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 15th, 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.