Did you know that the most common payroll accounting mistake is not properly tracking paid time off? Or that failing to account for bonuses can cause big headaches down the road? If you’re responsible for overseeing your company’s payroll, it’s important to be aware of these and other common pitfalls. By knowing what to watch out for, you can avoid costly mistakes and ensure a smoothly functioning payroll system.
No one wants to make a mistake when it comes to their payroll accounting, but unfortunately, mistakes happen all the time. Below are some of the common payroll accounting pitfalls and how you can effectively avoid them:
- Not knowing how to classify your workers.
The difference between an independent contractor and employee is important for employers to remember, as it can lead them in various directions. If the mix-up occurs with any fines or penalties that could cost up to thousands of dollars.
Labour standards are the laws that establish what employers must do to protect their employees. The most important of these labour protections include overtime pay, minimum wage and many more for most workers under law.
However, there is no such standard for contractors or independent contractors which means they may not receive any benefits from having been classified as one either way (exceptions apply). It is therefore important that you know how to classify your employees (whether they are independent contractors, probationary employees, interns, or tenured personnel) so you know how to compute not just their salaries but also their benefits and deductions.
- Incorrect paycheck calculations.
Payroll admins have a lot to keep track of when it comes down to calculating pay. For overtime wages, the general rule is 1.5 times an employee’s regular wage for any time worked beyond 40 hours in a week. In certain countries however, the law provides for specific policies for overtime pay, tax exemptions, and other deductions.
It is crucial that you are well-versed with these laws so that you won’t commit mistakes in computing employee salaries. Miscalculated pay can be used as a basis for labour law violations against your company.
- Poor time tracking practices.
Poor time tracking capabilities can result in under or overpayments of payroll. If your company doesn’t have a reliable way to track employee hours, it increases their chances for making mistakes like these which will lead to him/her correcting the error as soon as you notice anything wrong with paychecks.
- Forgetting payment deadlines.
Missing a key deadline is easy to do when there are so many steps in the payroll process. Employees count on your organization for delivering payment consistently and on time, but sticking too much can damage their trust of you as an employer or make them think that all companies behave this way towards employees. This not only affects how they feel about working at our company – if it’s bad enough some might even go elsewhere.
Payroll taxes are not just about the money. The consequences of missing a tax deadline can have a huge effect on your company, with fines or legal trouble as possible outcomes for failing to meet these obligations in time.