3 Common Payroll Mistakes and How to Steer Clear

3 Common Payroll Mistakes and How to Steer Clear

Any organization that has employees must have payroll, and good payroll management is a must as it allows the company to ensure that they’re accurately and timely compensating their employees. This is why we at Taurus CPA Solutions are exploring the importance of error-free payroll, some of the mistakes to avoid, and how we can help your business avoid them.

The Importance of Error-Free Payroll

Many people have experienced issues with their paychecks, whether due to inaccuracies or the paychecks being distributed later than usual. Employees want to feel valued and motivated, and payroll issues can lead to a disengaged workforce that feels discontented and willing to seek opportunities elsewhere if payroll issues become a regular occurrence. Not only that, but the area of payroll is tied closely to legal compliance and labor laws. Improperly classifying workers, whether they’re employees, independent contractors, exempt, or non-exempt, can result in legal battles and penalties.

Common Payroll Mistakes

Incorrect Hourly Rates or Calculation Errors

Miscalculating hourly rates can lead to overpaying or underpaying your employees, which leads to frustration and disappointment, as those in charge of the payroll must then dedicate time and resources to investigate and correct errors in the payroll, which can take anywhere between two and 10 days to resolve. You also want to ensure that the company doesn’t deduct the wrong amount for benefits or other payroll deductions.

Worker Misclassification

Misclassifying workers also leads to incorrect hourly rates and calculation errors, which exposes the company to legal consequences and tax liabilities. A misclassification can be identifying a worker as an independent contractor instead of an employee or stating that they’re exempt from overtime when they aren’t exempt and are due their overtime pay as per the Fair Labor Standards Act. Misclassifying employees leads to trust issues among those who work for you, impacts your business’s reputation, and costs the organization money.

Not Properly Tracking Employee Hours or Overtime

Overtime is more than just employees working over the standard 40 hours per week; it also includes when employees work during break times, the time they spend traveling between work sites, or even during training, team building activities, company parties, or other activities outside of their normal work hours. If that time isn’t tracked properly, it leads to improper overtime payments, which can then take a lot of time to fix, and employers who fail to pay the proper overtime are obligated to pay back wages, the employee’s legal fees, or even paying fines per violation, which are about $1,000 each with higher penalties, including criminal penalties, for repeat offenders.

How to Avoid Payroll Mistakes

It’s easy to spend a lot of time trying to find solutions to avoid making costly and time-consuming payroll mistakes, but one of the easiest solutions is investing in payroll and accounting software like QuickBooks. QuickBooks automatically calculates overtime and pay rates and reduces human error. Another solution is to outsource your payroll management to a qualified professional, which has the added benefit of ensuring that you comply with labor laws and allowing you to focus your attention elsewhere.

Reach Out to Our Experts 

Don’t let the complexities of payroll management overwhelm you; we’re here to help. At Taurus CPA Solutions, our certified professionals are here when you need us most, whether for tax preparation and planning, business consulting, or another area. Reach out to us today to avoid risking common payroll mistakes so you can focus your attention on other aspects of your business.

No Comments

Sorry, the comment form is closed at this time.