An effective payroll method in your company is just like oxygen. When it’s present, you can hardly notice it. Whereas, when it’s missing, you are unable to think of anything else. It makes payroll one of the less appreciated operations within your business. When done correctly, payroll can keep workers satisfied and aid your enterprise to stay safe from legal consequences. On the other end, when payroll errors crop up, their effect can ripple across an organization.
But, fortunately, all the common payroll mistakes can be easily avoided with proper planning, education, and the right tools.
With a complicated payroll method, there are many areas where companies can make errors. Here we present the common payroll mistakes to watch for in your business.
With PTO, deductions, overtime, and more payroll administrators have a lot to monitor while calculating pay. For overtime pay, the rule is 1.5 times a worker’s daily salary for any time worked beyond 40 hours in a week. Ineffective time tracking abilities can also contribute to pay miscalculations. If your organization does not have a reliable method to monitor paid time off or staff hours, then your chances become higher of making payroll underpayment or overpayment.
- Missed Deadlines
Time is crucial in payroll. But with multiple steps in the payroll process, missing the deadline is extremely easy. Your workers count on your company to deliver payment continually and on time. The inability to stick to a reliable schedule can destroy a worker’s trust in the organization.
While coming to payroll taxes, deadlines are no less significant. Missing tax deadline can cost your business a considerable price with penalties, and also legal trouble. Understanding timeline- internal for paydays as well as external for taxes is crucial to an effective payroll process.
- Not Sending Tax Forms
The year-end is a difficult time for payroll professionals. After a year of processing taxes and payments, companies should send out all-important tax forms to workers. Staff requires W-2 forms, while the contractors who had earned more than 600 dollars require 1099s. Hence, failing to fetch the appropriate forms to the right person on time is not inconvenient for workers, and it can spell trouble for your organization.
- Unable to Keep Records
When talking about payroll records, you can never be thorough. The Fair Labor Standards Act needs staff to keep three years’ worth of pay records. Such records comprise of payment rates, payroll dates, worked hours, and more. It may seem a lot of data, but a few states need more with records dating even further back. This data helps you to run payroll more effectively now and then. Without the updated records, you are at high risk of miscalculating pay, and more.
Tips to Prevent Payroll Errors
Here are a few elements into your payroll method, which can help you to catch mistakes before they occur, thus making payroll easier, accurate, and faster.
- Implement the Right Tools
Which is the best way to keep payroll errors from disturbing your company? Invest in the right human resource management software and payroll system. The right HR solution like SutiHR will handle and update crucial employee information such as account number, wages, hours, and later communicate those changes to your payroll solution, thus eliminating the need for double entry.
The right payroll system must sync with your automated HR software and automate the time-consuming tasks. Payroll systems make it simple to file taxes, run reports, dispense pay stubs, and more.
- Always Keep a Checklist
Payroll professionals have a lot of things to track, even if they have a solution to support their methods. With the help of a checklist, they can go through each step, reviewing every piece, and ensuring that everything is perfect.
Also, you may want to keep lists of all recruits, deduction changes, pay changes, and other upgrades in a centralized location, planned by pay period. Later, when you are working on the payroll for that period, you can review every list to ensure that all the changes made into your system are accurate.
- Run Report Before Payroll
When you have access to the payroll system, running some major reports before payroll processing can aid you to catch and avoid errors. Such reports include.
- Cash requirement showing how much amount your company should have to pay payroll, broken down by categories such as deductions, taxes, and more.
- Summary for the deduction, which offers all deduction on each worker so that you can double-check the prices.
- The payroll register report enables you to see all payroll details in a summary format.
The Bottom Line
Staying aware of the payroll errors is the primary step to preventing them in the long run and maintaining an effective payroll method. While running a smooth payroll may at times feel like thankless work, it impacts multiple other aspects of the more prominent companies, such as company culture and staff satisfaction. Hence, invest now in making the payroll process perfect, so your organization does not have to pay for it later.