The Impact of Payroll Errors on Businesses
Payroll errors can have a major impact on businesses. They can lead to increased employee turnover, decreased productivity, financial losses, tax penalties, and much more. Understanding payroll errors and the impact they can have on businesses is crucial for helping to avoid mistakes. If you’re a business owner or HR manager, it’s important to have a plan in place to help ensure payroll accuracy.
Let’s take a look at some of the common payroll mistakes and their consequences, as well as how PEOs can step in to offer compliance support and help businesses avoid costly errors.
Common Payroll Mistakes and Their Consequences
Paycheck mistakes can be costly for any organization. With a better understanding of what these errors are, however, it can be easier to avoid them.
1. Misclassifying Employees
Classifying employees correctly is essential when it comes to payroll processing. As an employer, it’s crucial to understand the difference between employees and contractors, and to know which is the accurate classification for your workers. There are certain rules and regulations when it comes to overtime pay and benefits that may apply to some workers while others may be exempt. Incorrectly classifying your employees can lead to legal repercussions, IRS audits, and a decrease in employee morale.
2. Incorrect or Incomplete Records
Managing payroll records manually can leave lots of room for error as well. As a business owner or HR manager, you likely have your hands full with work. Keeping track of spreadsheets and employee pay can be incredibly overwhelming. Incomplete payroll records can lead to underpaying employees as well as falling out of compliance with state and federal tax laws.
3. Miscalculating Wages and Overtime Pay
Miscalculating wages and overtime pay isn’t uncommon when it comes to manually processing payroll. It can be difficult to accurately track employee hours and overtime when you have so many other tasks on your plate. Underpaying employees can reflect poorly on the company. Overpaying them, however, can be just as detrimental to morale—as you’ll be expected to ask for that money back.
4. Missing Expenses
Whether it’s due to data entry errors or employees filing their expenses too late, these missing expenses can have an impact on your business and its compliance with state and federal laws. Overlooking reimbursable expenses not only leaves your employees feeling frustrated, but it also creates more work for you to do after the fact.
5. Submitting Taxes Incorrectly
Manually processing payroll leaves room for human error in tax submission. Whether an employee was incorrectly classified initially or wages were miscalculated, tax mistakes can result in issues with the IRS, penalties and fines, as well as time spent backtracking to fix these errors.
How PEOs Help Prevent Payroll Errors and Ensure Compliance
Professional employer organizations—PEOs—step in to handle the administrative tasks for your business. If you own a business, it’s likely that your focus will need to be in other areas, so having payroll experts to support you can be incredibly beneficial.
1. Streamlined Payroll Processing
Essentially everything a PEO offers can help to streamline payroll processing. PEOs are experts in the field, and they utilize specialized payroll software to help simplify the process and ensure accuracy. Time tracking, overtime pay, benefits, and paid time off can all be managed in one place, and then integrated together.
2. Expertise in Compliance
PEOs have made it their mission to know all about state and federal tax and labor laws. These rules and regulations can be incredibly complex and take time to fully understand. PEOs expertise in compliance can help you save money in the long run by avoiding potential fines and penalties.
3. Utilizing Automation for Accuracy and Efficiency
When you work with a PEO, employees will have their own portal to access and adjust their information. This eliminates the need for manual data entry on your part as an employer to help reduce human error. Automation also means employees will get paid on time every time.
Simplify Payroll with PEO Services
If you’re ready to eliminate payroll errors, ensure compliance, and boost employee satisfaction, PEOPayGo is here to help. Our trusted PEO services simplify payroll, deliver accurate paychecks, and give business owners and HR managers peace of mind.
Contact us today to streamline your payroll and keep your team happy!
