Processing Payroll? Here are Common Payroll Mistakes that Small Businesses should avoid!
Beyond the crucial matter of delivering salaries accurately on time, managing time-sheets, invoicing and taxes- payroll administration is one of the time-consuming and daunting task for every business. A huge amount of data to be collected and the risk of even a small miscalculation, missing deadlines or not keeping up with a regulatory change can result in big penalties and unsatisfied employees. However, avoiding these mistakes can save businesses lots of headaches and financial penalties down the road.
Here are some common mistakes that small businesses should avoid:
#Improper Employee Classification
Today’s small businesses are not only relying upon full-time employees but independent contractors, consultants and part-timers are also the part of their diversified workforce. Getting the proper classification of this workforce is mandatory as this grouping entitles how the compensation is reported to IRS. Misclassifying employees as independent contractors (for example) can save you from paying taxes and benefits but can cost big in terms of money in the long run. The best way to avoid this mistake is strictly following the guidelines determined by IRS.
#Inappropriate Record-Keeping
Payroll processing includes vast amount of data- number of hours worked, expense accounts, accident reports and other relevant payroll information. Keeping a robust and easy-to-use record-keeping system is vital in order to have a proper filing system. Any errors in data entry and employee information can lead to hefty fines and can put you in a headache while tax season comes around. Usually employers need to keep these payroll records for at least four years for auditing purposes.
#Missing Payroll Taxes Deadlines
Nearly half of the small businesses in the U.S. are fined with an average of $850 every year for payroll tax related errors and most common of these are due to missed deadlines or late payments. Important dates- when the tax season starts and ends, remittance deadlines, etc. must be marked on the payroll calendar and every payroll team member must be familiar with these deadlines and the tax landscape in which your business is operating.
#Unplanned Payroll Schedule
Employers must be having regular payroll schedule whether it is weekly, bi-weekly or monthly in order to avoid any possible penalties. How often do you pay your employees, has a huge impact on your cash flow and staff morale. However, there is no specific payroll frequencies but according to States laws- you can always pay more frequently but not less.
#Confidentiality and Security
Data security in payroll should be the top agenda to take care of for every business size as this data involves employees’ sensitive banking information. With advancing technology, the inventiveness of thefts is also increasing and you might be next to face the consequences. Even a minor security breach can damage your day-to-day business activity and your company reputation. Keep your employees aware about the payroll security, analyze your infrastructure and then adopt security tools suiting to your needs.
Summarizing It Off:
Payroll is one of the biggest burdens for small businesses and there is no excuse to not keep up with the regulatory mandates. Above article describes some mistakes that small businesses commit while processing their payroll. TeemWurk Payroll system is a powerful tool designed to streamline your payroll operations in real-time while maintaining data security and confidentiality.
