Five most common payroll mistakes




The Five Most Costly Payroll Mistakes & How to Avoid
Them

Payroll: Add up the hours...
employee morale and, in worst case situations, even lead to costly and embarrassing litigation.

Last November, the San Fr...
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5 most costly payroll mistakes

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A short and quick read regarding the five most costly mistakes a small business can make, often do and seldom realize.

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5 most costly payroll mistakes

  1. 1. Five most common payroll mistakes The Five Most Costly Payroll Mistakes & How to Avoid Them Payroll: Add up the hours worked by an individual for a specified period of time, multiply the hours by an hourly rate, pay that person the result, less a few deductions. So what's the big deal? Regardless of how they do it, employers must pay their employees on time and correctly. And each payperiod, employers are required to calculate, deduct, and pay federal and state taxes, unemployment insurance, workers’ compensation, retirement plans, 401(K) remittances, benefits, sick time, vacation accruals, and garnishments (for child care or student loans), and other forms of compensation, such ascommissions.Sound confusing? There's more. In several industries, employers are responsible for tracking different wage rates on a variety of jobs, each with its own craft and fringe benefit requirements, different unions, and different workers’ compensation codes all in one pay period or for one employee. Restaurant payrolls are complicated by tips and gratuities, banquet tips and service charges. In addition, multistate businesses must comply with all the tax codes in every state in which they operate. Payroll is an essential part of any business, but administering it can be cumbersome and timeconsuming. What’s more, the payroll burden continues to grow. As government regulations create new requirements, there are new pitfalls, and new risks of fines and penalties. Payroll preparation is not an easy job and mistakes can be costly. According to IRS statistics, approximately 33% of employers make payroll errors costing them billions of dollars annually in penalties. With more tax law changes expected, there is even greater risk for payroll errors. Besides penalties for late payment/underpayment of tax liabilities, payroll errors can sharply educe
  2. 2. employee morale and, in worst case situations, even lead to costly and embarrassing litigation. Last November, the San Francisco Chronicle reported that two nurses and a medical clerk sued Alameda County over payroll problems, alleging that the county owed them back wages and frequently issued inaccurate and late paychecks to hospital workers. At least 280 county hospital employees reported payroll errors. Michael Smart, the medical center's chief executive officer was left without a good explanation and could only say, "I don't know the cause. We have a very complicated payroll system." The lawsuit sought back wages plus damages, as well as a complete accounting of all back pay due and an injunction preventing the medical center from withholding pay. This is a situation that no employer wants to deal with. It's generally accepted that payroll is a nonproductive, repetitive, administrative activity, the time and cost of which should be minimized. Payroll tasks can stretch your resources and keep you from focusing on the more important aspects of your business. When payrolls are prepared manually, they are not only timeconsuming, mistakes are inevitable and payroll errors can cost big money. With the trend toward automation, more and more companies are bringing advanced technology into the workplace using computers to handle inventory, accounting, word processing, and a multitude of other back office functions. PriorityHR 250 Monroe Ave NW Grand Rapids MI 49503 616-437-7377

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