Common Payroll Issues

Payroll plays a large role in companies for a reason. It’s the sum of all of the financial records for employee salaries, which includes their wages, deductions and any bonuses. The crucial nature of payroll means that it’s imperative for companies to pay close attention to how it is managed under their financial departments.

Payroll is straightforward in concept, but it’s not entirely foolproof. Processing employee payroll is still subject to various common errors, despite the time-sensitive nature of such finances. Following are six of the most common payroll issues that companies tend to deal with.

Inaccuracy of Information – Working With Inexperienced Payroll Processors

At times, dealing with payroll related tasks can be a chore. To address this issue, many businesses and HR departments tend to hire out payroll processing to a third party. Some may delegate the work to an inexperienced employee.

On occasion, an employee or third party’s inexperience with their client’s workforce information can lead to them making crucial mistakes during the processing of such information. Sometimes, the information processed for employee wages may be inaccurate (for example, social security information), leading to possible delays in processing.

Using the Correct Deduction Amounts

Processing deductions from employee pay is considered one of the most complex parts of payroll. Both state and federal laws apply to deducting certain amounts from employee pay. Due to this, it’s easy for businesses and HR departments to make errors during payroll processing in regards to utilizing the correct deduction amounts.

Not Classifying Employees Correctly

Many small businesses utilize several types of workers, including temporary employees, freelance workers and contractors. Diversity in worker types can sometimes lead to payroll issues. It’s important that workers be classified correctly for tax purposes, since businesses can be subject to paying their owed taxes along with any fines.

Overtime Rules

Current federal and state laws require many employers to give overtime. Overtime generally consists of 50 percent of the employee’s typical hourly wage; in most cases, employees must be paid their hourly wage and the 50 percent overtime premium for each hour worked overtime. Due to the exceptions that overtime laws generally include, some payroll processors may be subject to mistakes.

Garnishments and Child Support

Employees who have been ordered by the courts to pay a certain amount to another party are subject to garnishments from their income. A creditor generally takes a certain percentage from their income, which is usually deducted from their paycheck. Employers are required to fulfill the terms of an employee’s garnishment; otherwise, those that don’t are subject to penalties.

Keeping Up With Regulatory Changes

Over time, payroll regulations do change. Sometimes, significant changes may be made to how payroll is processed for businesses across the country. In order to avoid the payroll issues that may originate from regulatory changes, businesses should do their best to stay updated with regulatory changes that may occur in their state or around the country.

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