If you’re just getting started with managing payroll for your small business, you might be a little nervous. It’s a fair reaction - after all, there are plenty of small (and big) mistakes you can make when processing payments for your employees, and they can have some pretty substantial consequences. Courtesy of expenseRegister, here’s a look at some of the most common payroll mistakes, how to prevent them, and how to recover if they do occur.
The most obvious - and shockingly common - payroll issue is missing or late payments for your employees. Your very first employees may be understanding about this, but that patience will only last so long. If you simply forget to make a payment, rectify the situation as quickly as possible.
However, missing and late payments don’t always come down to error on your end. Sometimes this happens due to a miscommunication between your business bank account and your payroll software. If you run into this issue regularly, find something more reliable. Look for small business banking features that serve your business needs, including a high-yield interest rate, cash flow insights, minimal to no service charges, and integration with your payroll system.
Payroll adds an extra layer of complexity to your tax responsibilities. You have to pay taxes on your employees’ behalf at regular intervals throughout the year, and you also need to keep close records of what your employees have been paid and what they’ve paid in taxes so you can provide accurate information come tax time.
Missing tax deadlines or keeping poor records can land you in serious hot water. Taxes must be received by the due date, which means sending them early enough to avoid mailing delays. The absolute latest you should send taxes in two days before the due date, and, if you’re that close, you should have your envelope certified. This proves when you sent it, which can help you avoid fines if your payment arrives late.
If you miss a payment, send it in as soon as possible. You’re still likely to incur a fine, but the penalty price goes up the later your payment is, so avoiding further delays is crucial. To avoid this in the future, set reminders for yourself or use a service that can remind you or automate payments on your behalf.
If your hourly employees work more than 40 hours in a given week, you’ll need to pay them overtime. Check local overtime laws to see what your rates are, but the federal minimum is 1.5 x regular pay, or time and a half. This means if your employee typically makes $16 an hour, they’ll make $24 an hour during overtime.
Several small things can go wrong when it comes to overtime. For example, you need to be sure you’re keeping close track of your employees’ hours so you know if you need to pay overtime in the first place. You also need to make sure when an employee actually qualifies for overtime, which they may not.
If you pay a lot of overtime, consider hiring another employee. The frequency of overtime suggests that you’re understaffed, and this can lead to employee burnout since they’re taking on more than they can achieve in a full work week. Hiring another staff member can bring some balance to your teams’ workload and, ultimately, make everyone more productive.
Managing payroll is a major adjustment, but remember: It’s a sure sign your business is growing. If you’re really struggling to get the hang of it, consider using a payroll service or hiring a payroll expert to manage things on your behalf. Making this job easier on yourself will pay huge dividends in the long run.
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