Did you know that simple payroll errors can be costing you lots of money? According to the IRS, about 40 percent of small to mid-sized businesses are facing penalties due to incorrect payroll filing. Unfortunately, more than five million employers paid a total of $7 billion worth of civil penalties in 2017. No business is immune to the repercussions of payroll mistakes. Here are some avoidable yet common mistakes that mostly happen during the payroll process.
1. Misclassification of Contractors and Employees
When hiring members to your team, you need to ensure that everyone is classified correctly. Their classification influences their job structure and duties. It also determines how both of you will be taxed. If you misclassify an employee as a non-exempt or a contractor, you will probably get into trouble in the future. This is probably one of the most costly payroll mistakes you can make. Avoid the problem by ensuring that you understand different classifications and use them appropriately. If you have any problems,The professionals behind Ignite HCM advise that you bring in a professional to help with these matters. They will help you avoid future problems you may experience.
2. Depositing Late Employment Taxes
When managing your retail business, you probably pay employees different amounts. Chances are that you pay them at different times. If, for example, you have a part-time cashier and a full-time manager, they obviously don’t get the same pay.
With the variety of pay structures, it may be difficult to keep track of your taxes. You are likely to forget what taxes need to be paid and when they need to be paid. However, you must stay on top of payments and taxes unless you want to find yourself in harsh payroll tax penalties. Employers have to deposit employment taxes regularly. Failure to do it attracts penalties.
Establish clear dates for employment tax and stick to them. Put them on your calendar to reduce your chances of forgetting.
3. Failure to Pay or Miscalculating Overtime
Regular shifts in retail last four to eight hours. You are probably being careful to avoid incurring high overhead costs. One of the best ways to do that is by scheduling non-exempt employees 40 hours or less every week. However, there are instances when your non-exempt employees will end up working over 40 hours. You must ensure that these hours are well-documented and your employees are paid for working overtime. The FLSA protects non-exempt employees and they are entitled to their overtime pay. Their pay rate shouldn’t be less than the time plus one-half of the regular pay rates. There may be additional rules depending on where you live.
If you fail to compensate your employees for working overtime, they have the right to file a complaint. You may get into trouble with the Department of Labor. You will not only pay their wages but also face a civil penalty. Keeping clear records of employees’ working hours is the best way to avoid this problem.
Payroll problems are more common than they should be. Fortunately, you can avoid them without much strain. Don’t be the business that loses its hard-earned revenue to penalties. With a few simple tips, you can make your employees happy and avoid losing money. Consider getting the help of professionals if you need them.