them.
1) Not Updating Employee Information
Update employee information as soon as it changes to ensure that payroll calculations are accurate. This includes changes in address, job title, and salary. Incorrect employee information can result in over or underpaying employees, and no one wants that. If you have a payroll system in place, make sure it is updated with the latest employee information. You can also automate payroll by integrating it with your company’s human resources management system. This way, changes to employee profiles are automatically reflected in payroll, and you never have to worry about manual updates again.
2) Not Understanding Overtime Regulations
Overtime pay is a sensitive topic for many businesses, but it is important to understand the rules and regulations surrounding it to avoid any legal consequences. The Fair Labor Standards Act (FLSA) sets the standards for overtime pay, which is time and a half for any hours worked over 40 in a week. If you are unsure about whether or not your employees are entitled to overtime pay, consult with a trusted payroll service provider.
3) Arithmetic Errors
Seems pretty obvious right? Know that it’s incredibly important to be 100% focused when doing calculations. Something as simple as a misplaced decimal point could wind up costing you thousands, if not tens of thousands, in penalties. It doesn’t cost you anything to be extra thorough.
4) Improperly Classifying Employees
Employee classification is essential for payroll purposes. Incorrectly classifying employees as exempt or non-exempt can result in legal penalties. The FLSA has strict rules about who can be classified as exempt from overtime pay. Generally, employees who are paid a salary and perform certain job duties are classified as exempt. If you are unsure about whether or not an employee should be classified as exempt, consult with a payroll specialist.
5) Failing to Make Deposits on Time
If you do not make payroll tax deposits on time, you could be subject to interest and penalties from the IRS. To avoid this, set up your payroll system to make deposits automatically. This way, you will never have to worry about missing a deadline again. By following these tips, you can avoid common payroll mistakes and ensure that your employees are paid correctly and on time. A well-run payroll system is essential for any business, so make sure yours is up-to-date and running smoothly.
If you need help getting your payroll system in order, contact us at GetPayroll today