Payroll headaches are an epidemic in offices around the country. Even if you can streamline time tracking, there are dozens of payroll problems that pop up when you least expect them. Minimizing the errors and maximizing efficiency to complete consistent, compliant, and accurate payroll seems to be full of hurdles, hoops, and obstacles in your way.
Here is a list of your most common payroll problems, and how to fix them today to prevent them from happening in the future.
If you’re consistently seeing mistakes in your payroll, it could be because of an organization issue. Find a space to keep all your payroll, employee records, and critical information organized. Eliminate as many paper forms as you can to minimize the mess and keep the process as streamlined as possible.
Even if you’re a small business, you need to know what kind of employees you have. Perhaps some are full-time, or part time, but others might be classified as temporary, freelance, contract workers, or seasonal. Each type of employee needs to be classified correctly to ensure the correct withholding or payment of taxes is taken care of. Misclassifying employees can result in back taxes and federal penalties. The basis of the classification is not just the title you assign, it’s more about the employer/employee relationship and the nature of the work.
Dealing with overtime, vacation schedules, and sick days can be mind-numbing, and it makes payroll a painstaking process. For that reason, keep scheduling simple by using a software that works for your business. Choose a software that tracks employees time each day, sick days, vacation time, and overtime hours for you. This is much easier than a manual time card system which leaves you guessing and more susceptible to errors. If a software program sounds difficult, or your software is causing more problems than it’s worth, it might be time to call in a professional to outsource your payroll and let them manage the tracking of employees.
Assuming One Size Fits All
Just because your brother-in-law, neighbor, or cousin runs their own business doesn’t mean they know how to handle your payroll. Sometimes, even that which seems to be common sense is not, and you can’t blame errors on a misunderstanding. A one-size-fits-all approach doesn’t always work, and in some cases, taking non-professional advice can actually make your headaches worse.
Pre-Tax and Post-Tax Payroll Deductions
Not all deductions are created equal. Some may reduce an employee’s federal and state taxable wages, but not necessarily their FICA wages. Pre-tax deductions reduce tax obligations by coming out of gross earnings. There are different deduction rules and some must be renewed annually. The only way to eliminate potentially expensive errors is to be very clear about the rules governing each type of deduction. Even some accounting software can get it wrong, so having a professional to double check is imperative. If you don’t have an accountant on your team, it may be worth it to outsource your payroll to a team of professionals who can make sure you’re taken care of.