Payroll mistakes are messy, and they rarely resolve themselves expeditiously; in fact, more than one payroll error in a year can result in employees seeking alternative employment. Additionally, making a mistake with your payroll can cost your company countless hours—and dollars—to resolve.
If you’d like to hold onto your employees and avoid hefty legal fees, take a look at our top eight common payroll mistakes.
Perhaps the easiest error to diagnose—and the toughest one to fix—is simple inaccuracy in paying your employees. This can result from any one of numerous causes; messy record-keeping, outdated time-keeping methods, and straight-up forgetfulness are all common culprits. Unfortunately, this mistake’s relative commonality doesn’t do anything to lessen the impact it has on your employees: After two inaccurate checks, nearly 50 percent of employees will look for a different job.
Even if you don’t lose your employees, you risk a lawsuit with every incorrect check you write. Fortunately, a possible solution is available: self-serve payroll. By allowing employees complete transparency with their punches and ongoing payroll, your staff will approach you with any problems they see far before the problems actually manifest. Automated payroll will also help prevent human errors, cut down on data entry, and overall create a more accessible environment for your employees.
Another area of inaccuracy revolves around using the honor system, which—while commendable—also stands to lose you a lot of money with the wrong employees. There are several different types of automated payroll system that will allow you to use GPS or biometrics to double-verify punches; this is the best way to ensure that employees are reporting honestly without harboring hard feelings.
A common theme on this list is outdated—or manual—payroll. Outdated timekeeping and payroll processes can cause multiple different kinds of headaches, from inaccurate payments to noncompliance or other costly errors. Simply switching to an automated or enhanced payroll system will keep everyone—employees, managers, and the government—satisfied enough that they don’t come poking around your office.
If you can’t foot the bill for a payroll system overhaul, you can always consider outsourcing. Abacus Payroll offers affordable services tailored to your specific needs to ensure that you and your employees receive only the best in payroll processing.
Remote Worker Accommodations
It’s 2020, and some—if not most—of your employees probably perform a degree of remote work; in fact, you may even have an entire segment of your team that works entirely from home or separate locations. While payroll for these employees can be difficult to manage, their convenience is absolutely paramount if you want to retain them.
The easiest way to keep remote workers satisfied without any extra hassle is a self-serve payroll portal that they can access online. Implementing this kind of system allows employees to punch in and out as needed, view their tax documents, and more; on your end, you are usually able to keep track of employee hours, set parameters for work time, and import your employees’ hours directly into your preferred payroll system.
Since the traditional payroll options may not accommodate remote workers’ hours, tax requirements, or geographical needs, using a self-serve portal is all but necessary for these kinds of employees.
You’re probably aware that some of your employees aren’t actually “employees” in the traditional sense. Classifying contractors, temporary hires, or freelancers as employees is a common error—one that can result in fines, overpayment, and even an audit; since your full-time employees use W-2s and everyone else uses a 1099 for tax purposes, misclassifying employees can ultimately have a disastrous outcome.
Organization and an updated contract for temporary employees are probably the two best ways to combat this error. If both you and your contractors understand their status within your company from day one, you’ll run less of a risk of misclassifying, misreporting, and withholding the wrong amount of tax money.
Overtime is only a pleasant surprise for employees, and only come payday—and, if you’re not staying on top of your payroll, they don’t even get that satisfaction. Unfortunately, failing to pay employees overtime on time can, like every other mistake on this list, lead to anything from general dissatisfaction to federal fines.
Using an automated payroll clock and forecasting for hours can help you stay on top of your overtime hours even when they come as a surprise, and making sure you’re compliant with state and federal law regarding overtime will prevent the rest of the aforementioned logistical headache. Remember, having employees account for their hours is a convenience for both them and you.
Multi-State Messes and Regulatory Changes
Whether you have multiple physical locations or simply employees who live and work remotely in a different state, accounting for different states’ regulations and individual pieces of legislature along with your own can prove challenging—and, like anything else on this list, will net you steep fines should you fall out of compliance. Fortunately, most automated payroll options or outsourced payroll services will account for these disparities for you.
If hiring an external payroll team or updating your current system isn’t an option for you, keeping up with multi-state regulatory changes can be extremely challenging. If at all possible, make sure that any future hires have the proper qualifications to juggle payroll, your state’s legislative changes, any other relevant states’ changes, and federal alterations. Having a background in tax processing can help, so look for candidates in that area.
Remember, outsourcing your payroll to a service such as Abacus Payroll, Inc. is often a cost-effective way to ensure that your employees get paid, your business meets state expectations, and you walk away with a degree of satisfaction. If you’re encountering state or regulatory problems, outsourcing really is your best option if updating your payroll isn’t feasible.
This one’s a bit of a no-brainer—until you’re in the middle of a multi-state organization and you forget. Your current payroll vendor or HR team should communicate with you regarding upcoming bank holidays. The more advance warning you have, the better your planning will be. You should also keep in mind that some holidays don’t merit a day off in some states, so double-check with your payroll provider or handler before crossing out any calendar days this year.
Paid Time Off
With the advent of mandatory paid sick leave, making sure that your PTO policy is correct is more important than ever. You can circumvent the majority of pitfalls by keeping detailed records and double-checking all of your employees’ time-off requests; however, using a payroll vendor or service will help alleviate some of the responsibility.
Payroll is tricky to get right and catastrophic to get wrong, but rest assured that the majority of common mistakes are easy to avoid with the correct anticipation. For more information on how you can keep your business compliant and your employees paid, call Abacus Payroll at (856) 667-6225 today!