Avoid These Common Payroll Errors
Nearly 54% of Americans have dealt with a payroll error in some fashion in their working life. Mistakes happen, but when it comes to payroll, mistakes can be extremely costly for your business. Learning about simple yet costly mistakes can help you minimize payroll errors. Better yet, using powerful HR technology can help remove human error and significantly reduces the chance of common payroll errors.
Employer Support Services offers comprehensive payroll services leveraging advanced payroll technology to make your life easier by processing payroll faster and more accurately than ever.
[Related: HRAs & FSAs – A Comparison & Contrast]
The 5 Most Common Payroll Errors
Employers must pay their employees for all wages earned, and payment must be completed in a timely manner. Mistakes like miscalculations, incorrect payroll taxes, or paying employees late can be detrimental to your business and cause employees to leave. A simple error can lead to employee turnover costs, retraining, and a mountain of paperwork; even worse, you could end up dealing with a lawsuit from an employee or have to pay hefty government fines.
It’s best to prevent the below common payroll mistakes and shield your business from potential consequences if possible.
In most states, miscalculation errors can be corrected on the next pay cycle. But a payroll error like paying an employee too little may cause them to look for employment elsewhere, even if the error is fixed in a timely manner. Frequent miscalculations can result in a poor reputation and possible hiring difficulties later down the line if previous employees broadcast their poor experiences online.
- Incorrect or neglected payroll taxes
Employers and employees are responsible for withholding taxes. Incorrect payroll taxes can add up over time and be extremely costly for both the business and the employee when corrected all at once. Employees who are unexpectedly burdened with unpaid taxes due to their employer’s mistake may leave or seek legal action after reporting it to the Internal Revenue Service. You could end up having to pay settlement fees, to court, or pay attorney fees for this violation.
- Not Paying Overtime
Non-exempt employees must be paid time and a half for all hours worked over 40 hours in a week. Noncompliance with overtime laws can result in legal action against the company and hefty fines.
- Paying Employees Late or Infrequently
Employees are entitled to be paid for their hours worked in a timely manner. If employees are paid late, they may leave the company. In some cases, payroll errors like late or infrequent payment may open the company up to legal disputes. You could also face employee turnover costs and a poor reputation from past employee reviews.
- Failure To Maintain Historic Payroll Records
Local guidelines may vary; however, the US Department of Labor requires employers to keep all payroll records for at least three years and timecards for two years. It’s recommended to keep payroll records for four to five years to protect yourself in the case of audits and legal action from past or present employees. Failure to keep sufficient records is a payroll error that can bring fines from the local and federal governments.
[Related: How To Improve The Onboarding Process]
How to Prevent Common Payroll Errors
You can work to eliminate common payroll errors in several ways. At Employer Support Services, we generally recommend the following three simple solutions:
- Benefits Of Outsourcing Payroll
Payroll processing can take up a large portion of an employee’s workweek, with 72% of companies reporting that it takes more than an entire day to process. Combine that with the need to stay on top of ever-changing regulations, and it’s not surprising that 38% of companies are outsourcing at least part of the payroll process.
When employers use outside companies to manage their payroll, they gain access to HR and payroll professionals. These experts can help alleviate any problems with payroll and answer any questions a business owner may have.
- Cloud-Based Payroll Solutions
Another prevention method for payroll errors is cloud-based payroll solutions. This solution provides those who manage payroll access to payroll solutions remotely. Cloud-based payroll solutions provide flexibility for companies with remote employees and offer reliability during power and internet disruptions.
- Integrate Payroll with Onboarding
If you haven’t already, integrate your payroll with onboarding. This allows new employees to enter their own personal data, like tax and bank information, and puts the responsibility on the employee to verify the accuracy of the information. You should also have an employee portal set up so that employees can check pay stubs and maintain accurate records of their personal information. ESS offers fantastic onboarding and payroll solutions to help your company succeed.
If you need comprehensive, reliable payroll services, contact Employer Support Services. Our payroll professionals can help ensure your business doesn’t commit any costly payroll errors. Get peace of mind with our easy-to-use payroll platform and our experienced staff of payroll experts.