As arguably one of the trickiest administrative functions of any organization, the tiniest and seemingly inconsequential of mistakes can take the whole payroll process down, and even force employees to work overtime to make the necessary corrections. When payroll mistakes go completely unnoticed on the other hand, you can enter into the dangerous territory of non-compliance, and even incur fines and costly legal action.
Still not convinced? Check out the payroll challenges listed below and if your business is struggling with any of them, it might be worth consulting with a third-party payroll professional:
Classifying employees
Calculating payroll accurately is only possible when employees are correctly placed into categories, known as types, and these are based upon the organizational needs of your business. Full-time, freelancers, part-time, temporary, contractors, interns and several more, types of workers may be entitled to different benefits and compensation according to regional and national laws surrounding payroll. When an employee isn’t classified correctly, not only could you end up paying them more or less than they’re eligible for, but you could also face several tax compliancy issues.
Calculating leave and attendance
Managing leave and attendance manually will always prove difficult for companies, especially for those employing more than ten workers. Not only can this task be time consuming, but getting it exactly right can be even harder. With advances in technology and software solutions, third-party payroll professionals can help small businesses get their payroll right every month, and save them a lot of stress, time and money.
Keeping abreast of payroll laws
Continually evolving, payroll laws are hard to stay on top of, and without a dedicated team who are always abreast of changes at a national or local level, it can be easy to get it wrong and end up not being compliant. Third-party payroll providers on the other hand, make it their job to watch out for new laws and understand them in their entirety; passing their knowledge down to the businesses they work with, and helping them to be compliant at all times.
Tax deductions and net calculation
This process can become longwinded and complex for any small business still using manual systems, and without the help of an outsourced payroll provider. W-4 forms have to be collected from new hires to ascertain how much tax should be withheld from their salary, a list of voluntary deductions for each employee has to be compiled and reimbursements must be accounted for, too.
Management of payroll records
Holding important information, payroll records may need to be documented for a certain period, and they include how many hours each employee has worked, their rate of pay, taxes and other deductions, benefits, pay period, date of payment and so on. Passing an audit is made much more difficult if these documents aren’t ready and don’t contain all the information required by law, and a third-party payroll provider can ensure that they’re always up-to-date, and are always safely stored using digital methods.
Many small businesses are reluctant to pay an outside party to perform their payroll tasks for them, and this is mainly through a combination of naivete and a desire to save money. However, the reality is often that without their help, costly mistakes are made, laws are broken and there are disgruntled employees aplenty! To stay on top of your payroll responsibilities, outsource them to a professional, reputable provider.