7 Payroll Mistakes to Avoid in 2021

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For many employees, the three magical words that make their world a little bit more beautiful are, “Today is payday.”  Of course, a payday is a joyous event for almost every worker, but what about the people at the other end of the spectrum? They need to ensure that the payroll goes as smoothly as possible. However, that does not always happen.

Fortunately, payroll mistakes are not unfixable, and in this blog, we will discuss some of the most common payroll mistakes to avoid in 2021.

Payroll Mistakes to Avoid in 2021:

1)   Wrongly classifying employees:

Normally, a business will have two main worker categories, namely contractors and employees. The employee class is then subdivided into non-exempt and exempt in the United States (and similar classifications in other countries). Furthermore, the legal rights provided are often different for non-exempt and exempt employees.

At this point, it is important to understand that every worker classified as an employee is subject to certain safeguards and benefits such as minimum wage and timely payments.

Contractors, meanwhile, are independent workers and are therefore not subject to any such protections under the law.

In a rush, the HR department is possible to commit an error by assigning an incorrect status to a worker.

If this error comes to light, it can cause you some lengthy legal problems. Hence, ensure that you recheck the assigned status for both the independent contractors and either type of employee.

2)   Rolling over payroll deadlines:

There are few things worse than not paying your workers on the day that you need to. This is not just about making a delayed payment but accompanies several other repercussions such as higher employee turnover and lower trust between employees and employers.

It is vital that you see things from your employees’ point of view and understand their problems. Often, an employee is their family’s sole working person, which means that getting a timely payment check is of paramount importance to them.

Making timely payments is particularly important for small businesses, as a lack of consistency might mean that you end up losing vital employees to your bigger counterparts.

3)   Not paying overtime wages:

The effort and time that an employee puts in ultimately benefits the company that they work for. Often, an employee puts in additional hours to make sure that the output and efficiency of the business are not compromised. In such cases, it is imperative that the employer provides the employees with overtime pay in addition to their regular wages.

Unfortunately, in many situations, the employer makes incorrect calculations about the hours that an employee has worked. This often causes the employee to miss out on their deserved overtime pay.

Additionally, employers need to be aware of the rules regarding overtime pay. Businesses are often expected to pay an hourly overtime wage that is 1.5 times higher than the employee’s regular pay. Also, remember that any hour worked above the standard workweek is classified as overtime work. Overtime payment rates can vary, so make sure that you adhere to the regulations of the specific region and industry associated with your business.

4)   Poor tax management:

There are some taxes that employers need to submit on behalf of their employees. The amount for these taxes has to be withheld by the employer before paying wages to their workers.

Make sure that you are not missing any deadlines regarding form filling and submission. Local laws, state laws, and federal laws have established bound taxes. You should understand the taxes that are applicable to your employees and then proceed accordingly.

5)   Inconsistency in payment frequency:

Every monthly payment should be made properly. As we said, many, if not all, of your employees are heavily dependent on the wages you pay them. Remember that it is permissible to increase the minimum pay-period frequency, but it cannot be reduced. For instance, if you make monthly payments, you can change the schedule and pay your employees weekly or bi-weekly, but not on a bi-monthly basis.

6)   No consideration for bank holidays:

This factor is more relevant to small businesses. During your busy days, it is easy to forget the payroll date for a particular month coincides with a bank holiday, which means that banks will not be operational on that specific day.

Although this is an innocent error, we would recommend that you have some personnel or system in place that will help you plan the payroll days and shift the dates if and when needed.

7)   Poor pay record maintenance:

Contrary to what many people feel, it is never bad to be thorough about your money. Carefully track all the inflows and outflows of money so that you do not run into any problems during record maintenance.

For legal purposes, an employer needs to make sure that all of their records are updated – else, there is a fairly good chance that you will find yourself in some kind of legal entanglement. According to many countries’ regulations, employers need to maintain data for a specified number of years, at a minimum.

This data should consist of details like payroll dates, payment rates, and hours worked – amongst a lot of other stuff. Remember that many states require a lot more information and are pertinent to far longer periods. Every state has a different payday requirement.

Final Word:

Managing payrolls can get hectic, but that does not mean that you have to settle for erroneous work. We hope that this guide will prove helpful to you in ensuring that you get your payroll activities right and steer clear of blunders that can range from minor inconveniences to major issues.

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