5 Common Payroll Management Mistakes US Businesses Need to Avoid

Running a business involves various challenges that cannot be faced all alone by an entrepreneur. It is not possible to operate your business single-handedly. Every entrepreneur needs a team of efficient employees who together makes a business entity work. In return for their efforts, employees expect rewards. Along with the comfortable infrastructure and flexible working environment, an effective payroll management system is essential for keeping the employees happy and motivated.

An efficient payroll management system ensures an adequate amount of payment to the employees at the right time. In case the payroll management of an organization is improper, it would lead to a feeling of distrust and dissatisfaction among the employees that has a negative impact on the image of the organization. The following are some errors in the payroll system that the US businesses need to avoid.

The following are the reasons which explain why financial reporting is crucial.

• Delay in processing payroll: The business needs to identify the number of days required for payroll processing. Every employee depends on the payroll for making payments further for the services undertaken for living. Therefore, in case of delay in receiving payroll on time would lead to dissatisfaction among employees and hence demotivate them that would further impact the productivity of the employee. Therefore, payroll should be processed timely.

• Incorrect payroll set-up: Improper payroll set-up leads to many errors. In case the right payroll management system is not maintained by an organization, it would lead to incorrect tax filings and payments that would further lead to penalties. Various laws and policies must also be taken care of while setting up the system.

• Classification of employees: Incorrect classification of employees can lead to penalties. It is critical to classify employees rightly either as independent contractors or employees as this classification of employees is further reported to the tax authorities for compensation purposes.

• Incorrect payment: As the business operates in a complicated environment, errors in making payments are obvious. But these errors can lead to improper payment to employees that would have a wrong impact on the goodwill of the company. Incorrect payrolls can also lead to improper tax payments and overpaying an employee that would disrupt the management of business finances.

• Exclusion of rewards or bonus: All the rewards, reimbursements, gift cards, and bonuses are considered as taxable fringe benefits. These things are subject to tax withholding. Also, the employee expenses related to the business are reimbursed and should be submitted with proper documentation. A business is required to use a proper valuation method to calculate all the expenses, rewards, gifts, taxes etc. for the effective payroll management.

Inadequate payroll management can lead to various consequences and penalties for any business organization. These penalties can be avoided only by properly managing the payroll system. Big and growing businesses commonly make errors in maintaining their payrolls properly, which makes it imperative for them to seek professional payroll solutions. There are many professional companies that provide payroll management services, which can help to reduce the burden of the entrepreneurs regarding payroll issues.