Common Payroll Mistakes a Small Business Should Avoid
Running a small business takes a lot of work and countless things need to be kept in mind to ensure that the business succeeds and that the customers and clients are happy. However, you can’t forget the importance of the behind-the-scenes aspects of running a business. Choosing to use payroll software can help you avoid many of the following mistakes that are far too common with small businesses.
This is one of the most common mistakes that businesses make, although it should be the last thing they do. Incorrect pay could occur for a range of reasons. Someone might have been mistakenly docked a day’s pay, or several hours of pay, even though they were at work. The company might not have correctly adjusted for an employee’s raise, which could mean they are owed back pay. In other cases, the company might pay the employee too much. Regardless of the reason, this is a serious problem that could lead to legal consequences if it is not amended.
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Not Paying the Payroll Taxes
The government collects payroll taxes, and these need to be calculated and paid on time. Not paying the payroll taxes will lead to fines from the IRS, and this happens with more small businesses than you may imagine. Make sure the taxes are accurate and that they are paid before they are due to reduce the risk of missing a payment or making a late payment.
Not Paying Attention to the Minimum Pay Period
Do you know the minimum pay period in your state? Many states have laws that determine the minimum payment period. If you want to be on a monthly payment schedule, it might not be allowed in your state. Find out the laws and make sure that you abide by them.
Paying Late or Not Paying
With a small business, it can sometimes be difficult to keep track of everything that’s happening and that needs to be done to keep things running. There is a risk that you or those who are in charge of payroll might forget until it’s too late. This means that the payments could be late by one or more days. This is inconvenient for employees and it could harm their finances.
Not Paying Overtime Properly
Employees that are not salaried are considered to be exempt. When they work beyond their normal 40 hours in the week, they are supposed to be paid at 1.5 times their normal hourly wage. Do not forget this when handling the payroll.
Not Paying Nonexempt Properly for Training
According to the Fair Labor Standards Act, meetings, training, and lectures will normally count as working time. The only time that they aren’t considered working time that should be paid is when all of the following conditions are true: it happens outside of normal working hours, it is voluntary, it does not relate to the job, and there is no other work performed at the same time.
Not Paying Non-exempt Employees for Functions
If there is a company function that the employees are required to attend, they need to be paid for it. This is true whether the event happens at the workplace or outside of it. Holiday parties are a good example of this.
Improperly Maintained Records
Do not make the mistake of keeping haphazard records. You are required to keep your payroll records and documents. Most states require you to hold onto them for four years, but you will want to check the laws in your state. The types of documents that must be retained include pay stubs, W-2 forms, and timesheets. Check with the labor office in your state to determine which forms you are required to keep for your employees. Make sure the records are kept organized and in a safe location.
Consider Payroll Software
These are just some of the most common mistakes that many small businesses make with their payroll. Now that you have a better understanding of the types of mistakes that are often made, it will be easier for you to avoid them. To help make your payroll processing easier, you should consider using payroll software. Choosing a complete payroll solution will reduce the risk of making many of these mistakes.
May 19, 2021