Effective payroll can be exceptionally good for your business and employees. It ensures employees receive correct payments in compliance with worker’s law. However, without proper practices in place, you can quickly run into problems and mistakes. These practices can easily avoid these problems.
Common Mistakes
These are some of the common mistakes experienced by employers and businesses;
Make Sure Not To Misclassify Employees
Employment misclassification is a major issue that causes wrong pay or over- and underpayment. It is a standard error to misclassify employees as exempt from labour laws and overtime regulations when they are actually non-exempt. This can result in fines and loss of wages from the employees’ end. Likewise, misclassifying employees as independent contractors when they should be classified as employees leads to back pay and fines.
Avoid Miscalculating Pay
Miscalculations on paychecks can cause employee dissatisfaction and may result in non-payment of wages. Furthermore, organizations spend an average of 2-10 days resolving some payroll errors. Such delays can put a lot of financial pressure on the employees. To address these issues, one has to write an employee payroll error letter that informs the employee of such a mistake and what has been done to rectify it.
Not Tracking Employee Hours and Overtime
Incorrect recording of overtime hours may lead to wrong payment, which then may trigger adjustments in several tax years. This process is time consuming and interferes with the morale of the employees in the organization. The overtime payment errors may include–When employees report to work during their breaks or when they are moving from one site to another.
Best Practises To Follow
These are some of the best practices to follow to avoid potential mistakes;
Always Keep A Handbook At Hand
A comprehensive manual is essential for the payroll process since it is delicate and may involve changes. There should be well written rules and regulations concerning the payroll of the employees in the handbook to ensure that all questions are answered. They can refresh their memory and also cross-check before processing each payroll period.
Classify Employees Correctly
When your business expands, it is crucial to define the appropriate employees. The misclassification can result in penalties from the CRA. Additionally, employers can categorize employees as exempt or non-exempt. Employers pay exempt employees a fixed salary and do not give them overtime, while they pay non-exempt employees hourly or by salary and owe them overtime pay.
Use Technology to Your Advantage
Using paper timesheets and manual records can be very problematic for no reason. In today’s modern world, a totally automated payroll system has many advantages, including accuracy, efficiency, and security.
Contact Faith Accounting & Tax For Professional Bookkeeping & Payroll Services
At Faith Accounting & Tax Inc., we prepare your financial statements, such as income statements and balance sheets. Our proficient bookkeepers ensure that day-to-day operations are recorded accurately. As an expert bookkeeping service, we ensure that invoices, expenses, and payrolls are handled accurately. Contact us at Faith Accounting & Tax Inc. for a consultation.
