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    8 Common Payroll Management Mistakes to Avoid for Small Businesses

    payroll management mistakes

    Do you manage a small business? Are you wondering how to set up a payroll system? Are you looking to avoid common payroll management mistakes?

    Employees and contractors depend upon a reliable payroll system to keep their wallets full and their work productive. As a business owner, it’s your job to make sure they don’t leave you for a more dependable employer.

    Here are some snafus you should be avoiding.

    1. Not Syncing Up Your Systems

    The best recurring payment system for your company will come at the right price and provide payment options that are convenient for your staff. It can help you avoid calculating errors and improve the speed of your operations.

    You’ll need, however, to make sure that it’s compatible with any other programs your company uses to keep track of its employees. If, for example, the system you use for pay and benefits doesn’t line up with your system for employee profiles, you could have a lot of extra work to do. It also makes it easier for processing errors to occur.

    Before you purchase a payroll processing system, make sure it’s compatible with your other human resources software. You’ll want it to make your job easier rather than more complicated!

    1. Not Keeping Good Records

    Your company should keep accurate payroll records for at least the last four years. Exact requirements will vary from state to state, but it can help you avoid an audit. Some states may require information from even further back.

    You’ll want to have records of W-2 forms, pay stubs, and timesheets. Make sure you have accurate documents showing the hours worked by your employees, as well as their rates and dates of employment. 

    1. Wrong Classifications

    Employees may be missing out on tax exemptions if they’re really independent contractors. Similarly, they may be entitled to certain benefits and protections if they’re mislabeled as contractors rather than employees. 

    Payroll errors such as these can end up costing you time and money later on. You may need to check with the IRS to clarify whether or not someone is an independent contractor. 

    Generally speaking, an independent contractor works more flexible hours, whereas employees have set dates and times they need to be at work. Independent contractors are also more likely to be paid per job rather than by the hour. 

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    1. Not Enough Payments

    Your state has a minimum requirement for payments to employees. You can pay more frequently than your state requires, but not less. Today, most employers provide direct deposit so employees don’t even need to worry about going to the bank to cash their check on paydays.

    Make sure you pick a payment schedule that works with your cash flow and stick to it. Your employees will appreciate the consistency!

    1. Not Complying With Regulations

    Payroll regulations can change each year at both the state and federal levels. 

    You’ll want to check with the U.S. Department of Labor when it comes to regulations at the national level. You can also check with your state labor board for requirements such as minimum wage.

    1. Being Understaffed

    Keeping track of payroll regulations and employment regulations can be very time-consuming. Errors can lead to a failure to comply with regulations.

    As your payroll numbers grow, you’ll want to make sure you have enough staff working to make sure that all matters are carefully attended to. A failure to do so could end up costing you time and money in the end.

    1. Not Complying With Leave Laws

    Many states have paid leave laws for sickness or family reasons. These include New York, New Jersey, and California. Your jurisdiction within your state may also allow for additional leave time.

    Make sure you adhere to all paid leave laws at both your local and state levels. This can be tricky for smaller businesses, but a failure to comply could lead to bigger problems for your business.

    1. Payroll Fraud

    You’ll want to regularly audit your payroll system in order to make sure all of the payments getting made are above board.

    You can avoid timecard manipulation by using strong controls. It also helps to spread out payroll duties to a few different employees so no individual will have all of the control over your payroll.

    You’ll want to beware of any third parties that could try to implement payroll diversion schemes. Make sure you have a transparent system with high ethical standards. All of your employees should know that they will be held accountable for fraud of any kind.

    Benefits of a Strong Payroll Process

    An accurate payroll process will make your employees feel secure. They’ll know that they’ll be able to pay their bills and they’ll feel comfortable working productively for your outfit. 

    A strong system can also make tax reporting easy. When filings and paperwork are due, you’ll have complete, accurate records that will help you get taxes done quickly and avoid penalties.

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    Employees can also check up on their own payroll information frequently and let you know if anything has changed. As a result, you’ll have an accurate payroll system that will keep your business running strongly and smoothly.

    Avoiding Payroll Management Mistakes

    Payroll management mistakes can be quite costly in terms of both time and money. With adequate information on regulations, thorough records, and reliable data systems, you can be sure that your payroll is being managed accurately and securely. And you can get on with the business of making your business thrive!

    Don’t stop getting market-savvy now. For more information on business and lifestyle, read more of our blog today. 

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