5 Common Payroll Mistakes… and How to Avoid Them!
There’s much more to payroll than just paying employees the right amount at the end of the month…
A well organised and efficient payroll facility can have a positive effect on the running of your business and your staff. Make a mistake and the repercussions can have a lasting and financial impact.
The good news is payroll errors can be easily avoided with the right planning, software and education.
Your payroll clerk can go from villain to hero in the time it takes to open a pay slip!
Payroll is often the one function that employees both love and hate at the same time.
When things are going well, your payroll administrator is often seen as one of the most popular people in a business. Why not? They are the ones with the responsibility for ensuring everyone gets paid.
Things can change drastically when an employee scans their pay slip and realises it’s not right, particularly if they’ve been under-paid. At that point, your payroll administrator becomes the brunt of dissatisfaction.
The problem is, there is no room for error when it comes to payroll, but common mistakes can be avoided if communication is clear, timescales are adhered to, and you have a team you can rely on.
So, what are the most common issues and how can they be prevented?
1. Human error
It’s easy for payroll staff to input inaccurate data if they are busy and under time pressures, particularly if they are lacking training or ‘wearing many hats’ – we’re all human!
In this instance, you have a couple of options:
Solution 1: Utilise a cloud-based accounting software such as xero or QuickBooks. Market-leading payroll software can automate many of the processes that are involved, and eradicate issues associated with manual entry. If this is something you’d like to look into, we’re certified advisors so can help you get set up!
Solution 2: Hire an accountant with a specialist payroll clerk. You’ll benefit from a dedicated, trained professional without the expense, risk and time implications of allocating the task to someone in-house.
2. Miscalculating timesheets, over-time and bonuses
If information about the renumeration earned by a team isn’t recorded accurately, it can lead to errors in payment.
To prevent this, make sure that there is clear communication between management and payroll, and ensure that staff are fully aware of the company's overtime and bonus policies.
If you haven’t done so already, you may also wish to explore the option of making your processes digital, rather than relying on paper (and clear handwriting!)
3. Using the wrong tax rates
Tax rates are regularly changing, so it's important that your payroll team are up-to-date with the latest rates and know how to apply them correctly.
Incorrectly using tax rates can result in the business owing additional taxes, as well as late penalty fees and interest charges.
To avoid this, ensure that your payroll staff receive regular training on tax laws and use a cloud-based accounting software such as xero or QuickBooks that automatically updates tax rates.
4. Misclassifying workers/employees
There are two main classifications to consider with your staff when it comes to payroll; you need to know if workers are independent contractors or employees.
Misclassifying an employee can land you in deep water, as it can lead to multiple financial errors and have legal implications.
Speak to one of our advisors about how to identify classifications and make sure you’re set up for each team member!
5. Processing payments late
Employees rely on – and deserve to - get paid on time and in full.
Late payments can cause a lot of frustration and can also result in additional fees for the business.
To prevent this, ensure that your payroll team have the necessary resources to process payments on time.
You may also wish to explore the option of outsourcing your payroll requirements, so that you’re not left short-staffed during periods of sickness or holiday.
How can Cobalts help?
At Cobalt Accountants, we understand that making sure your team gets paid is one of the most important tasks a business carries out each month.
Running an efficient and effective payroll function shouldn’t be an after-thought – it takes time and expertise.
If you don’t have the right people in the job, or they don’t have sufficient time or resources, consider outsourcing your payroll to an external provider.
A third-party payroll specialist can help you to keep accurate records, maintain data backups and ensure employee files are up to date in-line with legislation – as well as making sure your team are always paid on-time and in-full!
We can manage the entire process on your behalf, giving you the time and space to do other things.
Give us a call to chat through different options.
Whatever stage you’re are with your Payroll, we’re here to help. Book a free consultation now.