The Payroll Blog

News, tips, and advice for small business owners

Wage Theft and the State of Small Business Employee Trust

Posted On
12/15/2020
By
Stephanie Davis

As a small business owner with employees, it’s important to accurately pay employees. While this may seem obvious, a lot goes into preparing paychecks and the opportunity for miscalculations is high when following a DIY approach to payroll. 

A knob that says trust pointed at the word high, representing high trust.

Those miscalculations may not always seem like a big deal, especially if they get fixed quickly, but continuously making payroll mistakes can cause employees to lose trust and turn to other places for work. Below we explain what you need to know about wage theft, how employees feel about incorrect paychecks, and where to get help to ensure you’re compliant.  

What is Wage Theft? 

Wage theft covers a variety of infractions that occur when workers do not receive their legally or contractually promised wages. Common types of wage theft include:  

  • Non-payment of overtime 
  • Not delivering a final paycheck when an employee leaves 
  • Failing to pay for all hours worked 
  • Not paying proper minimum wage 

Sometimes wage theft is accidental, such as misclassifying exempt and non-exempt employees. In that case business owners may not be paying proper overtime wages if an employee should receive them. Other times, wage theft is intentional and it’s a big problem that affects workers across the country. Restaurant work, agriculture, home health care, and retail are some of the industries that have the most reported cases of wage theft.  

How Employees Really Feel About Incorrect Paychecks 

To better understand how employees of small businesses really feel about payroll and paychecks, SurePayroll surveyed 1,000 small business employees who work at a small business with less than 20 employees and uncovered some important information. For example, according to the survey, 34% of employees say they have little to no money in their bank accounts on payday, and 71% schedule bill payments based on their payroll schedule. These numbers show that employees are already vulnerable and an incorrect, or delayed paycheck, can have big impacts on their lives. Additionally, employees are putting a ton of trust into their employers to get payroll right. Over 90% of small business employees say they trust that their employer will run payroll accurately and on time. While employees understand mistakes happen, more than half of respondents reported continuous incorrect paychecks could cause them to look for a new job.  

How Payroll Mistakes Can Lead to Wage Theft 

As we mentioned, some wage theft is unintentional and comes down to incorrectly handling small business payroll and taxes. In another SurePayroll survey, we asked 500 small business owners about all things payroll and taxes. According to our results, 42% of small business owners are following a DIY approach to payroll, which can be time-consuming and make mistakes more common to pop up. Regarding wage theft, 32% of businesses surveyed have made a mistake on payroll, with the most common payroll mistake being they underpaid an employee. In the cases of underpaying employees, it’s important to figure out how that happened and get the wages back in their hands as fast as possible. Withholding the incorrect amount of payroll taxes can also cause paychecks to be incorrect and result in missing wages.  

How to Avoid Wage Theft  

If you are one of the small business owners DIY-ing payroll, and you’re making frequent payroll mistakes, it may be time to look for help somewhere else. One place to start is working with an accountant or bookkeeperWhen you choose to get help from an accountant or bookkeeper, they can help with a variety of things including payroll. They will ensure that you are following the proper payroll laws for your state and that employee paychecks will be accurate. Additionally, they can guide you on finances overall for your small business, including help managing cash flow. Another option is to sign up with an online payroll service. With an online payroll service, you can rest easy that your employees will be paid accurately and on time, every time. When choosing a payroll provider, it’s important to do research and ask questions because they aren’t all created equal. Look for a service that makes running payroll easy, will have your back in case a mistake does happen, and flexible payroll options, such as when you need to run payroll last minute, are all great things to have.  

Bottom Line 

Getting payroll right is crucial for many reasons. Continuous mistakes and problems paying employees accurately can be a huge red flag to the IRSAdditionally, you don’t want employees to lose trust in you and decide to work somewhere else. 

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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.