Completing your payroll in-house allows your company to save money. However, mistakes could increase your liability and jeopardize your business.
Identify common payroll mistakes and then fix them as you protect your company.
Your business may hire non-traditional workers, including freelancers, consultants and independent contractors, to perform a variety of duties. These talented individuals provide an invaluable service as they multiply your workforce while saving your money.
Because you don’t have to pay taxes on independent contractors, you may classify regular employees in this category. You will face hefty fines, though, for this misclassification. Always be careful to label employees and non-traditional workers correctly.
Missing Records on File
For each employee, you must maintain accurate and detailed records. These records prove the identity of your employees and allow you to comply with various federal and state laws.
Ensure you store several documents for each employee, including their employment application, W-4, I-9 and pay stubs. Because guidelines vary, check the applicable laws to ensure you keep the right employment records on file.
Inaccurate Information on Pay Stubs
Data entry requires precision, and it’s easy to get in a hurry or accidentally hit the wrong letter or number on your keyboard. This mistake can cause you to include inaccurate information on pay stubs.
Pay stub inaccuracies can cause costly fines and penalties. Triple check that you have the correct data on each pay stub, including the employees’:
- Official full name
- Social Security number
- Payroll details such as hourly rate and hours worked
- All taxes, deductions and contributions
Delay Payroll Filing
You spend most of your time operating your small business and handle everything from hiring employees to customer service. Occasionally, you may be too busy to file your company payroll on time.
A delay in payroll filing affects your employees and business. Your employees will express displeasure, resulting in reduced motivation, goodwill and morale. Rushing can also cause you to make expensive mistakes. Plan time each week to prioritize payroll prep to keep your employees happy and to protect your business.
Complete Payroll by Hand
When you do your payroll by hand, you touch each timecard and calculate each salary. The personal touch may be okay when you’re first starting a business, but you could easily make mistakes and will face increasingly complex calculations as your company grows.
Consider automating your payroll process. Numerous reliable options decrease errors, could reduce payroll processing costs by 80 percent and give you more time to focus on running your business.
As you complete payroll for your employees, take care not to make these common mistakes. They increase your liability and could cause expensive fines and other costs.