As a forward-thinking employer, payroll is an area you cannot afford to get wrong when dealing with your employees. A single payroll mistake can cost your business a lot of resources and can result in personal penalties for you. Educate yourself about these five common errors so as to avoid these costly consequences.
Wrong Classification of Employees – Are They Independent Contractors or Employees?
Workers are either independent contractors or in-house employees. Getting the distinction between these two groups of employees is quite important since you are required to report the salary you pay your employees under each of these categories differently to the IRS.
Benefits such as medical insurance are a major distinction between these two groups. If you misclassify your employees, this error can have a significant bearing on the employee’s status and the taxes that should be withheld. You might be required to pay penalties amounting to 10 percent of whatever employment tax liability should have been remitted in the previous tax years.
But you have a way out if you if you learn that you have made this mistake. Rectify this as soon as possible to avoid paying these hefty penalties.
Remitting Withheld Taxes Late
The law requires you to withhold taxes from your employees in certain exceptional cases. But if you do not remit these taxes to the right authorities on time, you might face several problems. You may be required to pay penalties and interest on the amount.
Since different states have different regulations to consider, compliance can be a little confusing initially. But the good news is that you can automate the process with accounting software and go beyond this barrier. This system does not add to your workload but calculates the amount due and then remits the necessary returns automatically.
Dealing with Constant Changes
Constant change characterizes today’s world. From ever-advancing technology to ever-shifting work habits, the business world is constantly evolving in order to remain successful. This exposes employers to the risk of using outdated payroll systems and making serious errors. While no single payment can make everyone happy, your payroll must be well equipped to meet the needs of all your employees.
There are a few ways your payroll team can overcome these challenges. Firstly, you need to give them a wide variety of payment options that comply with the law and company policies. Secondly, it is important that you ensure they get educated with regards to both state and federal laws so as to remain up-to-date with changes in the law. They can achieve this by taking courses such as fundamental payroll certification, certified payroll professional, and others that focus on a variety of situations and challenges that may arise in the course of duty.
If some of your employees work in two or more states or multiple countries, it is your duty to ensure you comply with all state and federal laws governing the affected employees. You can realize this by simply ensuring you are meeting minimum wage requirements. In the worst case scenarios, you might be required to use a completely different payroll system to file taxes for each of these locations. These wide disparities can create major issues when processing your payroll. And they can eventually have you pay huge fines for improper tax filings.
But there is a solution to this menace as well. Whenever you are hiring a worker in a different location, ensure you or your payroll team is well acquainted with tax and employment law in that particular state or country. Also, it is your responsibility to ensure your payroll program can handle multi-state workers. Whatever the type of system you are using, whether manual, payroll software or an online payroll service, do a trial run to ensure you are safe.
Untimely Payroll Processing
Some employers struggle to pay their employees on time for many reasons. One major problem is that many payroll teams often push aside payroll issues until when it is absolutely necessary to deal with them. This habit can lead to serious complications when major events such as holidays pop up and lead to late payments.
With systems advanced payroll systems in the market today, you can collect all your time and attendance data within a very short time and with incredible ease. This can reduce the amount of calculation you will have to do manually and make it possible to keep track of all factors that affect your payroll. If the schedule is still going to be affected despite these efforts, ensure all your employees are well informed in advance to give them room to plan if they need to do so.
About The Author
This guest post was made by Payroll Express, an Idaho based company offering cheap payroll service to small and medium sized business across the US.