When you hire a bookkeeper to take care of your payroll, you expect them to do the job properly. Unfortunately, even professionals can make payroll mistakes that have significant consequences.
Payroll mistakes can be significant, as they might run afoul of tax law or worker rights. Any of the practices or mistakes listed below could eventually lead to serious consequences for your company.
Rounding down to avoid overtime
In theory, federal law does allow employers to round payroll time records in specific increments. However, they must apply that rounding policy equally in situations that benefit the company and that benefit the worker.
The company cannot pick and choose when to apply a rounding policy just to avoid paying overtime or to reduce how much they pay their employees. If workers eventually bring a claim against the company for that unpaid overtime, your business could face a lawsuit for unpaid overtime wages, which could damage both its finances and its reputation.
Failing to apply garnishments or withhold child support
When your company pays its workers, it will have to make certain deductions first. These include withholding taxes and also possibly applying child support or garnishments to an employee’s income. Failing to properly withhold money from a worker’s paycheck could lead to accounting headaches and possibly even allegations of fraud in the future.
Failing to meet payroll deadlines
Whether your company issues paper checks or pays workers via direct deposit, you have an obligation to make payroll available to workers by a certain posted date and time. If a payroll employee fails to send the direct deposit funds or issue paychecks on time, the business could be subject to fines in addition to possibly causing financial difficulties for its employees, who depend on receiving their pay in a timely manner.
Not saving all of the payroll records
Ensuring that your company has official payroll records is one of your responsibilities as an employer. You have to maintain all employment records for several years. If someone working in payroll deletes your records regarding when employees worked, you could find yourself facing claims by workers that will be difficult to contest and possibly penalties for non-compliance with recordkeeping rules.
Payroll mistakes could easily cost your company thousands of dollars if they result in litigation or attempts to enforce the law by government agencies. Making sure that you comply with employment laws helps protect your company from payroll issues that can have financial and legal consequences.