Common Payroll Mistakes and How to Avoid Them

A smooth payroll process in your organization is like oxygen—when it’s there, you hardly notice it; when it’s missing, you can’t think about anything else. That makes payroll one of the least appreciated yet most important functions within a business. Payroll, when done correctly, can keep employees satisfied while also protecting your company from legal ramifications. Payroll errors, on the other hand, can have a large impact on an entire company.

Fortunately, all of the most common payroll errors are easily avoidable with education, proper planning, and the right tools. Continue reading to learn about these payroll mistakes and how to avoid or correct them.

The 5 Most Common Payroll Mistakes

There are many places in which organizations can make mistakes with a process as complex as the payroll. Here are some of the most common payroll errors to watch for in your company.

#1 Misclassifying Employees

The legal rights of exempt and non-exempt employees differ. Some companies fall away and misclassify employees as independent contractors or as exempt employees.

Including denying the employee certain major advantages or wages, misclassification can also mean missing valuable tax dollars from the government. The resulting underpaid or overpayment can become an expensive payroll error, if left unchecked.

#2 Miscalculating Pay

Payroll administrators have a lot to keep track of when it comes to the calculation of pay with over-times, commissions, deductions, PTO, etc. Your state may however have different overtime policies; your organization should always comply with the law which for the employee is more generous.

Failure to track times can also contribute to an incorrect pay. If you are unreliable in tracking the hours of your employee or paying your time off, your odds are to overpayment or an underpayment error.

What is a Payroll Correction?

If adjustments to the amounts paid are required, a payroll correction is required. Poor payroll agencies can cause money to be added or removed from the original amount like forgetting to account for holiday.

How Long Does a Company Have to Fix a Payroll Error?

While legal time frames differ depending on the state, the short answer is that mistakes should be paid promptly. Fixing payroll shortages should help prevent penalties as soon as possible. Labor laws requires full payment of completed work, with most companies either adding to the next pay period the missing pay or cutting check between paying periods.

#3 Missing Payroll Deadlines

Timing is everything in payroll. But the lack of a key deadline is all too easy with so many steps in the payroll process. Your workers rely on your organisation for a regular and timely payment, which can damage the company's trust and opinion by failing to adhere to a reliable schedule. Many states have requirements for pay frequency, not to mention…read more