7 Common Payroll Mistakes that You Should Avoid
Payroll is one of the most important departments of your business and even a minor mistake in the salary of your employees can put you in a lot of trouble.
Therefore, you must have a clearly defined process for paying salaries to your employees, paying taxes to the government, and filing compliance reports.
But despite all precautions, many businesses still make a lot of mistakes in payroll management and therefore, I have listed down top 7 payroll mistakes made by businesses and how you can avoid them.
Here are the 7 common payroll mistakes made by businesses:
Wrongly Classifying the Employees
There are various types of employees in a company such as full-time employees, part-time employees, contract employees, apprentices, trainees, etc. Your company might be paying some employees on an hourly basis and others on a daily basis.
So, you should be careful while classifying your employees. You should classify your regular, contract, and trainee employees correctly. By misclassifying your employees, you are committing mistakes in the payroll records.
Even a small mistake in the payroll record can become costly and the whole payroll process might go wrong.
Wrongly Calculating Overtime Wage
If your employees are putting extra efforts and working for additional hours, then you should calculate wages for their additional time correctly. If you fail to pay your employees for the extra work, then you might end up paying penalties because there are a lot of rules to be followed for payment of overtime.
Extra time wages differ from regular wages and overtime wages are different in different states. Miscalculating overtime wages might also bring down your employees’ morale and bring down employee engagement.
Neglecting the Payroll Deadlines
It is very important to mark your payroll calendar and stick to a payroll plan if you want to keep your payroll records perfect. You must know the tax deadlines related to your industry and state. Neglecting these deadlines may lead to payment of penalties and in the worst case, it might go beyond penalties to the termination of your license.
If you want your payroll records accurate and perfect, then you must prepare a strict plan to stick to deadlines. If you execute your payroll process before the expiry of payroll deadlines, then you do not have to worry about penalties.
Resisting Buying a Software
Managing payroll manually can be time-consuming and tedious. It doesn’t matter if the size of your company is big or small, but if you manage your payroll manually, the chances of committing mistakes are high. You have to consider a lot of factors for calculation of salary and taxes and staying updated on all of them manually might get difficult for you.
So, do not resist investing in payroll software. If you think buying payroll software is out of your budget, then there are a lot of free payroll software available online. Investing in payroll software might seem unnecessary in the beginning but trust me you will save a lot of time and money in the future.
Not Having Backup and Recovery
The payroll records are prone to a lot of threats. Online data theft, viruses, and malwares are some of the online threats to the records. On top of that, there are other threats like fire, human error, etc.
If you don’t want to lose your precious payroll data, then you must have backup and recovery so that you can recover your data from the backup in case of any unexpected accident.
Mistakes in Record-Keeping
Payroll records are a collection of many details such as salaries, taxes, overtime, employees and resigning, etc. If you make mistakes in these records, then the whole payroll process might get faulty.
Keep reviewing your payroll records thoroughly to avoid any such mistakes in record-keeping. You could also get your records audited by an external payroll agency to fix any discrepancies in records and gain more confidence.
Neglecting Payroll Updates
The government keeps changing payroll and tax rules every now and then. So, the tax rules which you were following in the initial days might have changed for your present payroll. In addition to this, the tax laws for different states are not the same.
You have to follow the present updates in the payroll industry. Follow the payroll journals, blogs, and government websites to keep yourself updated in the payroll industry.
Payroll management is a huge process. To keep your payroll records accurate, avoid these 7 mistakes made by many businesses to have a perfect payroll process.
SreeJuly 15, 2021 - 10:06 am
Good post. Payroll can be a difficult and complex process. However, with the help of the right payroll software, you’ll find it becomes much easier and streamlined. Our HR management platform will give you all the tools needed to reduce risks associated with payroll errors, including misclassifying employees, calculating overtime wages incorrectly, not paying taxes on time.