Top seven payroll mistakes

Any business with employees must have a system in place for handling payroll activities, which includes paying employees, filing all necessary government forms, and paying taxes promptly.

There are numerous aspects to payroll, particularly in companies with full-time and part-time employees as well as independent contractors. Here are seven of the most common payroll mistakes to be aware of.

Missing deadlines

It is imperative that you mark your payroll calendar and report and deposit and payroll taxes and Medicare contributions to federal and state agencies in a timely manner. Payroll tax is applicable to all salaries, allowances, director's fees, superannuation and the gross value of fringe benefits. Late deposits can result in penalties and interest charges. As payroll tax rates and thresholds fluctuate every year, remember to check with the relevant state revenue office.

Misclassifying workers

Because of the growing number of temporary employees, consultants, and other independent contractors, it is essential that you properly determine the classification of everyone working for your company so you can determine how to report payroll information for tax purposes.

Not properly handling garnishments, levies, or child support

Employees may owe money by way of a court order to other parties. This means whoever is handling payroll will be responsible for sending the payment to the appropriate recipient.

Miscalculating overtime pay

There are guidelines that must be followed when determining overtime pay and miscalculations can be costly. Employees who have worked more than 38 hours a week are entitled to either a higher rate of pay or 'time in lieu', which allows overtime employees to take time off. Different rules apply to part time and casual workers, so it is important to consult the Fair Work Ombudsman for further information.

Leaving too much responsibility to the software program

There are several excellent programs available for doing payroll such as KwikPay (for SMEs with less than five employees), MYOB and ePayroll. However, many people neglect to enter all of the data or assume that the program can perform calculations without all of the necessary information.

Not maintaining confidentiality

Payroll information should not be disclosed to anyone outside of the payroll department or the senior management team. It is important that such confidentiality be maintained and that payroll is handled in a secure environment.

Not having adequate backup

Should the individual responsible for payroll be away or sick, the state still needs to receive payments on time as do employees waiting for paychecks. There needs to be more than one person capable of both understanding and handling the payroll functions. In addition, if the computer is "down" for whatever reason, you need to have a manual backup system for handling all payroll functions.

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