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5 Biggest Payroll Mistakes to Avoid

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Mistakes often are chalked up to human frailty, but those affecting your company’s payroll aren’t so easily dismissed.

Failure to comply with payroll laws can cause increased scrutiny from government agencies, penalties, fines and – in extreme cases – imprisonment. Employee goodwill also could be lost, as workers quickly tend to become disillusioned by payroll mistakes.

Here are the five biggest mistakes employers make when processing payroll and how you can avoid them:

  1. Misclassification of Employees as Independent Contractors

Misclassifying employees as independent contractors leads to the employer avoiding its share of taxes and the employee’s portion not being withheld. The misclassified employee also loses out on vital benefits and protections, such as employer-sponsored health insurance, overtime and unemployment compensation.

Generally, if you control what type of work will be done and how it will be done by the worker, then the worker is an employee, not an independent contractor. But, determination isn’t always so simple, as there are other variables to consider, such as the type of relationship you have with the worker and how he or she is paid.

  1. Improper Classification of Nonexempt Employees

Nonexempt employees are entitled to overtime, but exempt workers are not. Therefore, when you misclassify nonexempt employees as exempt, they don’t get overtime pay, no matter how many hours they work per week. This practice can lead to a wage-and-hour lawsuit.

Example: A 2015 Department of Labor press release states that a Fargo-based hotel owner was ordered to pay more than $180,000 to 200 current and former employees because he failed to pay them overtime and misclassified some workers as exempt salaried.

Typically, an employee must perform specific job duties and receive an annual salary in excess of a specific amount to qualify as exempt. The rules are intricate, so consider using an HR management tool, if necessary.

  1. Withholding Blunders

Paycheck deductions can be mandatory or voluntary, making the withholding process a multi – faceted one with vast potential for slip-ups. The most common mistakes include:

  • failure to withhold federal and state taxes;
  • improperly setting up the employee’s tax information;
  • inaccurate calculation of pretax and post-tax deductions, such as cafeteria plan premiums and wage garnishments;
  • making incorrect deductions from exempt employees’ salaries;
  • excluding taxable fringe benefits – such as gift cards and certain awards and prizes – from the employee’s income;
  • excluding specific expense reimbursements from the employee’s taxable wages;
  • providing employees with a Form 1099-MISC instead of a W-2; and
  • issuing incorrect W-2s.
  1. Late Tax Payments and Filings

The IRS typically requires biweekly or monthly deposits of withholding taxes and the employer’s share of taxes. In addition, most employers must file W-2s along with quarterly and annual returns. Note that the implementation of the Affordable Care Act has made the filing process even more detailed for employers. What’s more, the state has its own deposit and filing criteria.

Penalties vary for failure to pay, make timely deposits and file. For instance, IRS late-deposit penalties range from 2 percent to 15 percent, depending on when you make the deposit.

You may be hard-pressed to remember all the different withholding, payment and filing procedures. Consider using checklists (or flowcharts) and calendars to keep you on track.

  1. Subpar Recordkeeping

Nothing prolongs a payroll audit more than shoddy recordkeeping. And nothing makes an audit go more smoothly than sufficient documentation. To accomplish the latter, follow the payroll recordkeeping laws required by the federal and state government. Payroll records include documentation relating to minimum wage, overtime, equal pay and child labor.

Under federal law, you must retain payroll records for at least three years except for those dealing with wage calculations, which you can keep for two years. You also must establish a complete and accurate timekeeping system for your nonexempt employees to use. On top of federal law, you must also observe state and local regulations when it comes to record keeping.

Many employers entrust their payroll to a competent provider, reducing the likelihood of errors even more. However, make sure you are going with a payroll provider with strong financials and one that has been in the business for at least 10 years.


Bryan Bagby

by Bryan Bagby


Author Bio: Bryan Bagby is a seasoned payroll and tax professional with over seven years of industry-related experience. During his time as tax manager, he created a development plan, empowering leaders to build on their skills, while also championing an inner-department communication strategy. Bagby's dedication to providing service excellence ultimately led to a leadership role in Paycom customer service and he now focuses on improving timeliness and accuracy for Paycom’s billing processes and procedures as the Billing Manager. Bagby is an expert on employer taxes, personnel development, customer service and leadership. Outside of work, he enjoys spending time with his wife and children as well as the occasional round of golf.

Office Drama

It’s an Office, Not a Theater: Managing Office Drama

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Office drama is a distraction that could be costing your company millions. In her new book, No Ego, drama researcher and New York Times best-selling author Cy Wakeman defines drama as any disruptive behavior or thought process that takes energy away from results or a great work climate.

Need to minimize workplace drama?

Listen to the HR Break Room podcast episode “It’s an Office, Not a Theater: Managing Workplace Drama” with author Cy Wakeman.

Drama is expensive

According to Wakeman, employees spend nearly three hours a week on workplace drama, totaling an estimated 816 hours being wasted per year. This isn’t just a nuisance that hurts employee morale and eats up management’s time, but also lowers productivity and, ultimately, profits. With so much at stake, it’s important to remember that organizations can minimize this type of financial drain.

Egos fuel the fire

Wakeman identifies five key causes of workplace drama:

  1. lack of accountability
  2. lack of engagement
  3. withholding buy-in
  4. resisting change
  5. ego-driven work environment

Each cause manifests itself differently, but perhaps the ego’s most common way of creating tension is through employee venting allowed by open-door policies.

Creating an approachable environment is important, but often, in an effort to give employees access, members of management invite toxic conversations that can last as long as 45 minutes, according to Workman’s research. Instead of colluding or sympathizing with employees, the best way to minimize the drama is to bypass their ego; train managers and employees to reflect on their challenges instead of blasting the faults of others.

Self-reflection: the cornerstone of accountability

Becoming more self-aware and learning how to edit your own story is a critical life skill that helps minimize drama, personally and professionally. Most times, the stress that arises from drama does not come from reality, but from a story we make up about our reality. If we hold ourselves accountable to the truth, we realize that most of what we are upset about did not even happen.

Recruit for a low-drama workforce

Recruiting is one way to reduce workplace drama. It is crucial to find people who not only perform, but are able to stay emotionally ready for what’s next.

Finding highly accountable top talent can be challenging, which makes implementation of an applicant tracking system essential. These prospective employees are in high demand, and recruiting them successfully requires swift, seamless action before they go somewhere else. Organizations lacking the tools to attract and recognize quality applicants could be at a disadvantage.

HR’s role in minimizing drama

A big opportunity exists for HR to cut the cost of workplace drama and, more importantly, put an end to the entitlement that feeds such conflicts. HR needs to be especially careful about its employee engagement philosophies, because engagement without accountability creates entitlement. HR should not be afraid to challenge conventional wisdom that does not yield positive results. For example, one popular idea is that employees can be engaged by perfecting their circumstances. This may sound great on paper, but in actuality, there is no way you can perfect their reality; instead, you grow them to become better equipped to live in their reality.

HR can create surveys to send to top performers in order to get a better understanding of their day-to-day environment, including pressure points. Using this data, HR can implement trainings that enrich the mental processes of managers, and eventually, all employees within the company.

Office drama may be an inevitable part of today’s workforce, but by training managers and employees on the right mental processes based on self-reflection, your organization can save countless hours of employee time and untold wasted dollars.

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Posted in Blog, Featured, HR Management, Leadership, Talent Management

Chelsea Justice

by Chelsea Justice


Author Bio: Chelsea is co-host Paycom’s HR Break Room podcast, editor-in-chief of its corporate culture magazine, Paycom Pulse and is Paycom’s communications supervisor. During her more than eight years in marketing, corporate training and communications, she has created hundreds of magazines, training guides, videos and webinars for multiple industries. In her free time, Chelsea is planning her next travel adventure, perfecting her most recent baking recipe, devouring a good book and, above all, spending time with family.

Political Conversations

Knowing the Limits of Political Conversations at Work

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Having political conversations in the office can be difficult, especially in the wake of a divisive post-election season. When employees from various walks of life work in the same space, there’s more opportunity for political disagreements and potentially toxic office conversations.

Determining how your organization will handle political activity in your organization remains a blind spot for many organizations. A 2016 SHRM survey reported that 72% of HR professionals said their companies discourage political activities in the workplace, but only 24% of organizations have a written policy. To further muddy the waters, 8% reported having an unwritten policy that was not communicated explicitly.

 For more tips on how to manage political conversations at work, check out our  HR Break Room podcast episode, Political Conversations at Work: Should HR Pass It or Veto It

These heated conversations make way for an important question for employees and HR to consider: What are your organization’s rules and limits in participating in politics?

Private institutions are king.

It’s important to note that not all organizations operate under the same rules and regulations when it comes to engaging in political discourse or being active in political campaigns. For instance, because of the U.S. Supreme Court’s Citizens United ruling in 2010, private employers have the right to make their opinions and preferences known to both employees and the public.

This ruling also gives private organizations a great deal of leeway in handling political discourse and policy on their own terms. They are not prohibited from restricting employees’ speech and even can have employees participate in political campaigns on the clock.

What’s even more surprising? The Bill of Rights doesn’t protect workers in the private sector from being fired over speech in or outside the workplace – it only prevents the government from infringing upon citizen’s speech.

What can nonprofits do?

The rights of private organizations differ quite a bit from the rights of nonprofits. Organizations that want to maintain the highly sought-after 501(c)(3) tax-exempt status are forbidden from participating in partisan “political campaigns” or else risk having that status revoked by the IRS.

However, the definition of “political campaign” can be ambiguous, especially when nonprofits are allowed to participate in such nonpartisan activities as voter registration drives and legislative advocacy programs.

Here’s a quick breakdown of nonprofit advocacy groups and what they can/can’t do in the political arena:

  • 501(c)(3) groups – are religious, charitable, scientific or educational organizations and are not supposed to engage in any political activities, though some voter registration activities are permitted.
  • 501(c)(4) groups – are social welfare groups and organizations that may engage in political activities, as long as these activities do not become their primary purpose.
  • 501(c)(5)groups – are labor and agricultural organizations that may engage in political activities, as long as these activities do not become their primary purpose.
  • 501(c)(6)groups – are business leagues, chambers of commerce, real estate boards and boards of trade may engage in political activities, as long as these activities do not become their primary purpose.

 

The next three nonprofit groups exist FOR political purposes:

  • 527groups – are tax-exempt groups organized under section 527 of the Internal Revenue Code to raise money for political activities. These groups are typically parties, candidates, committees or associations organized for the purpose of influencing an issue, policy, appointment or election, be it federal, state or local.
  • Hybrid PACs (Carey Committees) – these nonprofit committee groups are not affiliated with a candidate and has the ability to contributing funds to a candidate’s committee and to make independent expenditures, as long as they have separate bank accounts for each purpose.
  • Political Action Committee (PAC)– these nonprofit committees raise and spend limited money contributions for the purpose of electing or defeating political candidates.

 

To know how to make the best company policy at a nonprofit, it is important to understand how the IRS determines these terms. The IRS uses what it calls “facts and circumstances” to determine whether nonprofit organizations are engaging in partisan political activity. This means certain activities not normally considered political in a non-election year could be considered political two months before or after an election.

When determining how your 501(c)(3) organization gets involved in political activities, it’s crucial to consider the nature and goals of the activity before deciding whether it is worth the potential risk.

Few organizations have policy.

Whether a Fortune 500 company or a local nonprofit, knowing exactly what your organization’s limits are in participating in politics helps employees understand expectations and act accordingly. These allowances and their boundaries also can help you determine how to handle these political conversations when they inevitably arise at work.

If you’re interested in learning more about how to manage these sensitive political topics, please subscribe to Paycom’s HR Break Room podcast and listen to our latest episode with special guest Robin Schooling.

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Posted in Blog, Compliance, Employment Law, Featured, Leadership, Nonprofits

Caleb Masters

by Caleb Masters


Author Bio: Caleb is the host of The HR Break Room and a Webinar and Podcast Producer at Paycom. With more than 5 years of experience as a published online writer and content producer, Caleb has produced dozens of podcasts and videos for multiple industries both local and online. Caleb continues to assist organizations creatively communicate their ideas and messages through researched talks, blog posts and new media. Outside of work, Caleb enjoys running, discussing movies and trying new local restaurants.

Office Drama

5 TV Shows With Worse Office Drama Than Your Workplace

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Office drama can be a stressful part of any job. And human conflict is a tale as old as time. But when workplace theatrics start to look eerily like the latest episode of Game of Thrones or Mad Men it’s probably time to take closer look at what’s happening with your employees. Let’s take a look at five of the best television shows that have worse drama than your own office and what we can learn from them.

Need to minimize Workplace drama? Listen to the HR Break Room podcast episode It’s an Office, Not a Theater: Managing Workplace Drama with author, Cy Wakeman.

1. The Office

Nothing beats a classic, and we all know The Office’s Dunder Mifflin is nothing short of an HR disaster. This office is filled with the least productive staff on television. With all of the gags, quirks, and of course, video documenting, it’s a small miracle Dunder Mifflin kept any of these employees on staff for more than a week.

The drama in The Office is silly and usually lighthearted. But if we examine the show through the real-world HR lens, it’s easy to see how that drama negatively impacted productivity. Over the course of nine seasons, surely some work was done, but the leadership in the office – including Toby, the HR representative – could never keep Michael, Dwight, Pam or the rest of the team focused on the task at hand. The takeaway here is that drama – no matter how big or small – steals valuable time away from your people. Leaders should remember to check in with their people via one-on-ones to ensure that drama is not distracting employees from their work.

2. Mad Men

Don Draper’s swagger and charm may be irresistible, but we could do without the office dynamics of his ad agency, Sterling Cooper. Mad Men’s top-notch writing and 1960s aesthetic combine to tell a story about how one leader’s personal issues can spill into the office and destroy employee morale.

Mad Men is undeniably one of the most respected TV shows from the last decade, and you cannot deny its class, but Sterling Cooper is the posterchild for office drama and HR nightmares. Leadership always sets the tone. Don Draper’s toxic lifestyle influenced the unhealthy environment. Don’t be like Don Draper; lead with respect!

3. Halt and Catch Fire

If we jump forward a decade or two to the 1980s, a different type of office drama emerges in Cardiff Electric, a PC company. The show is set during the height of the personal computer race and stars Joe MacMillan – an engineering prodigy – who finds a fatal flaw in IBM’s computer. Joe’s ambitions are fierce and so is the “all work and no play” mentality he uses to lead his team. This leadership style led to burnout, sellout and even betrayal from members of his team.

Big ambitions are essential to driving a successful company, but if Halt and Catch Fire tells us anything, it is that your people’s happiness is important, too.

4. Silicon Valley

Let’s step away from the past to look at a show that’s a little more cutting-edge. Silicon Valley takes viewers into the insanity of a California tech start-up. Sure, there are fun ideas galore, but when the work of building and implementing a product begins, things get messy between Richard, Erlich and Nelson – and a comedy of errors ensues.

If there is anything to take from the absurd events that occur on Silicon Valley it is that HR is always essential in helping prevent disasters, even in start-ups.

5. Game of Thrones

Game of Thrones might seem like a real stretch, but hear me out! The dark and twisted Westeros adventures of Daenerys Targaryen, Jon Snow and Tyrion Lannister may seem as far away from your workplace as any TV show, but if you look closer, the power struggle for the iron throne may have more in common with your work than you imagined.

In Game of Thrones characters are always living in fear for their life. This high-stakes environment often leads to characters throwing each other under the proverbial bus, making secret alliances and plotting to usurp their superiors. The fear-driven culture of Westeros is not pleasant for anyone with aspirations for a happy life.

Creating a healthy culture built on wholesome core values is essential to making a successful organization filled with happy employees. When investigating and building your own culture, don’t let those Westerosi dynamics creep into your organization’s mission.

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Posted in Blog, Featured, Leadership, Talent Management

Caleb Masters

by Caleb Masters


Author Bio: Caleb is the host of The HR Break Room and a Webinar and Podcast Producer at Paycom. With more than 5 years of experience as a published online writer and content producer, Caleb has produced dozens of podcasts and videos for multiple industries both local and online. Caleb continues to assist organizations creatively communicate their ideas and messages through researched talks, blog posts and new media. Outside of work, Caleb enjoys running, discussing movies and trying new local restaurants.

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