Managing payroll is a constant for every business with employees. And, when the payroll increases as a business grows, so does the possibility of errors. But that doesn’t have to be the case.
Every business must work to ensure accurate and effective payroll management processes. Their payroll staff is tasked with staying apprised of the current rules and regulations, any new or updated forms, and maintaining compliance as required at the federal, state and local levels.
As a business grows and increases the workforce, these additions naturally add to the overall scope band burden of the payroll staff. In addition, there are the intermittent changes that occur when some employees leave, or when independent contractors and temporary employees are hired.
The problem for many companies is that the payroll processes often grow organically and by necessity, as opposed to the result of a strategic plan. The problems inherent in this approach was highlighted in a recent survey in which over half of businesses polled stated that there was a need for improvement in their payroll process.
Some of the most common payroll issues that were mentioned in the survey were organizational inconsistency in the payroll process, incorrect tax withholding, and over and under payments to employees. In addition, there is the ever-present issue of an over-burdened payroll staff which leads to increased processing errors.
Improving the Payroll Management Process
One approach that many businesses take is to acquire reliable and state-of-the-art payroll software. While this can go a long way towards making HR, payroll, and employee data less overwhelming, data storage and the manual processes still need to be well organized to minimize errors.
This is critical as payroll errors are not only costly, they also add to the workload of a typically over-stretched payroll department with otherwise unnecessary work. In addition to the hard costs, these add to the stress of the payroll staff employees, as well as the level of trust and confidence that an organization’s workforce holds for the management.
Ten Common Payroll Management Mistakes
There are several errors that can be made by a company’s payroll department. The greater number of manual processes that are involved, the greater the likelihood of mistakes being made. Here is an illustrated list of the ten most common mistakes made using typical payroll management processes in businesses that manage payroll in-house:
Minimizing the Costs of IRS-related Payroll Process Errors
While these represent the most typical mistakes made by small and mid-sized businesses, there is an additional oversight that is the result of either improper or untimely handling of IRS forms. In fact, the failure to issue IRS Form 1099 and W-2s is a common occurrence unfortunately.
For example, overlooking or failing to issue Form 1099s is a common problem for organizations using independent contractors to perform work for their business. The IRS, however, requires businesses to issue a Form 1099 to “any business or individual who has been paid $600 or more in any calendar year.” In addition, those businesses must forward copies of the Form 1099 to the IRS.
As with any number of other IRS requirements, the failure comply correctly can be costly. In fact, a business can be fined with a $75 penalty for each Form 1099 that was not issued. In addition, that business can also be required to pay up to an additional 31 percent of the amount that was paid in federal taxes.
Another common and related mistake is the failure to issue IRS Form W-2s to all employees by January 31st. This seems to be more common among small businesses. When Form W-2s are sent out late, the company will be subject to a $50 fine from the IRS for each W-2 that is not provided on time.
For larger companies it can be easy to overlook employees who left or were dismissed during the previous tax year. These employees must receive a letter containing their IRS Form W-2 that is postmarked no later than January 31.
In some instances, the consequences can be far costlier. For example, if the IRS determines that an organization is deemed to have “willfully neglected” to give its employees Form W-2s, the IRS can impose additional penalties and other measures.
A Better Option for Your Payroll Management
Businesses have several options for managing their payroll process. Having software installed in-house, or using cloud-based programs, can offer good alternatives. But if you really want the full benefits available to you then outsourcing to a provider like Accuchex can still be the best decision.
In addition to the time and dollar savings, having the peace of mind of knowing that your payroll processes are being handled competently, accurately, and on time is a great reason to consider outsourcing.
On top of that, you can be assured that the accountability and liability for compliance rests with your vendor, freeing you from the constant pressure of staying fully informed and compliant with the ever changing - and growing - rules, regulations, and legislation.
Reliability, full-service options, and reputation are the hallmarks of a quality payroll management service provider. If you are currently looking to invest in outsourcing your payroll management, get your Free Download: Payroll Outsourcing Guide to help you make an informed decision or call Accuchex Payroll Management Services at 877-422-2824.