Undeniably, payroll is an integral part of any business. It not only helps safeguard the reputation of the business, it also helps ensure you are compliant with all the existing payroll laws. However, payroll can be a really complex process and the slightest oversight can put your company in jeopardy.
Fortunately, this is where a payroll software can come in handy. To help ensure the business runs seamlessly, all the proper measures should be followed. Nowadays, many businesses consider investing in payroll software a smart and practical idea.
Even if you are extra careful, there are still a few mistakes you need to steer clear of to guarantee the payroll process is smooth sailing as can be. Below are some of the payroll blunders you should avoid at all cost:
Mistake #01: Missing Payroll Tax Deadlines
This is a prevalent payroll mistake that can get you in deep trouble. You have to remember that missing payroll tax deadlines can result in serious legal battles that might tarnish the image of the company. You can also end up paying hefty late payment penalties and charges.
How to Avoid This Mistake
Even expert HR managers can still end up missing payroll deadlines. This is especially true when things get really busy. To avoid this mistake, it would be wise to invest in payroll software. Payroll software comes with inbuilt calendar tools that can help you set up automated payments.
Mistake #02: Inability to Maintain Clean Records
Your inability to maintain clean records can sometimes prove catastrophic to your business. Apart from causing confusion and chaos in the organisation, it can also affect your compliance with the company policies. Moreover, it can also put the company at risk of being sued or penalised.
How to Avoid This Mistake
With a payroll software, you can easily streamline the payroll process and significantly minimise the chances of human error. A great payroll software also comes with cloud-based storage, timekeeping software, and direct deposits to help you save time.
Mistake #03: Absence of a Strong Backup
A robust payroll data backup should be considered a must for your organisation. Without a payroll data backup, can you imagine what will happen if the payroll manager quits immediately or your network crashes?
How to Avoid This Mistake
It is recommended that you have a backup of your payroll data and store them in a location that’s safe and secure. Consider investing in a cloud-based payroll software to ensure your payroll data is safe and protected.
Mistake #04: Inaccurate Tax Calculations
Tax laws can change every now and then. If you have a business in various locations, it can become challenging for you to stay on top of tax laws in various countries and locations. However, it is not an excuse to not get your tax calculations right.
How to Avoid This Mistake
It is recommended that you stay on top of your employment tax rates annually so you are aware if there are any changes. Ensure you also keep an eye on your medicare tax, social security tax, state income tax, and so on.
Mistake #05: Inaccurate Classification of Workers
Misclassification of workers is another common payroll mistake most people commit. Companies have two types of workers: Full-time and independent contractors or freelancers.
Unfortunately, employees are sometimes misclassified. When an employee is misclassified, you can end up owing them back pay. Misclassification of employees may also result in penalties.
How to Avoid This Mistake
While misclassification of employees is rampant, it can be a very costly mistake. Mistakes like this are typically considered intentional by the IRS and your business can be penalised. To avoid misclassifying employees, keep the following in mind:
- Do not treat independent contractors or freelancers as employees
- Invest in a good payroll software
- Hire contractors or freelancers through leasing companies