Managing even a small set of employees has its challenges. If you have been a Minneapolis start-up owner for a while, you’ll know that payroll can be a headache for you.
Every month, you as the employer are responsible for overseeing the payment of wages to your employees. On top of that, you also have taxes and contributions to think of as you crunch the numbers ad nauseam.
The tedious and detailed nature of payroll management can make any manager’s head spin, leading to errors that can spell disaster for your business. These errors often come in the form of the following:
Read on to learn more about these errors in greater detail, as well as how to avoid committing them!
Record keeping is arguably the backbone of efficient payroll management. A simple mismatch can lead to subsequent errors like misclassifications, payment delays, and improper tax filing.
Having complete records is equally important as having them in an organized fashion. After all, having folders of W2 forms will not mean much if they are not classified in some way. Having organized and complete records can also protect your business should you get audited by the IRS.
Having incomplete records can cost you as much as $260 per employee. And, if you are running a start-up, this is an expense you definitely want to avoid.
Everyone makes mistakes — including whoever manages your start-up’s payroll. When this occurs, the following can be the results:
Errors can not only lead to getting in trouble with taxing and employment authorities, they also can have and adverse effect on employee morale and job satisfaction. The American Payroll Association discovered that nearly half of employees may seek other jobs if you commit errors in payroll.
Avoiding miscalculations is possible and straightforward with double-checking computations and hiring the right payroll service provider.
Payroll can be a complex process for many reasons. One of them is the need to properly calculate taxes and social security benefits depending on the classification of employees.
The classification of your employees is crucial to pay the right taxes and social security benefits. Failing to do so can get you in trouble with the Internal Revenue Service (IRS).
For example, independent contractors and regular employees belong to different tax brackets and statuses. If you fail to distinguish between a contractor from your regular employee, you may be audited due to tax inconsistencies.
Indeed, most businesses are aware of tax deadlines. The problem with compliance with the tax deadline seems to be related to delays in calculations and filing. In other cases, we can point to late deposits as the reason for delayed payments.
Whatever the reason, delayed income tax payments for each employee can result in hefty penalties.
The penalty for paying taxes late can include:
For the most part, delays in tax deposits are the result of mismanaged schedules on the payroll. You can easily address delays by scheduling computations and streamlining your depositing processes.
Your payroll consists of data. Yours, your business’s, and your employee’s. These pieces of information should not be readily available to other people except the parties that are concerned. And, in almost all cases, this involves the employee.
Employee information consists of his or her wages, withholding taxes, and benefits. These may not be the same as that of another employee. For this reason, leaking this information or failing to keep it secure can lead to conflict among your workers.
Luckily, there are now solutions that can help you keep records and payroll confidential. Often, these involve software, accessible to only a few select members of your team and yourself.
There is an old saying:
Everything works well until it no longer does.
Any process for your start-up from digital marketing to payroll management, will require an overhaul from time to time. Whether it is how you manage payroll to the software you use, you need updates.
Updates both improve your payroll management and protect you from glitches that can occur. As mentioned earlier, the last thing you want is an erroneous payroll. Especially due to imperfections of faulty processes and software.
Preventing the above-mentioned errors can help you retain employees and avoid trouble from the authorities. Avoiding unnecessary delays is also the result of minimizing errors in managing payroll.
Here are some easy ways to steer clear of payroll errors that can cost you time, your business, and your employees:
Part of the problem of incomplete records is the absence of payroll records of past employees. It is a mistake to think that the records of separated employees deserve the shredder. Thinking this way can get you in trouble, especially if the IRS audits you.
So, how long do you keep the records of former employees? While the IRS has a rule requiring you to hold on to these payroll records for four years, we have a different take. Just to be on the safe side, keep all payroll records for up to seven years after your employee has left.
Whether you use QuickBooks, Gusto, ADP, or Paychex, always go for an update when it is available. Automation makes running your business more efficient even in payroll management. Nonetheless, you want to ensure that your software is updated to protect you from glitches.
Making sure everything is correct on the day of the payroll cut-off can be jarring to some. And it may be for you. Of course, checking everything at the last minute can also lead to more errors.
Scheduling enough time after pay period cut-off allows you to check and double-check. This period also gives you enough time to correct errors before you wire what needs to be deposited.
Payroll, like any process, involves several steps and tasks. And, when you are at the helm of a start-up with more than a handful of employees, these tasks can multiply.
A to-do list you need to accomplish before your bi-weekly cut-off dates can break tasks into manageable chunks. Having one will also streamline your personal payroll processing into tangible steps.
As mentioned earlier, payroll records also include tax forms like W2s. For contractors, you need to require 1099 forms. This helps you file taxes accurately based on the classification of your employees.
You do not need to be a Fortune 500 company in the Twin Cities to experience the benefits of an entire accounting and HR department. In this part of Minnesota, start-up businesses like yours can outsource payroll to payroll companies in Minneapolis, MN.
Do you want to avoid payroll mistakes and optimize your payroll? ICOMP has spent the last two decades handling payrolls and making life easier for business owners in Minneapolis.
Don’t hesitate to reach out for a free demo of our accurate, affordable, and reliable payroll services!