Relying on paper processes, manual data entry, or a mass of Excel spreadsheets leads to errors that may take weeks or months to uncover. Disorganized records can also lead you to miss an employee payment or follow-up on items needing urgent attention. You’re likely to miss something if you’re using multiple spreadsheets or paper documents to keep track.
Choosing the Right HRIS: 7 Tips for Small Businesses
Due to a technical glitch in your payroll system, your payroll processing is delayed by two days. If an employee has been underpaid, adjust the amount during the next payroll cycle and inform them of the correction. In this instance, you’d calculate the amount owed for the five hours of overtime and include it in their next paycheck. One of your hourly employees works 45 hours during a particular week. However, due to a manual entry error, they are only paid for 40 hours. This error results in them not receiving overtime pay for the extra 5 hours.
Employee satisfaction
This is particularly important if your contractors are based abroad, as the rules around misclassification can potentially vary. You would also need to consult with your legal team, as you may be subject to legal action. States may have stricter guidelines on who may or may not be considered exempt.
- Even if a legal issue doesn’t force an organization to furlough or lay off employees, it could still sabotage the trust workers have in their employer.
- First, check with state and local laws to verify overtime wage guidelines for where your business is located.
- Additionally, well-organized records can streamline HR processes such as onboarding, benefits administration, and performance reviews, saving your business time and money.
- With a process as complicated as payroll, there are numerous places an organization can make fatal errors.
- That number only increases the later you report your tax liabilities.
- Classifying a non-exempt employee as exempt not only opens your organization to FLSA-related fines, but can also cause an employee to miss out on overtime earnings.
Not only will employees lose important wages and benefits, but it means the government loses valuable tax dollars, eventually resulting in over or underpayment. Incorrectly logged overtime hours can lead to improper overtime payments, which leads to corrections possibly spanning across multiple tax years. Correcting those errors takes time and can be incredibly unsettling for employees, whether they are underpaid or overpaid and have to return money to the company.
Not tracking employee hours and overtime
For example, under California law, the minimum wage must be $14.00 per hour for workers at businesses with more than 26 employees and $13.00 per hour for companies with 25 or fewer. An integrated payroll system automates payroll workflows, helping you avoid manual entry, paper-intensive processes that can often open the door to errors. You could also fall out of compliance with labor laws by not paying employees what they’re owed.
For example, California requires overtime pay for any employee who works more than eight hours in a workday. Rupert Jones is a financial independence geek who strongly believes in the power of networking. He spends his time helping people leverage secrets of financial wealth and processes to achieve financial freedom. Payroll is a continuous process with many moving parts, including paying taxes and verifying that records the 5 best accounting software for small business are current. Employees can falsify timesheets or forget to enter their hours worked. They may inaccurately estimate their time or neglect to document overtime shifts.
Frequently review your payroll system’s tax withholding formulas and adjust future withholdings to compensate for any current discrepancies. Alternatively, you can work with an EOR provider (like Remote) that manages your team members’ benefits for you — wherever they are based. We ensure that the correct benefits deductions are made and that this is reflected in payroll. Your company hires a content writer as an independent contractor. However, they exclusively work regular hours for your business, have a company email address, and use a laptop provided by you.
Retention is essential for organizations to succeed; preventable issues like payroll errors push employees away. If you’ve already processed an inaccurate payroll, you should act as soon as you realize the mistake and report the error to state and federal entities if necessary. In some cases, your organization could face penalties and fees as a result of an error, and these will only loom larger the longer they remain unaddressed. Payroll admins have a lot to keep track of, even if they have software to support their processes. With a checklist, they can go through every step of the payroll process every time, reviewing each piece and making sure everything is accurate. According to 2022 research by Ernst & Young, companies make an average of 15 payroll mistakes per payroll period—and each mistake costs an average of $291.
