During the hiring process, you might begin paying employees through payroll. You take their hourly pay and multiply it by the number of hours they worked. You subtract taxes and any other necessities.
But after some time, you see that your employees aren’t getting paid what they should. You try to pay attention to the checks, but you aren’t sure how to navigate mistake-free payroll.
If you don’t know how to avoid small business payroll mistakes, keep reading. We’ll cover the most common ones in detail.
Failing To Withhold the Proper Taxes
If you are an employer, it is your responsibility to withhold the proper taxes from your employee’s paychecks. Failing to withhold taxes can be a costly mistake for both the employer and the employee.
The best way to avoid this mistake is to be aware of the tax withholding requirements for your state. Make sure that you are withholding the correct amount from each paycheck.
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You should also have a system in place to track the taxes that have been withheld. You may find payroll services here to ensure that you are remitting the correct amount to the government as they are the payroll experts.
Not Updating Employee Information
Outdated employee information can lead to overpaying or underpaying employees, paying them late, or making other errors. This can lead to errors in payroll calculations and incorrect tax withholdings.
To avoid making this mistake, set up a system for updating employee information as soon as it changes. This might mean having employees fill out a change form whenever their address, phone number, or other information changes. You might set up a system where employees can log in and update their information.
Failing To Classify Employees
The IRS has very specific rules about who is classified as an employee and who is classified as an independent contractor. If you misclassify one as an independent contractor, you could be subject to heavy fines and penalties. To avoid this mistake, make sure you understand the distinction between an independent contractor and an employee.
Miscalculating Payroll Deductions
This can happen for a variety of reasons, but the most common is forgetting to deduct certain items from an employee’s pay. To avoid this mistake, it is important to keep a close eye on all payroll processing and deductions. Make sure they are being calculated. It is a good idea to have a system in place for tracking payroll deductions so that you can spot any mistakes.
Inputting Incorrect Hours Worked
This can happen if an employer estimates employee hours worked instead of tracking actual hours, or if an employee fudges their timesheets. To avoid this mistake, make sure you are tracking actual employee hours worked, either through a time clock system or by having employees submit weekly time sheets. Review time sheets before processing payroll to ensure accuracy.
Avoid Payroll Mistakes
No business is perfect. By taking the time to avoid payroll mistakes, you can set your business up for success. By ensuring that you have the right processes and systems in place, you can avoid many common mistakes.
Take the time to avoid payroll mistakes and you’ll be on your way to a successful business. Found this article helpful? Check out our site for other blogs.