Payroll mistakes can be very costly for any business. The mistakes normally occur within a company’s payroll department. Payroll mistakes can mean $1000’s of dollars in expensive fines and penalties from the IRS, a downturn in employee morale, and potentially they can cost a business its existence. The primary reasons these problems happen are due to errors made by company’s doing payroll themselves. Featured here are the top preventable payroll processing and administration errors and what to do about them.

Employee Overtime Hours Regulation Rules

When hours worked by company staff exceed 40 hours, there are state and federal laws that dictate overtime pay be paid. There may be certain state, federal or locale rules on regulations governing overtime, but overall rules and laws ordinarily mean the commonly followed practice is to pay time and half for employees working more than 40 hours. But, due to the fact there are multiple laws and certain exceptions where overtime statutes come into play, this area is part of payroll processing where errors happen quite often.

Payroll Deductions for Court Awarded Legally Mandated Payroll Garnishments

Because payroll garnishments are not a regular task for company payroll departments to deal with, it is a payroll processing area ripe for mistakes. Income garnishments mandate employers must comply with the court order. If an employer does not comply with the order or if they make mistakes, the company may be fined or charged penalties.  

Payroll Rules and Laws Regulatory Conformity

It is fact of payroll that rules, laws, and regulations are in a constant state of flux and businesses must always be up to date and comply with any changes. Large changes occur virtually every year on either the state or federal level and many times both. Businesses normally work to be current with respect new payroll rules, laws and changes in the tax code, but many times there are such are large number of regulatory compliance updates that need to be done that mistakes get made which can be costly to the business in fines and lost time.

Tax Code Regulatory Rules on Employee Classifications

Particularly now in 2020, businesses employee multiple workers falling under several classifications. Workers are comprised of full-time employees, part-time employees, permanent part-time employees, gig-economy contract employees and a variety of different types of industry vendors. Because of the plethora of types of workers and multiple job classifications, this may result in major payroll mistakes and problems that cannot be ignored.

Businesses workers must be properly classified for vitally important tax reasons. If an employee is not classified correctly, it the outcome can turn into taxes due not being paid. The IRS will mandate the business pay the taxes that were not paid on employee income and most likely on top of the taxes owed there will be additional penalties and fines added to the total. This is the last thing any business needs because it can be crippling and destroy the business.

Compliance with Federal Payroll Tax Deposits and Payments

Each month on the 15^th, businesses know that federal tax deposits must be submitted to the IRS if the company collects taxes from the paychecks of its employees. The IRS will levy fines and penalties on tardy payroll tax deposits. The penalties are 0.5% of the business’ monthly payroll taxes due and 25% penalty for seriously tardy tax deposits.

Summing it All Up

 Payroll processing and payroll management is complicated and difficult to stay in compliance with. Businesses deal with several payroll issues including the costly mistakes, expense and lost productivity when payroll in-house does payroll, payroll record keeping, integration with human resources and employee benefits, tracking employee time-off and sick leave, the complexity of payroll deductions, and compliance with federal payroll tax deposits and payments, just to name a few. Ultimately a business must get current and stay current with all aspects of payroll and its management, but it is difficult to do. The best solution to resolve most if not all the problems mentioned here is to hire a payroll processing company that offers an all-in-one solution. Going that route is easy, its not that expensive, and the company will be better off for it.  

Payroll mistakes can be very costly for any business. The mistakes normally occur within a company’s payroll department. Payroll mistakes can mean $1000’s of dollars in expensive fines and penalties from the IRS, a downturn in employee morale, and potentially they can cost a business its existence. The primary reasons these problems happen are due to errors made by company’s doing payroll themselves. Featured here are the top preventable payroll processing and administration errors and what to do about them.

In-house Payroll Department Administrative Employee

Across the country, many businesses big, medium, and small, process payroll internally and regrettably manually. When payroll is done manually it normally involves timecards, paper reports and difficult tedious processing time managed by a payroll clerk or a human resources department. Mistakes get made when adding up payroll hours and then calculating the taxes due, insurance premiums owed and then generating company employee paychecks. Mistakes in any error can be drastically costly.   

Document Record Keeping for Payroll

Maintaining proper employee and payroll records is legally required. Keeping all the records in an organized way that works and is correct is critical. Doing it right can be as easy as setting up an easy follow system along with maintaining all records in a separate location or keeping them electronically, instead of maintaining a hard copy record of both reports and payroll checks.  

Setting Up Payroll and Integrating it up with the Human Resources Records

When it comes to payroll processing programs, personnel systems and company benefits it is found that the software technology for each area cannot be integrated. Ideally each of these programs should be able to “talk to each other” through integrated software programming.

Employee Paid Time Off and Sick Leave

Calculating employee sick leave and paid time off by hand is a ongoing job that is ripe for errors. Timecards are still around, as are basic electronic time sheets, but they are both ways of doing time keeping ripe for mistakes as well. On top of payroll problems and grave mistakes is the ever present need to track employee time off and sick leave, which can lead to ineffective management of a business because not knowing when people are working or who is sick can lead to poor business results, which can mean grave issues for business.  

The Critical Importance and Complexity of Payroll Deductions

Processing payroll is a basic task. However, payroll clerks, payroll departments and business owner can tell you, the deductions employees have coming out of their check is technically difficult and requires certain intricate configuration.  Because there are multiple employment laws related to both federal and state income tax deductions, it is simple for employees and businesses handling payroll processing to make mistakes. On top of payroll processing being and intricate job, it happens to be a component for a business where errors occur while completing the task.

Summing it All Up

 Payroll processing and payroll management is complicated and difficult to stay in compliance with. Businesses deal with several payroll issues including the costly mistakes, expense and lost productivity when payroll in-house does payroll, payroll record keeping, integration with human resources and employee benefits, tracking employee time-off and sick leave, the complexity of payroll deductions, and compliance with federal payroll tax deposits and payments, just to name a few. Ultimately a business must get current and stay current with all aspects of payroll and its management, but it is difficult to do. The best solution to resolve most if not all the problems mentioned here is to hire a payroll processing company that offers an all-in-one solution. Going that route is easy, its not that expensive, and the company will be better off for it.