If you have employees, you also need a system in place to handle various payroll activities.
These include things like paying your workers, filing the needed government forms, and paying your business taxes on time.
There are several aspects to the payroll process, especially in bigger companies that have both part- and full-time employees and independent contractors.
If you want to ensure that everything goes smoothly, it’s a good idea to get to know some of the most common payroll mistakes that may occur. When you make your HR payroll department aware of the issues, you can prevent them or at least take steps to minimize their impact.
Missing a deadline
It is essential that you note on your payroll calendar when you need to report and pay your payroll taxes to state and federal agencies. If you deposit these funds late, it may result in expensive interest charges and penalties.
With the growing number of remote and temporary employees, consultants, and all the other types of independent contractors, it is crucial you determine each of your worker’s classifications. This is going to help you figure out how to report their pay for tax purposes. Keep in mind, if you do not classify your employees properly, it can cost you money when it comes to taxes.
Not sending out 1099s
If you have independent contractors as part of your workforce and they receive over $600 in compensation, you must provide them with a 1099 form by January 31st of the following year. There are many companies that do not send these out in a timely manner, creating other problems for themselves and their workers.
Not handling child support, levies, or garnishments properly
Your employee may owe money according to a court order to a third-party. This means that your payroll department or a person needs to send the payment to the proper person.
Miscalculating your worker’s overtime pay
There are specific guidelines that you have to follow when you are figuring out overtime pay. Any type of miscalculation can be expensive. In recent years, litigation has been growing making claims that employees were treated as being “exempt” and therefore not allowed to receive overtime.
Leaving it all to the software in use
There are more than a few great programs that can help you with the payroll. However, the old adage “garbage-in, garbage-out” applies here. There are many people who fail to enter all of the needed data or they assume that the program can take care of the necessary calculations, even if you don’t put the information in properly or if the right information isn’t entered.
Failing to maintain confidentiality
The payroll information for your business should not be given to anyone who is outside of the department or who isn’t a member of the senior management team. You need to make sure that your payroll information remains secure and private.
Not saving all your business payroll records
Even though the rules may vary from agency and state, usually, all your records have to be maintained for a minimum of four years. Create a file system to get employee W-4 forms, canceled checks, and timesheets on-hand. This is also beneficial if the business is audited by the IRS.
If you want to ensure there are no issues with your business’s payroll processes, be sure to keep the most common mistakes that are listed here in mind. Doing so will help ensure you can avoid them and that you aren’t having to pay extra fees or deal with complicated situations related to your employees and what they are paid.
Wendy Dessler is a super-connector who helps businesses and she frequently writes about the latest advancements in HR, digital marketing and tech.