Highlights
- Payroll mistakes can cost your business money, frustrate your team, and damage your company’s reputation.
- The most common payroll mistakes include misclassifying employees and missing tax deadlines.
- At WorkLogic HR, we provide payroll administration services to keep your business fully compliant and avoid costly mistakes. Find out how we can help your business!
Accurate and timely payroll keeps your employees happy and productive. However, keeping up with ever-changing regulations and complex tax codes can be a nightmare for employers. Even seemingly minor payroll mistakes can have big consequences. Inaccurate paychecks can lead to frustrated employees, while missed tax filings can result in hefty fines.
The good news is that there are many things you can do to minimize the risk of payroll errors. This article explores five common payroll mistakes businesses make and gives you actionable steps to avoid them.
Let’s get started!
4 Common Payroll Mistakes — And How to Avoid Them
An EY research study found that even a single payroll error can cost a company an average of $291. To avoid falling into this costly trap, let’s uncover the most common payroll mistakes businesses make and explore some key strategies to keep your finances – and your employees – happy.
Misclassifying Employees
Employee misclassification is one of the top payroll mistakes that companies are exposed to. Basically, this occurs when companies mistakenly label workers as independent contractors instead of recognizing them as regular employees.
Classifying employees appropriately is vital to determine whether they are eligible for overtime pay, minimum wage, and other benefits that contractors do not receive.
Misclassifying employees can lead to hefty fines from government agencies for wage and hour violations, with penalties that can reach thousands of dollars. On top of this, disgruntled workers may sue you to recover unpaid wages and overtime. Even most damaging, however, is the reputational hit your company takes, hurting trust and impacting your ability to attract talent.
Worker Classification Best Practices
- Review and update job descriptions to ensure they accurately reflect the tasks, responsibilities, and level of control an employee has.
- Seek professional guidance on proper classification based on federal and state regulations.
Inaccurate Data Entry
Inaccurate data entry is a surprisingly common payroll mistake. This can go from transposed numbers in hourly entries to typos in employee names or bank account information.
The consequences of these mistakes may result in underpayments, missed overtime pay, or overpayments (which can create a headache for your accounting team).
How to Minimize the Risk of Data Entry Errors
- Use data verification methods, such as having a second person review entries. This can help catch typos before they cause problems.
- Invest in payroll software with built-in error checks to streamline the process and ensure accuracy.
Missing Tax Deadlines
Keeping up with ever-changing tax deadlines is a challenge for any business. However, failing to deposit or file these taxes on time can result in hefty penalties and interest charges from the IRS.
How to Never Miss a Tax Deadline
- Implement a dedicated payroll calendar that highlights key filing and deposit dates.
- Use payroll software programs with automated reminders and electronic filing capabilities to streamline the process and minimize the risk of human error.
Security Breaches
Payroll data is a goldmine for cybercriminals. It contains highly sensitive information like Social Security numbers, bank account information, and employee names and addresses. This information could be potentially used for financial fraud, phishing scams, and identity theft.
A payroll data breach can have devastating consequences for both your company and your employees, from financial losses to hefty fines and reputational damage.
How to Prevent Security Breaches
- Use strong passwords, firewalls, and encryption software to protect your payroll systems.
- Educate your employees about cybersecurity best practices, such as phishing email awareness and password best practices.
Keep Your Payroll Accurate and Safe with WorkLogic HR
Payroll mistakes can be very costly for your business. Not only do they expose you to hefty fines and penalties, but they also erode trust with your employees and damage your company’s reputation.
However, keeping up with tax regulations and evolving compliance requirements can be a challenge for businesses with limited HR resources. At WorkLogic HR, we leverage our team of seasoned payroll experts to navigate these complexities. We ensure your business stays compliant, delivers accurate payroll on time, and frees up your HR team so they can focus on core priorities.
Ready to streamline your payroll? Contact us today for a free consultation and discover how our expert payroll services can help you avoid costly payroll mistakes!
