Payroll compliance is a big deal for employers, and if you’re not benefitting from the expertise of a third party payroll provider, it can prove to be a confusing and somewhat daunting task.
With so many things to keep track of, taxes to be filed and pay to be calculated correctly, payroll can push even the most efficient of employers to the limit. However, by following the 5 best practices outlined below, you can stay compliant and keep both the IRS and your employees, happy:
- Take advantage of payroll software
For anyone still manually calculating payroll, there’s a strong likelihood that you’re not doing it right. Even if you use the services of a third party payroll provider, you can benefit from payroll software, which enables you to automatically calculate and process payroll, while keeping on top of any changes to existing regulations.
- Know your deadlines
Filing certain employee tax reports and forms on time is critical for any employer, and failing to keep track of important deadlines can result in fines and penalties. Along with filing deadlines, you must also keep a close eye on payroll processing deadlines, and the date upon which you plan to submit all withholdings.
- Don’t make employee classification errors
Independent contractors don’t file their taxes in the same way as an employee (only employees have taxes withheld from their paychecks), and by misclassifying them, you could cause problems for your business, and the employees themselves. In some instances, misclassification can lead to costly fines and the payment of back taxes.
- Track time and attendance accurately
When employees aren’t paid correctly, this error often arises due to the employer’s failure to properly track employee time and attendance, hence getting the payment wrong. Reprocessing payroll due to inaccurately tracked time and attendance can lead to even more errors, and so it’s best to have a formal and accurate time and attendance system in place to make payroll easier to manage, and keep employees paid correctly for the time they’ve worked.
- Submit with holdings on time
When a business takes money from an employees paycheck, those tax with holdings must be submitted to the government in a timely fashion; failure to do so can mean that those funds remain in the business and end up creating problems with cashflow further down the line.
Even if you make a payroll error unintentionally, it can have significant and costly consequences for you as an employer, and for your business as a whole. However, by having a sound system in place to ensure that you’re always compliant, and always pay your employees on time and in full, you can avoid repercussions involving federal, state and local governments, and prevent unhappy employees from filing a complaint against you.
Failure to focus on payroll compliance simply isn’t worth the hassle and expense it can cause, so work with a third party payroll provider to make sure it never becomes a costly problem.