Are you in compliance with your payroll? While nearly all companies would respond with a resounding "Yes!" a closer look at their payroll often finds various errors. A misclassified employee here, missing paperwork there – you may be looking at costly errors in the form of fines and litigation. Even if you're sure your payroll practices are up to snuff, it could still be worth you time to investigate whether you are committing these four common payroll compliance mistakes.
If year-end taxes are the only thing your accounting department thinks they need to worry about, you're making a very common but potentially costly payroll compliance mistake. Employers need to report their new employees, file Form 941 quarterly, and ensure that employees and vendors receive their appropriate forms prior to filing taxes. If your payroll system doesn't include an ongoing calendar of when federal, state, and organizational deadlines are approaching, you may miss providing important information.
What's the difference between exempt and non-exempt? Well, it's more than just a title. With the federal government looking to tighten restrictions on exempt workers, now is the perfect time to reassess how you classify your workforce. Exempt employees are salaried employees that manage two or more employees or provide some input into the job status of other employees. Many times, companies use exempt status inappropriately to reduce the need for timekeeping, which may be beneficial to both the company and the employee, but is against government regulations. The same errors can happen between employees and 1099 Contractors. Understanding the differences in employee classifications and ensuring you strictly meet federal guidelines is essential to preventing this common payroll mistake.
If you still have a finance person pouring over time sheets and tax forms, you're sure to have some human error. The more manual your process is, the more probability that an incorrect figure is being reported for taxes or an employee is shorted a couple of hours from their paycheck. Even the best accountant makes mistakes and if you haven't automated your data gathering and record keeping with a workforce management system, you will have errors in your payroll. While a great finance person is pivotal to employ, reduce the chance of calculated errors by automating your payroll process.
Poor Record Keeping
When employees first start their new position, human resources is often working furiously to gather all necessary information for payroll. As the years go by, that paperwork is moved, rearranged, and sometimes even lost. One common payroll mistake is for a company to be maintaining outdated or incomplete records on their employees, vendors, and contractors. All employee paperwork should be easily accessible, easily reviewable, and easy to update by that employee. Companies that are maintaining paper copies surely have outdated information. Instead, consider implementing a workforce management system that allows files to be scanned and uploaded. This way both the employer and employee can access and adjust their paperwork as needed.
Running a business requires keeping up-to-date with a lot of moving parts. The best employer may have problems keeping compliant with payroll not because of neglect but because they don't embrace technology to simplify the process. Automation and education are two ways to combat these four common payroll mistakes and prevent any others from happening. By putting more time into developing a functional system that alerts employees to update information, update records, and gather information for upcoming deadlines, your employees can do their job more effectively.