Implement a uniform timekeeping system that accurately captures all your employee’s hours. Work with them to backtrack and fill in the missing data to the best of your ability, and document any discrepancies or estimates made. Your finance team notices inconsistencies in how overtime pay is being calculated across different departments. Learn how to manage global payroll for your team and keep your company compliant with international labor laws.
Incomplete Records
The FLSA is administered and enforced by the Wage and Hour Division of the US Department of Labor. Take preventive steps to identify and rectify payroll errors before employees or tax authorities are asking you questions. You also might not be aware of all the payroll taxes that apply to employee earnings. For example, non-exempt employees in California earn overtime understanding current assets on the balance sheet pay on hours worked past eight hours in one workday. Here are some of the most common payroll errors and how to avoid them.
If you incorrectly calculate gross pay, your payroll taxes will also be off. And remind employees to let you know when their information changes. The payroll process can be error-prone, but keeping missteps to a minimum is crucial for the benefit of your employees and your business as a whole. The first step to avoiding mistakes is to be in the know about what they are.
Poverty transforms the comforts many of us take for granted into luxuries. You may also want to keep lists of all new hires, all pay changes, all deduction changes, and other updates in one central location, organized by pay period. Then, when you’re working on payroll for that period, you can review each list to ensure all the changes made it into your system accurately. Failing to get the right forms to the right people in a timely manner isn’t just inconvenient for employees—it can also spell trouble for your company.
You will also likely need to consult with your legal team if the cut-off dates are legally mandated (i.e., they should be paid every 14 days).Accidentally overpaying employees is more common than you may think.Staying on top of labor law poster guidelines, state and Federal changes, OSHA requirements, and the like will all help you avoid these worst-case scenarios.Part of your duties as an employer is keeping records of important documents.For some extra peace of mind, you can also contact your state and local governments to check on rates or do a quick Google search.
Failing to Keep Proper Payroll Records
You have to keep up with updates to existing laws and legislation, like minimum wage, paid time off (PTO), and tax withholding. You must also learn and institute new government policies and programs as they roll out. If you’re not keeping up with these constant changes, you’re opening the door to payroll errors, costly compliance issues, and legal troubles.
Are You Making These 5 Common Payroll Mistakes? (Plus Best Practices You Need to Know)
Year-end is hectic as heck for many business owners (including myself). And with all of the hecticness, it can be easy to get caught up in other tasks and forget to send out tax forms (e.g., Form W-2) to your team. Keep an eye on your inbox or mailbox for notifications about rate changes.
For example, in Oregon, you can wait until the administrative costs in accounting: definition and examples next pay period to correct the mistake if the amount is less than 5% of the total paycheck. A best practice is to use a payroll software or provider for accurate calculations. Another common payroll mistake is failing to report non-wage compensation. Examples include bonuses, awards, stock options, and fringe benefits (e.g., personal use of a company car). These errors can happen due to misunderstandings, constantly changing tax regulations, manual or inadequate payroll processes, or lack of oversight.
Submitting the Wrong Tax Amount
That way, you can just plug in the hours, and the software will handle what is bad debts expense the calculations for you (hello, free time). First, the employer must stop the actions that led to the violations. After identifying the issue (assuming the violation was unintentional), the employer must remedy any harm caused. This could mean paying back pay and compensation for lost wages, benefits, and other financial losses employees may have incurred.
Employers may also be on the hook for back pay and benefits that employees were entitled to. The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. Comprehensive coverage for your business, property, and employees.