Common Mistakes That Lead to Payroll Errors

Employers have an obligation to their workers and the law to make sure payroll is calculated and processed correctly. The last thing company owners and managers need are careless mistakes that result in inaccurate payroll. Such errors can lead to over- or underpaying workers, incorrectly reporting and paying taxes, and lost time spent trying to correct the issues.

BenefitMall naturally recommends contracting for payroll solutions for small business as a means of preventing as many errors as possible. But whether you handle things in-house or utilize an online payroll service, there are still four common mistakes you need to be on the lookout for. Being diligent about these four things can really make a difference in maintaining accurate payroll calculations.

1. Improperly Recording Hours

Companies employing hourly workers have to record hours in order to calculate weekly pay. This may not seem a big deal in the modern era of electronics and digitization, but you'd be surprised how many small companies still struggle with this. Among those having the greatest trouble are companies employing hourly workers whose schedules continually fluctuate.

The restaurant business seems to be one area in which these kinds of mistakes occur frequently. Restaurant workers tend to work different schedules every week, requiring employers to work extra hard at properly recording hours. We recommend using a time management software package that utilizes electronic means to record hours. Taking as much of the responsibility for accurate recording out of the hands of HR staff and turning it over to automation almost always increases reliability.


2. Rushing to Meet Deadlines

The second mistake that leads to payroll errors is rushing to meet deadlines. Even with an online payroll service, the employer or a designated worker must enter a minimal amount of information into the payroll system at the end of the week. Waiting until the last hour of the day on Friday can lead to rushing through data entry in order to get done and go home. A better idea is to adjust the designated worker's schedule so that there is plenty of time allocated for data entry.


3. Changes in Pay Schedules

When a company changes its pay schedule – e.g., switching from weekly to biweekly pay – the transition to the new schedule is an open door for mistakes. Many of these are avoidable by taking the time to bring all employees involved in payroll management up to speed on the change, how it will work, and when it will take place. Employees should be completely comfortable with the new schedule before it is actually implemented.


4. Inadequate Software Training

Lastly, payroll solutions for small business generally utilize computer software regardless of whether payroll is handled in-house or contracted out. A leading cause of payroll mistakes is inadequate training in the software a company uses. Mistakes can be amplified when the company switches to a new software program or upgrades the current system.

Every employee with payroll responsibilities needs to be adequately trained in the software being used. Furthermore, the training should not be a one-time exercise. Software evolves over time, even when sticking with the same package, so periodic training is required to keep up. Software training goes a long way toward eliminating mistakes.

Whether your company contracts with an online payroll service or handles everything in-house, mitigating mistakes should be a priority. Accurately processing payroll leads to happy employees, easier and more accurate reporting, greater efficiency, and less time and money spent on correcting errors. The goal is to make payroll seamless enough that it fades into the background.

See how PayFocus, our online payroll solution, can be your seamless solution