7 Common Payroll Mistakes Small Businesses Make
Handling payroll is one of the most critical steps for a business, especially a small business. If done wrong, it can trigger a chain reaction that can be catastrophic for the company. Starting from unhappy employees leading all the way to compliance and legal headaches, it can cost you time, money, and your reputation.
Surprisingly, the major payroll mistakes that companies make are easily avoidable if you do your homework right. Whether you have a business in Tampa or nearby, you should work with reliable payroll service provider like Onyx Payroll. Following are some common payroll mistakes that small businesses make.
1. Confusion Between Employee Types
Classifying employees can be a daunting task. Payroll issues frequently occur because business owners are confused when it comes to classifying employees. They don’t understand who is an independent contractor, who is exempt, and who is non-exempt under the hour and wage laws. Wrongly classifying them can lead to penalties, fines, and other liabilities.
Pro Tip: To avoid any confusion, you should review all the definitions under the state regulations and the FLSA (Fair Labor Standards Act)
To avoid any problems, you should consult with a good payroll solution provider that is fluent in Tampa/Florida laws and regulations.
2. Wrong Time Record Keeping
Florida, especially Tampa, is a place where there are a lot of part-time employees working. They are paid by the hour. Mistakes occur when there is an error in tracking hours and calculating the overtime rate. Another confusion is regarding the rules that apply to salaried employees regarding rest periods. Businesses can avoid this by:
- Automating calculations whenever possible
- Using reliable tools to track time, like punch systems or software.
- Give training to the staff about Tampa/Florida overtime laws
3. Poor Record Keeping about Employee Information
An error in recording employee information, like incorrect tax withholding forms, social security numbers, outdated phone numbers, or addresses, etc., can lead to payroll mistakes. Similarly, wrongly calculated hours worked, time cards, benefits, and deductions can be problematic for audits and payroll calculations.
To avoid this, businesses should focus on having:
- A good onboarding system, which includes proper information collection and maintenance
- A digital, organized data storage system
- Proper time tracking systems
4. Not Staying Up to Date with Payroll Rules and Regulation Changes
The financial landscape changes over time. No rules are static. State laws, tax rates, minimum wages, and Federal and local rules can change or be updated. Not being in the loop can lead to non-compliance.
Pro Tip: The key is to stay updated. Businesses can subscribe to tax and legal newsletters.
To be 100% sure that the work done is right, go for the services of a payroll company that monitors all the regulatory changes.
5. Overlooking Deductions, Benefits, and Other Situations
Payroll is not just about a final salary slip. There are so many deductions (retirement, insurance, tax), bonuses, benefits, reimbursements, commissions, overtime, and more. Keeping track and calculating them properly can be a hassle for many.
You can avoid a delay/miscalculation in them by:
- Having payment policies written down and shared with all employees during onboarding.
- Include deduction policies and benefits in the payroll system
6. Missing a Payroll Tax Deadline or Wrong Tax Withholding
The costliest mistake that businesses make is missing the payroll tax deadline or making withholding errors. This can lead to legal troubles. Florida payroll is confusing, as there is no state income tax, but local and federal rules. Some rules that apply are FICA and unemployment taxes.
If you’re managing your own payroll or partnering with a provider, make sure your chosen payroll solution includes built-in deadline tracking and automated compliance alerts to avoid costly penalties.
7. Avoiding to Use of a Good System
Many small businesses try to save money by running the payroll manually. Even though it might seem cheaper, but can lead to higher costs in the long run. Doing it manually increases the risk of late payments, wrong calculations, omissions, etc.
Unless you have a dedicated, knowledgeable, and experienced payroll staff, doing everything in-house is not possible. As the business grows, tackling these things becomes difficult.
The smart move is to rely on experts like Onyx Payroll Solutions. They deal with tax filings, compliance tracking, and automate all calculations to avoid errors.
4 Practices for Getting Tampa Payroll Right
- Go for a reliable payroll partner or system. Go for companies that have a good reputation and offer error checking, automation, good support, etc.
- Train your staff or hire expert help. Even if you outsource your payroll, there should be someone internally who understands the system.
- Maintain clear documentation. Everything should be documented properly and kept up-to-date and safe. Wage agreements, hiring/termination, employee classification and benefit deductions should all be documented.
- Regular audits. Periodic audits should be performed to check for any anomalies.
Conclusion
Payroll is not limited to writing checks or dispersing payments. Small business payroll in Tampa face higher stakes as there is complexity of taxes, deductions, benefits, etc. Try to avoid these 7 common mistakes to save you money, unnecessary tax, and legal penalties.
If you want to stay compliant and simplify your payroll, let the experts at Onyx Payroll Solutions help you. You can get a customized payroll solution with integrated HR tools.
Contact us today to get down to work!
