Managing employee payrolls is much more than just paying them for the number of hours they have worked. It involves tracking their bonuses, health insurance, taxes, social security, and other factors affecting their salary. Efficient payroll management includes paying employees the right amount at the right time.
Effective management of payrolls requires a lot of resources and is not as simple as it seems. Even one small error can cause a snowball effect that turns into various errors. Let’s look at some of the most common errors businesses make when managing their employee payrolls.
Calculating the right amount of salary the employee has to receive involves checking timesheets, leave applications, and any other factor affecting their salaries. This has to be done for every employee individually.
For example, bonuses and overtime are often miscalculated, and an employee gets underpaid. Underpaying an employee can result in breaking down a healthy and professional relationship between the employee and the employer and loss of motivation for that particular employee.
Similarly, an overpayment is also an issue because it can cause damage to your business’s financial condition if it’s repeated often.
2. Disregarding Payroll Taxes
The laws of the United States require businesses of all sizes to pay taxes. These taxes include federal income tax, employment tax, local tax, state tax, etc.
Failure to pay these taxes on time can result in legal penalties on the business and the IRS is usually very strict about this. Missing even one deadline can result in hefty fines.
3. Employee Classification Issues
Employees are classified according to their roles and positions in a business. They are entitled to different remunerations, bonuses, and taxes according to their classification.
Misclassification of employees can result in miscalculations in bonuses, which leads to the employee being underpaid or overpaid, and also results in a miscalculation of their taxes, which can result in legal problems for the employee as well as the business.
4. Delayed Payments
Delayed payment is once in a while if not a big concern, but if payroll payment is being delayed frequently, it can be a cause of concern, especially for workers on low wages. It can also cause the employees to lose trust and motivation in their employer.
What’s worse is that salaries are not credited at all. Sometimes, businesses hold their employees’ salaries because of heavy losses or failure, like the failure of a brand campaign they invested in, any other issue which costs a lot of money for the business, etc. This can lead to the mass resignation of employees in a company.
Effective payroll management is essential to run a business smoothly and keeping your employees happy. In performative payroll management, you can outsource it to us.
Nidhi Jain is a certified public accountant and runs her tax and accounting firm in Dublin, California. Our firm can offer payroll services at affordable rates. We also offer efficient tax planning in Bay Area and also bookkeeping services, IRS representation for audit defense, and more.
Reach out to us for more information regarding our services.