7 Most common payroll errors and how to prevent them

No doubt, business owners will be experts at multitasking but for an error-free process, you always would feel the need to outsource or employ robust software so that you can concentrate on the more sensitive core processes.

Similarly, messing up payroll can be a serious problem, and getting it wrong can lead to facing unexpected expenses for a business.

Here are 7 common payroll errors which we bring to your attention and how you can avoid them-

#1 Not keeping data confidential

There is a high level of sensitive data provided by the employees to payroll containing crucial records related to contact information and social security numbers. If the processes are paper-based, the records can be vulnerable to physical theft leading to a breach of privacy.

Solution

You can transform your manual payroll services into a paperless one and this will keep you safe from any sensitive data being leaked, the records will be safe in a file which would be accessed only by the ones who are allowed to view the confidential information.

#2 Errors in data entry

Some of the mistakes like not updating employee data daily, Not providing the correct information or mixing up data, Not storing employee data in a safe place for government purposes in the future, etc. These mistakes can lead to penalties or hefty fines by the government for not maintaining an accurate payroll record.

Solution

Employing an automated payroll software can be a huge lifesaver for your organization, helping you to streamline processes, and eliminating any manual errors made even if it wasn’t intended.

#3 Missing deadlines

It is crucial to track your payroll calendar and deposit your payroll taxes to the federal and state agencies on time. Delaying in tax payments can cause penalties and hefty interest charges from the government.

Solution

Automation of payroll will ensure that you get reminders ahead of time and there will be no chance of missing the date of payday. This can ensure a complete payroll solution and save the extra load when you are multitasking in your business.

#4 – Tracking absenteeism

Employee absenteeism is a critical part of every organization and can affect the overall productivity and profit if not calculated and controlled the correct way. Having to do all of this manually can be exhausting and there will always be a possibility of errors while maintaining it. There are huge chances of any loss of data, lack of backup option, and identification of any unnoticed errors.

Solution

With the help of software, time and attendance tracking can be an easy task, it can ensure that any extended employee breaks or unnecessary delays in clocking can be reported. When companies have a large number of employees, a smart system can help provide accuracy regarding any performance lags being reported.

#5 Not having a reliable backup plan

Planning for any uncertainties in advance is crucial for any organization. In case of a major PC crash or loss of data, you need to have a strong payroll data backup. Your organization is bound to be at stake if you delay these actions for the future thinking it won’t cause any harm.

Solution

Your payroll data backup needs to be placed in a secure place. You can consider a cloud-based payroll software that will keep your payroll data stored in a cloud giving access only to a limited number of people. This will ensure security for your confidential information and you can easily access the file anytime just with the login credentials.

#6 Regulatory compliance

Keeping up with the changing payroll laws and regulations can get tough for any organization as there is a chance of missing out on any important update. Mostly, there are significant changes made annually in the way payroll is processed at the federal and state level.

Solution

Newer payroll software versions can help you stay alert and never miss out on any updated laws making up for complete payroll solutions, this will ensure all your tax deductions are accurate and in compliance. It also eases the load on your employees who previously had to monitor the changing compliance requirements closely missing out on the other core specific work.

 #7 Employee classification

Classifying employees incorrectly is the most common payroll error. A business has different types of employees such as permanent employees, temporary employees, and independent contractors.

It is important for a business to classify them properly for tax purposes since errors are subject to wage losses for these employees.

Conclusion

These are the most common payroll mistakes. Payroll errors cannot be avoided completely but these can be avoided by proper planning to handle such mistakes in the future of your business.

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