At any company, getting paid is important. Of course, the purpose of performing a job is also important as well as how many fun, company trips are planned: people still want to be paid and paid correctly. In the long run, it can cost payroll significantly if they are not detail-oriented. Of course, distributing paychecks is the largest expense for any company but not distributing checks properly is even costlier. Here are a few reasons why.
Time Spent Fixing Mistakes
Due to the need of being accurate, especially in terms of the IRS, payroll records need to be on point. The IRS needs to know all the details of how money is accounted for. Employees have the right to paid properly without discrepancies. Also, recording payroll hours a second time can take even longer than when the hours were first accounted for.
Penalties Ensue from Payment Errors
There are many laws and regulations when it comes to running a business. It is often hard to comb through each law and have a full understanding of what is acceptable or legal within any organization. However, not complying with some laws have greater consequences than others. Fixing payroll errors can prove to be lengthy. Why does this matter? Think about tax season. Late tax payments or submitting incorrect information about employees could have legal repercussions.
Documenting Employees Versus Independent Contractors
In an organization, when a worker is classified as an “employee” this could mean that health care benefits have to be offered, as well as overtime opportunities, or possibly unemployment if an employee is terminated. When a worker is considered to be an “independent contractor,” companies are not liable for offering any of these benefits listed above. If a company made this kind of error, then they would have to go back and fix the mistake. Also, they would have to file back taxes. Finally, OSHA and the Department of Labor would surveil the company.
Causing Employees to Distrust the Company
Most individuals spend most of their time at work. Long hours put in on the job should be accounted for properly. Imagine the excitement of payday and then discovering that a paycheck was cut short. This would indeed cause discontent, anger, skepticism, and lack of motivation or enthusiasm. It is also rare that a payroll error can be fixed immediately. Often corrections are made during the next pay period.
Employee Retention is Effected
Sometimes, all it takes is one mishap for an employee to become dissatisfied with their job. Imagine if constant errors occur. This could result in multiple employees turning in their resignation papers. Ultimately, attempting to hire more people can become costly and even cause a company’s reputation to become damaged.
What’s a Good Way to Stop Payroll Errors from Happening in the First Place?
Human-error is a major issue when calculating payroll. Also, one person handling payroll alone may not be enough. It is suggested that a third party comes in and audits what is done. It is also suggested that there be some kind of payroll software system to double-check the payroll process.
PL Consulting Can Help You Plan Your Budget!
PL Consulting offers a diverse range of bookkeeping and other financial services. Each of our services is customized to fit the needs of our client and his or her business plan. Our team can help you with each step of your business from organization, to budget, to financial maintenance. We are located in Pikesville at 119 Old Court Rd Baltimore, MD 21208. Contact us at 410.764.3731 or firstname.lastname@example.org so that we can assist you with your bookkeeping needs. Remember to stay up to date with everything PL Consulting by following us on our social media platforms via Facebook, Twitter, and LinkedIn.Posted on