How to Prevent Payroll Mistakes
Prevent Payroll Mistakes – Payroll is part of every business, big or small. Wages, bonuses and withheld taxes plays a major role in the net income of companies and are subject to laws and regulations so preventing payroll mistakes can lead to more profitability.
For small businesses, payroll is even more crucial since you can be putting your company at a risk on noncompliance if you’re not fully versed in how it works. Continue reading to see how you can prevent payroll mistakes.
If you’re not up to date with the newest payroll laws, you can over-withhold federal income tax, underpay employees or state unemployment taxes and so on. In just the past few years, there were about ten federal regulations changed with reference to payroll. For example, do you know about the Working Families Tax Relief Act of 2004. This act includes middle class and marriage penalty relief, a number of extended tax breaks for businesses, code simplifications through a qualifying child and many technical corrections.
Wage garnishments refers to when a court issues and order requiring you, the employer, to withhold a specific amount of your employees’ paycheck and send directly to someone or an institution to whom they owe money until the debt is paid in full. Wage garnishments include levies and child support and they can be hard to implement, each with their own specific rules.
Employee Fringe benefits
These are extra benefits that supplement your employees’ income, such as a company car, subsidized meals, health insurance, life insurance, gift cards, holiday gift certificates, door prizes at company events and more. Employee fringe benefits are generally play a role in payroll mistakes, but these perks are also a competitive benefit that employers use to attract talented people. In fact, a 2015 study found that 25.2% of job seekers say fringe benefits are very important to them.
Third-party sick pay
Some businesses have a third-part insurance company taking over the salary payments for those on long-term disability. But payroll mistakes tend to be made when employers forget they are the ones still responsible for their employees’ share of social security, Medicare and federal unemployment tax. They also have to report federal income tax withheld and deposited by the third party.
Nonexempt employees have to be paid overtime when they work for more than the traditional 40 hours a week. If their incorrectly classified, wage and hour audits, penalties and lawsuits are a possibility. Make sure your fully understand the rules of nonexempt employees.