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What Are the Common Payroll Mistakes and How to Avoid Them?

by Muhammad Asad
March 28, 2022
in Business
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Payroll is an important element of every organization. The payroll department of an organization undertakes wage deductions, delivery of payroll checks, maintaining current and ex-employees wage records, and their dates of employment. It also calculates bonuses, overtime, paid/unpaid days, pensions, and much more.

Payroll management is a complicated process, and the slightest mistake can have a heavy toll. Some of the common payroll mistakes are elaborated below:

Common Payroll Mistakes

Misclassifying Workers

Some workers are regular employees, while others are independent contractors. If you mix them up, it could prove costly. You do not pay minimum or overtime wages to contractors. Similarly, you don’t deduct employment taxes from their wages. If you misclassify a worker, you have to pay both employee and employer’s taxes.

How to Avoid It

Misclassifying workers can end up being one of the most expensive mistakes an organization can make. The payroll staff should be adequately trained in recognizing the different classes of employees. Separate sections should be dedicated to deal with various categories.

Missing Deadlines

Time is very important in payrolls. Your employees depend upon their wages for their livelihood. Failing to stick to a reliable schedule can damage your employee’s trust. Similarly, it is also important to meet tax deadlines. Missing a tax deadline can cause penalties, late fees, and even legal troubles.

How to Avoid It

It is essential to mark your payroll calendar and set up a reminder in your payroll software to deliver the payments timely. Similarly, the taxes should also be paid well in time to avoid penalties.

Incomplete Records

When it comes to payrolls, maintaining complete records is a prerequisite. The record includes hours worked, the total number of employees, payment rates, payroll dates, and more. It keeps the organization safe in case of audits and ensures the smooth running of the organization or department.
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Incomplete records can lead to many unexpected costs.

How to Avoid It

You can never go wrong with your payroll if you keep a checklist of every type of record. With a checklist, you can go through every step of the process, reviewing each piece and making sure everything is in order.

Lagging On Garnishments

A garnishment is when a court issues an order that directs an employer to withhold a specific amount from an employer’s paycheck. The money is instead sent to a person or company to which the employee owes a debt. Disregarding a garnish request costs the organization in the long run.

How to Avoid It

There is a dire need to be responsive to garnish requests. Whenever a garnish request is received, you must put it in the relevant employee file and add it to your calendar so that it is not missed.

Not Maintaining Confidentiality

Payroll data should be confidential. It should not be disclosed to people outside the payroll department. Payroll breaches can have serious consequences. Similarly, if you are using payroll management software, there might be threats of cyberattacks, which could severely damage the payroll system.

How to Avoid It

Confidentiality and security is a big issue when it comes to payrolls. You must upgrade your payroll system frequently to make it immune to cyberattacks. Similarly, the manual payrolls should be computerized phase-wise to make them more efficient and safe.

Surely, managing payroll is not an easy job. However, you can make it error-free by automating the entire process. This step alone will help solve all your major issues. By automating the payroll management, it is implied to use payroll software for accountants. You can find abundant such programs online, but needless to say, if you want the best results, you should use the best software out of the lot i.e. Netchex.

One of the best payroll software in 2021, Netchex offers full-fledged payroll management support. It also comes with numerous other features. So, not only it can make payroll management easier for you, there are various other benefits you can obtain by using this small business payroll software. It comes with convenient pricing plans. And there is an option to opt for a customized plan as well.

Muhammad Asad

Muhammad Asad

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