5 Common Payroll Mistakes and How to Avoid Them
Payroll processing is one of the least appreciated and yet most vital functions of any organization, no matter how big or how small. It effects company culture and can have a direct impact on employee happiness and retention when problems arise. The good news is, most common payroll mistakes can be avoided with proper education, planning, and access to the right tools. When processing complex payroll for a company, there are numerous ways organizations can make mistakes.
Payroll Taxes
Not paying the proper amount of payroll taxes can be a huge financial burden and shock to your company. Over 4 percent of small businesses pay fines for missed or late payments.
A payroll provider can help figure out which taxes pertain to your type of business and will handle complex filing and payments to various tax agencies which not only keep your compliant complaint but also keeps you current on all of your payments.
Miscalculating Pay
Poor time calculations can contribute to miscalculated pay. If your company does not have a reliable way to track employee hours or paid time off, the changes of making mistakes can compound. Mistakes can result in payroll corrections which can lead to unhappen employees.
Employee vs Contractor
Employees and contractors are very different, especially when it comes to benefits and taxes. Contractors may make sense for some employers in certain situations where work can be temporary.
Care should be taken not to misclassify your workers because it might be a violation of labor laws. When a small business misclassifies an employee and a contractor, there tends to be tax consequences.
Please keep in mind it is a legal classification, not the choice of the employer, if the worker is to be classified as a contractor or employee. For more information on the New Jersey Dept. of Labor’s distinction between employees and contractors, click here.
Missing Payroll Deadlines
The end of the year and the beginning of the year is a busy time for payroll professionals. After a year of processing payments and taxes, companies are required to send out a series of tax forms to employees.
Employees will need W-2 forms and contractors will need 1099s. Any delay in sending out the forms in a timely manner can be inconvenient for employees and troublesome for the organization.
Paperwork and Records
The Fair Labor Standards Act (FLSA) requires you to keep accurate records about payments to nonexempt employees, including pay periods, dates and hours worked and hourly rates just to name a few. To obtain the entire scoop of all the details, you can visit the Department of Labor’s web page.
Being aware of the most common payroll mistakes is the first step in avoiding them. As companies grow, they often delegate these crucial and important payroll and HR tasks to a third-party payroll and HR company to handle. This frees you up to do the things you love, and let’s the payroll professionals do what they do best.
About Liberty Payroll & HR
As a local company serving NJ and NY, we understand your business and the laws effecting payroll and HR. We were founded by accountants, and that means accuracy is our mission. From onboarding to year end tax documents, Liberty Payroll and HR continues to lead the way in outsourced payroll services throughout NJ and NYC.
Switching is simple! Liberty Payroll and HR offers customized solutions to fit your small business needs. Our payroll and HR services are scalable! Whether your business is small or large or somewhere in between, we will customize a solution with the payroll features to meet your exact needs.
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