Table of Contents hide 5 Effective Strategies to Solve Payroll Problems How can I fix my payroll problems? Problem #1: Classifying Workers Incorrectly Problem #2: Wrong Tax Categories & Rates Problem #3: Making Mistakes When Calculating Overtime Problem #4: Not Making Payroll On Time Problem #5: Not Getting Help When You Need It Discover a Payroll Error? More Payroll Error Prevention Tips How Sunwise Capital Can Help 5 Effective Strategies to Solve Payroll Problems How can I fix my payroll problems? Errors in Payroll Cancel, update, and reprocess the payroll. Manually pay the affected employees. Adjust the next payroll to restore balance. Payroll is an essential part of every business, which is why it is so crucial to have the necessary funds and know-how to solve payroll problems. Almost every company will make a payroll mistake due to human error when running payroll. It’s important to ask how do you avoid payroll errors? If you can’t afford to establish payroll departments or perhaps investing in payroll software, you might consider a payroll service provider. Unfortunately, the payroll process can be a headache for many companies, causing critical and costly problems even if you only pay minimum wage. From regulatory changes to labor laws, it’s hard to keep up with all the local, state, and federal laws. We want to know what challenges payroll professionals to encounter during the payroll process. Check out some of these common payroll mistakes and related tips to help you improve the payroll process for your business. Here are the top 5 common payroll issues. Problem #1: Classifying Workers Incorrectly Every company must be careful about misclassified employees. A business may be made up of different classifications of employees, including part-time and full-time. There may also be employees who work as needed; there are exempt employees, employees who stay for a temporary period of time or work as freelance employees or independent contractors. When figuring payroll, it is essential to have employee classifications to deduct the right amount of taxes and allocate them accordingly. For example, the nonexempt employee is different than the independently contracted employee who is not required to pay taxes and social security when the paycheck is initially issued. This option is an attractive option for many employers because it can simplify the process on their end. Unfortunately, if you misclassify a contracted employee, they may miss out on wages and compensation. Especially when it comes to overtime pay. Also, misclassification can result in the company paying both the employee and the employer’s share of taxes or back taxes, plus penalties and interest. Tip: You can avoid this problem by taking a few extra minutes to make sure you are correctly identifying each employee. If you are not sure where they belong, you can find more information in Publication 15-A from the IRS. Problem #2: Wrong Tax Categories & Rates Tax rates can frequently change, which means the information you had when you started your company may not be current. Make sure to check all tax rates frequently and make adjustments in your payroll as needed to avoid penalties and interest. You will also need to make sure deductions are at the correct time. Some items are taken out before taxes, and some are taken out after taxes. For example, different types of supplemental insurance may have different deduction rules. Tip: Make sure you are familiar with all the current and correct regulations. It is also a good idea not to rely too heavily on accounting software, but instead, periodically check that the default settings are accurate and have not changed accidentally. You need to stay current with tax filings, including income tax, employment tax, and any payroll taxes. Problem #3: Making Mistakes When Calculating Overtime Time tracking for each pay period is crucial when keeping track of overtime hours and paying overtime. Full-time employees who work more than the set number of weekly hours are entitled to overtime wages and receive time and a half salary for these additional hours. Miscalculating overtime can be a challenge without proper record keeping. These payroll issues can be avoided sometimes with just an old-fashioned time clock and timecard. However, some employees may be exempt from this benefit. Tip: To avoid penalty charges, make sure you are up to date on overtime rules in your city and state and that you are following them precisely. Also, invest in time recording or tracking systems. Tracking employees’ hours and their time and attendance can be automated with little expense. Problem #4: Not Making Payroll On Time Many workers ask themselves if it is illegal for your employer to pay you late? Not only do late paychecks make employees angry and cause them to lose their trust in you, but the company can also be labeled non-compliant by the state. Paying your employees on time all the time leads to high employee satisfaction. Tip: Make sure you stick to your designated frequency of payment schedule and allow yourself adequate time to complete and distribute paychecks. If you need to, set an alert or reminder on your phone or computer. Moving your payroll system to a payroll company and direct deposit can be a time and money savings over manual payroll. Problem #5: Not Getting Help When You Need It As a business owner, you need to learn how to solve payroll problems and how to recognize when it is time to get outside assistance. Tip: If payroll is becoming a problem due to lack of funds, consider a small business loan to keep your company fully staffed and operating effectively, so you can continue to grow and thrive. How do you solve payroll? Payroll is calculated by taking gross pay and subtracting deductions and payroll taxes. Payroll calculation is a strict procedure. A careful calculation will avoid errors in employee net pay and tax payments. Steps to calculate payroll: Be alerted! Tell employees to finish timesheets by payroll. You tracking down timesheets delays payroll. Keep timecards Get everyone’s timesheets. This information is stored online. Confirm payroll. Verify all timesheets before sending them to supervisors. Extra pay is 50% more expensive than regular pay. Hours worked – Enter this information if you manually collect hours. If not, it’s likely there. Wage rate changes – Input all authorized wage rate changes, withholdings, and deductions. Ensure proper adjustments to gross wages for tax purposes. Work out net pay. Substitute hourly rates for hours worked. Compute net pay. Subtract from gross income all authorized withholdings and deductions. Review. Verify each employee’s gross, deduction, and net pay. If it’s not right, fix it. Pay staff. Simplify payment advice. Make a final payroll register. Authorize the checks. Pay employees electronically. Taxes. Payroll taxes are due on time. Reward. Keep checks in the safe until payday. Ask for identification before handing over a check. Discover a Payroll Error? What’s the statute of limitations? If an employee is late getting a paycheck, there is no one-size-fits-all solution to the problem. The rules vary by state. You must determine whether the check was lost before or after the worker’s receipt. However, it is prudent to establish a policy in advance for lost checks. Tip If you, as the employer, are at fault for the paycheck not arriving – for example, by typing the incorrect address – he is responsible for replacing it. Other situations are less clear, but it is probably prudent to replace the check in most cases. The Check Was Delivered Via the United States Postal Service Your employees are not compensated until their direct deposit or paychecks are received by the bank. If your state law specifies the frequency with which an employee must be paid – monthly, every other week, or weekly – you must deliver the checks by the designated payday. If employees do not receive their paychecks on time due to you mailing them on payday, they may sue you. What occurs next is determined by the reason for the non-arrival of the paycheck. If you are at fault – for example, if you misspelled the check’s address or placed it in the incorrect envelope – your employee is entitled to a replacement check. If the employee makes an error, such as providing you with the incorrect mailing address, there is a good chance you will be legally excused. Contact your company’s attorney or the state labor department for information on your state’s labor laws. When Employees Make Errors Even if the lost payroll check was not your fault – the check was thrown in the dumpster accidentally, the envelope fell out of his pocket – you still have an unpaid employee. Replacing the check may be inconvenient, but it may be necessary to maintain your employee’s satisfaction. If your employee cannot locate the check, request that he delay declaring the check lost for a few days. Contact the bank to hold payment if the check does not appear within that period. If you are not at fault, you are not required to reimburse the employee if the check has already been cashed. After the payment is halted, reissue the check. When a check is stopped, banks charge a fee. While you may believe that deducting the cost from the new paycheck is reasonable, the law may have a different opinion. Numerous states require that employees authorize deductions. In that case, request that the employee pay you separately from your pay rather than deducting it. Establish a Corporate Policy It is best to have a written policy in place before any paychecks going missing. This way, your employees will know what to expect, and you will avoid having to improvise in the face of an irate employee demanding payment. Your policies should clearly state what the law requires and what happens if an employee is found to be at fault for a loss. Incorporate the policy into your employee handbook to ensure that all employees who read it understand the expectations. More Payroll Error Prevention Tips Keep good records. Timesheets on paper are bad. Add overtime. Payroll is complicated enough without overtime. Review local labor laws. Scheduling sync Online payroll taxes How Sunwise Capital Can Help Payroll and cash flow often go hand-in-hand. Even the best-laid business plan breaks down when missed deadlines don’t keep pace with processing payroll. If you don’t pay employees, you probably won’t have a business the next day. When it comes to payroll, Sunwise Capital stands ready to help bridge the gap. Many companies have a hard time acquiring a business loan because of the extensive qualification process. Additionally, they may not know where else to turn when they don’t get a bank loan or low rates. As former small business owners, we understand how difficult the early stages can be, so we are focusing on helping small businesses. Sunwise Capital provides small business loans with lower qualification requirements than most banks. We want to help you get the funding you need to help your business reach its full potential. And we will work with you personally to make sure you have plenty of options to choose from and get the one that works best for you. Apply now for a small business loan and turn payroll problems into a thing of the past. To speak to a knowledgeable small business loan expert, call 888.456.9223.