Home » Our Blog » 5 Biggest Payroll Mistakes to Avoid
back to the top

5 Biggest Payroll Mistakes to Avoid

Share on Facebook Share on Twitter Share on LinkedIn Share on Google Plus Share through email Print it More share options

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.

What Substance Abuse in the Workplace Costs Employers

Share on Facebook Share on Twitter Share on LinkedIn Share on Google Plus Share through email Print it More share options

Of the estimated 14.8 million Americans who use illegal drugs, 70% of them are employed, according to the U.S. Department of Labor. Therefore, odds are your company employs workers who fall into this group. The use of drugs or alcohol by employees inside or outside the office can be costly for a business, leading to:

  • increased turnover rate
  • workplace incidents
  • poor workplace morale

From a financial perspective, the National Institute on Drug Abuse found substance abusers cost employers twice as much in workers’ compensation and medical expenses. Additionally, substance abusers are five times more likely to file workers’ compensation claims.

Furthermore, employees with alcohol dependencies are nearly three times more likely to have injury-related absences, according to the National Council on Alcoholism and Drug Dependence. In 2015, that council reported that federal surveys indicate 24% of workers reported drinking on the job at least once in the past year.

Recognizing the signs

Knowing how to handle substance abuse in the workplace starts with recognizing the existence of a problem. Whether it is abuse of alcohol, prescription drugs or illegal substances, a number of visible signs can indicate an employee needs help:

  • change in appearance
  • frequent tardiness
  • decline in job performance
  • slurred speech and drowsiness
  • mood swings and irritability
  • scent of alcohol

None of these signs alone indicates a substance abuse issue, but intervening early with employees displaying a combination of these signs may be valuable to your business. Implementing a companywide policy, training managers to recognize signs of substance abuse, and setting expectations with employees through training can help safeguard your business and your workforce.

 Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

 

Tags: , , , ,
Posted in Blog, Compliance, Featured

Jason Hines

by Jason Hines


Author Bio:

Jason Hines is a Paycom compliance attorney. With more than five years’ experience in the legal field, he monitors developments in human resource laws, rules and regulations to ensure any changes are promptly updated in Paycom’s system for our clients. Previously, he was an attorney at the Oklahoma City law firm Elias, Books, Brown & Nelson. Hines earned a bachelor’s degree from the University of Central Oklahoma and his juris doctor degree from the Oklahoma City University School of Law, where he graduated cum laude. A fan of the Oklahoma City Thunder, Hines also enjoys exploring the great outdoors with his wife and daughter.

Podcasts

5 Podcasts That Every HR Professional Should Download

Share on Facebook Share on Twitter Share on LinkedIn Share on Google Plus Share through email Print it More share options

Podcasts provide the opportunity to sit like a fly on the wall and listen to some of the most brilliant minds in the world converse about today’s biggest trends and challenges.

According to a study by Triton Digital, nearly one quarter of Americans listen to a podcast at least once a month. Education is a popular subject, with 40% of podcast listeners tuning in to that type. If you’re an HR professional or business leader looking to broaden your knowledge of HR and HR technology this year, I highly recommend filling your ears and brains with these five podcasts throughout ’18.

1. HBR IdeaCast

From Harvard Business Review, the weekly HBR IdeaCast features leading thinkers in business and management discussing a variety of key topics in the work world.

It is an excellent resource for insights on a wide array of subjects including, but not limited to, HR. The discussions apply directly to organizations nationwide. The podcast reminds me of NPR’s Fresh Air, but with an emphasis on business leaders.

Recommended episodes:

2. HR Happy Hour

Since 2009, HR Happy Hour has featured thought leaders, workplace and technology experts, academics and more to take on important aspects impacting HR, technology and the workplace.

The podcast is so long-running that it has episodes dedicated to just about every HR topic under the sun. The charming hosts Steve Boese and Trish McFarlane make trending topics fun and informative.

Recommended episodes:

3. CIPD

From the UK’s Chartered Institute of Personnel and Development, the monthly CIPD podcast covers everything from talent acquisition to workplace training and cybersecurity.

CIPD’s international perspective brings fresh eyes to subjects that resonate with many American HR professionals. With a backlog of more than seven years’ worth of episodes available, it’s easy to recommend.

Recommended episodes:

4. Workology Podcast

Covering the science and art of the workplace, Jessica Miller-Merrell’s Workology Podcast offers insights and actionable tips on HR and recruiting. Each 45-minute episode promises an in-depth look at every company’s most valuable asset: the employee.

In asking sharp, pointed questions about the latest HR trends, Miller-Merrell does an excellent job as host, bringing a unique and often unexpected take on familiar subject matter.

Recommended episodes:

5. HR Break Room

The official podcast of Paycom, HR Break Room brings you quick conversations on hot topics in HR and HR technology. Co-host Chelsea Justice and I talk with guest experts about the challenges faced by the everyday workplace, as well as their solutions.

To be a bit self-indulgent, I love doing this podcast because it gives me the opportunity to talk with some of the most brilliant minds in the industry. In our first year, our esteemed guests have included New York Times best-selling author Cy Wakeman, millennial expert Adam Smiley Poswolsky, HR Bartender’s Sharlyn Lauby, futurist Jacob Morgan, author and Harvard professor Mihir Desai and of course, motivational speaker and leadership expert, Mark Sanborn.

Recommended episodes:

You can learn more about goings-on within the HR sphere by subscribing to HR Break Room podcast. Here’s to a year full of professional growth through podcasts!

Tags: , , , , , , ,
Posted in Blog, Featured, HR Management, Leadership

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.

Deadline Extended

Employer Deadline Extended for Furnishing 2017 ACA Forms

Share on Facebook Share on Twitter Share on LinkedIn Share on Google Plus Share through email Print it More share options

Distribution of 2017 Affordable Care Act (ACA) Forms 1095-B or -C to your employees has been extended.

As issued in Notice 2018-06, the IRS has extended the deadline from Jan. 31 to March 2. (However, the deadline to provide Forms W-2 and 1099 to employees and contract workers remains as Jan. 31.)

Filing deadlines unchanged

While the deadline to furnish forms was extended, the filing deadlines remain the same: Feb. 28 for paper forms, and April 2 for electronic forms.

IRS Notice 2018-06 emphasizes that employers who do not comply with the due dates for furnishing or filing are subject to penalties under sections 6722 or 6721.

Good-faith transition relief extended

The IRS also announced the extension of good-faith transition relief. This may allow an employer to avoid some penalties if it can show that it made good-faith efforts to comply with the information reporting requirements for 2017.

This relief applies only to incorrect and incomplete information reported on the ACA forms, and not to a failure to file or furnish the forms in a timely manner. Additionally, the IRS stated it does not anticipate extending either the good-faith transition relief or the furnishing deadline in future years.

Contact a trusted tax professional if you have questions on how this may affect your business specifically.

Click here to read more about how the ACA is affect by the new Tax Cuts and Jobs Act.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

Tags: , , , ,
Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio:

As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

X

Contact Us

  • Are you a current Paycom Client?

    Yes

    No

    • Talent Acquisition

    • Time & Labor Management

    • Payroll

    • Talent Management

    • HR Management

  • Subscribe me to Paycom's newsletter.

*Required

We promise never to sell, rent or share your personal information with a third party unless required by law. By submitting this form, you accept our Terms of Use and Privacy Policy.