Payroll processing involves calculating and distributing pay to employees. That also includes deductions and bonuses and is a vital part of any business.
Because of its significance, payroll processing is a time-consuming and complex task that requires attention to detail, as any errors can have significant financial and legal consequences.
Here, Virtuous Bookkeeping, Canada’s leading virtual bookkeeping and payroll processing company, looks at some of the most common payroll processing errors to avoid. We also examine how outsourcing your bookkeeping can ensure compliance and precision in your tax filings.
Let’s get started.
Here are a few ways to avoid common payroll processing errors as recommended by this leading payroll processing service provider.
Among all payroll processing errors, not maintaining clean payroll records can be disastrous to your business. Your payroll department maintains and creates records of staff. Keeping precise payroll not only helps your business and staff but also helps you remain compliant with company policies.
But, due to its workload, your HR department may fail to maintain precise employee records which can create confusion and chaos. Common record-maintaining mistakes made by HR professionals include:
An automated payroll system lets you streamline the maintenance of employee payroll records, thereby reducing the possibility of human error.
Your company should have a strong backup of its payroll data. Have you considered the consequences if you only save important files on your computer’s hard drive without making a backup copy on an external drive or cloud storage? If your computer’s hard drive fails or is infected by a virus, important data can be lost. This can be disastrous if you do not take sufficient measures to back up your payroll data.
Many businesses invest in cloud payroll software to assure the security of their payroll data. You can access these files anywhere and anytime by logging in with your credentials.
Employee salaries are subject to professional tax deductions as well as income tax deductions at source (TDS). These tax rates may change. Moreover, the payroll team should calculate the tax precisely based on investment proofs, standard tax exemptions, and other income declarations provided by staff. Failure to do so may lead to improper payouts, penalties, and late interest payments.
Hire a leading payroll processing service provider to manage these tasks. They will make use of advanced, cloud-based payroll software to automatically update the latest tax slabs or rates and your payroll tax liabilities.
Not classifying your workers correctly is a common payroll error. Generally, companies have two kinds of workers: freelancers (or independent contractors) and full-time employees. Generally, businesses hire part-timers and freelancers to complete short-term projects. However, tax deductions, TDS rates, and benefit eligibilities for these independent contractors vary from those of full-time employees. Incorrect classification of workers, particularly in the context of non-tax-exempt and tax-exempt staff, can lead to penalties and non-compliance for your organization.
The data, which is gathered from staff during their onboarding process, must be accurate and reflected consistently in your business’s day-to-day operations. A centralized database serving as a single source that is integrated with the payroll system can reduce these misclassification mistakes. You may hire a leading payroll processing company to maintain the precise classification of your workers in a database.
Errors may occur thanks to incorrect timekeeping or overtime pay rates that are miscalculated. This may lead to litigation or statutory penalties and decrease staff morale.
As an employer, you should not mix overtime with regular wages. Consider hiring a leading payroll processing company to deal with these calculations. They use advanced payroll software that can keep accurate track of the work hours and attendance of staff. In this way, you can count on the software to calculate overtime wages to avoid costly litigation and the cost of buying said software.
These are the most common payroll errors you may encounter, as recommended by our leading payroll professionals and virtual bookkeepers. They cannot be prevented completely, but, with a little bit of planning, you can mostly avoid these errors, no matter the size of your business. If you are struggling to handle your bookkeeping or payroll processing, contact Virtuous Accounting & Bookkeeping. We are a leading outsourced bookkeeping and payroll processing company dedicated to offering the best solutions at competitive rates.
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