5 Payroll Mistakes to Avoid in 2019
With 2019 in full swing, there’s no better time than now to review your payroll system to ensure that everything is in good working order.
If everything checked out as planned in 2018, you can continue down the same path over the next 12 months. However, if you made any payroll mistakes last year, it’s imperative to avoid them in the future.
As a business owner with employees (even if it’s just one), you must have a system for handling all payroll related activities. From paying employees to filing government tax forms, there’s no shortage of responsibilities.
Here are five of the most common payroll mistakes, all of which are easy to avoid with the right system in place:
1. Worker Misclassification
Is a worker an employee or contractor? Exempt or non-exempt? While you might not think this is a big deal, misclassification will throw your payroll system into a tailspin, not to mention the fact that it can cost you a lot of time and money.
The employee vs. contractor designation is one you must understand. The IRS outlines everything here, including the consequences of misclassifying an employee. Misclassification doesn’t hurt just you as a small business owner; it also hurts your employees. For example, if you classify an employee as exempt when they should be non-exempt, that employee could have missed out on overtime wages.
2. Missing Deadlines
If you don’t have a payroll calendar, there’s a very good chance you’ll miss a deadline at some point. For example, you may forget to file an important federal or state return. Subsequently, you could be hit with a penalty and interest charges. When it comes to payroll, the one date you don’t want to forget is the day you process payroll. Missing a payroll date messes up your records and delays your employee’s paychecks, which is something they won’t be happy about.
3. Lack of Record Keeping
A record keeping system is a must. Without this, you could make inaccurate payments, mix up Social Security numbers, and forget to provide the necessary agencies with the information they require.
Not only does poor record keeping add stress to your life, but it can impact your bottom line and efficiency.
4. Miscalculating Overtime Pay
Don’t assume you can do whatever you want in regards to how you pay your employees overtime.
Federal overtime provisions are contained in the Fair Labor Standards Act (FLSA), and it’s your responsibility to understand what’s required of you.
If you miscalculate overtime pay now, it could cost your company big money down the road.
5. DIY Payroll
Many business owners are looking for ways to save a buck (even if it’s only a few dollars here and there). This leads them to a DIY (do-it-yourself) payroll system. There are many potential problems with this, including:
- Lack of knowledge regarding local, state, and federal requirements
- Greater chance of making an error
- Nowhere to turn to ask questions or express concerns
With a small business payroll provider on your side, you can forget about these potential problems. Instead, all the work is done for you. DIY payroll will be a thing of the past.
While some payroll mistakes are simple, others are time-consuming and costly to fix. As a small business owner, mistakes are bound to happen, but being aware of common mistakes and asking for help when you need it can help. If you decide the risk of the mistake isn’t worth it, choosing to go with a reputable payroll provider is always a good choice.
Have you made one or more of these payroll mistakes in the past? What steps are you taking to avoid them in the future?