Payroll errors are more common than you think. In fact, about 20% of US payroll cycles include some form of error. With high volumes of data to manage, several employees and attention to detail required, it can be difficult to manage all these elements and ensure that your payroll function is mistake-free.
These mistakes not only impact your employees, but they can also impact your business, as they can lead to financial loss. On average, each payroll error can incur a cost of $291. For businesses, particularly small businesses, this can add up quickly.
So, what are the 7 hidden payroll mistakes you’re not aware you may be making? Break it down with ProSourceSolutions.
Employee V Independent Contractor
During payroll, employees and independent contractors can be incorrectly classified, potentially leading to financial penalties and repercussions. Employees receive regular wages and are entitled to paid leave (sick, annual and long service leave), and the employer is required to make superannuation contributions on behalf of the employee. However, an independent contractor is paid as per their service to the business, is not entitled to paid leave, and they are responsible for their own superannuation contributions.
Overtime
When it comes to overtime pay, there are a few factors to look out for. For instance, if an employee is entitled to time-and-a-half pay or state-specific overtime laws. Tracking hours incorrectly can lead to mistakes with overtime pay, which can leave the employer responsible for back pay, penalties and even legal action.
Garnishments and Tax Levies
It is important to pay attention to garnishments and tax levies during payroll. Garnishments and tax levies refer to court-ordered processes where an employee’s wages are withheld to pay debt, which can include child support or unpaid loans, etc. Employers are required to notify the employee of the garnishment and ensure that deductions are calculated as per federal rules, with accurate records kept for compliance. Incorrectly managing these elements can result in the employer having to pay the full amount of the garnishment or levy, which has not been deducted or paid.
Payroll Taxes
As an employer, you’re responsible for your payroll taxes. However, issues such as poor cash flow management or missing deadlines can mean that you fall behind on your payroll tax duties. This leads to financial penalties and legal repercussions.
Record Keeping
It is a legal requirement to maintain transparent, compliant and detailed records of payroll. This is both for the benefit of employers and employees. This is to ensure that there is evidence of compliance and regulation adherence so as to avoid financial penalties. During yearly audits, records are particularly important so your business has proof and evidence in the event of employee claims that become legal issues.
Regulations
Payroll laws and regulations, alongside tax policies, are constantly changing. It can be hard to keep up; however, failing to keep up can leave you facing penalties. It is important to stay updated with changing legislation so your business can stay compliant, and your employees are protected and treated fairly.
In-House Payroll
A common mistake that costs small businesses in the long run is attempting to handle their payroll in-house. Though it can sound like a cost-saving approach, it opens doors for errors and compliance complications, which can result in further financial detriment. It’s not just the financial impact; an in-house payroll function is also time-consuming and requires extra hiring and managing.
How Does ProSourceSolutions Help?
ProSourceSolutions can help you outsource your payroll function so you can expect an error-free and seamless payroll cycle for you and your employees. With an outsourced payroll team, you can benefit from an efficient and time management system that is updated with regulation changes to ensure your payroll remains legally compliant.
You can reduce the costs of hiring an in-house payroll team, managing constant changes, and mitigating financial repercussions from payroll errors when you let us handle it for you. Payroll doesn’t have to be hard. Contact us today to find out more.
Get Started Today
Payroll mistakes will cost you in the long run. It also affects your employees’ workplace satisfaction and your business’s reputation. Get started with ProSourceSolutions today for an outsourced payroll function that works for you every time, without mistakes.
We’ll take it from here.
