5 Common Payroll Challenges and How to Overcome Them

Payroll challenges can slow down your team and interfere with employee satisfaction. 

Errors are a major hassle for your staff, who shouldn’t worry whether their paychecks are correct, especially errors that lead to tax woes. For your business’ HR, payroll, or accounting team, an inefficient payroll process, or worse, no payroll strategy at all, increases the risk of errors, wasted time, and penalties. 

Today, we look at five common payroll challenges business owners face with solutions to overcome them.

1. Mispayment & Missed Dates

Payroll mistakes such as deductions and benefits impact everything from taxes to accruals and pensions to garnishments. 

There are also dates and deadlines your company must adhere to for tax remittances, tax filing, and payment obligations. These errors can cost your company money in staff time for corrections as well as penalties and fees. An automated system ensures all deductions are made correctly and deadlines are met to avoid penalties and time-consuming corrections.

2. Misclassifying Workers

Understanding the classifications for each worker is crucial to proper payroll processes. 

If your company’s workforce consists of part-time, full-time, temporary, seasonal, and independent contractors, it is easy to misclassify workers and encounter issues with tax authorities. 

This is because misclassification impacts proper entitlement to benefits and creates issues with income tax and deductions. An adequate payroll and HR system ensures that each employee is classified for tax purposes and payroll deductions are made properly.

3. Payroll Tax and Compliance Errors

Tax, payment schedules, record-keeping, and tax laws change constantly. 

When you fail to keep up with regulatory changes, you increase the risk of fines and penalties. Keeping abreast of changing tax and employment laws to maintain the standards required is challenging for small businesses. 

Working with payroll professionals and using annually updated tax and payroll software ensures you remain compliant.

3. Poor Record and Data Management

Data management requires an integrated system to ensure all employee information, tax records, payroll, etc. align. 

This is a key way to avoid discrepancies that lead to payroll mistakes. Having a single source for employee records ensures all employee data and payroll information remain consistent and up to date to prevent wasted time and errors. Proper records contribute to accurate and efficient payroll reporting, deductions, employee payroll records, and more. 

Centralization and standardization of payroll data and records allow you to maintain a single source for real-time data available across all departments involved in payroll, including HR, accounting, and the employees themselves.

4. Time Fraud

Time theft becomes easier for employees when manual timesheets are used. 

This costs your small business money that often goes unnoticed. Time fraud or theft can be avoided using real-time tracking and time clock software to help discourage common time fraud issues. 

5. Lack of Training

Proper training is particularly challenging in small businesses where employees take on several roles. 

Although this might seem to save your company money, it often costs money in the long run. Cross-training payroll staff can be effective if you provide ongoing training and tools that make the job easier. Training empowers staff to take on extra responsibility and manage payroll efficiently.

The best way for small business owners to avoid costly payroll issues is to have the right people on the job equipped with up-to-date software and training.

About Focus HR, Inc.

Focus HR, Inc. uncomplicates the people side of business by providing small business owners with outsourced HR, project HR, and Leadership Coaching. For more information, please contact us today! If you liked this post, please subscribe to our blog. You can opt out at any time. To learn more about FocusHR and for updates, please like our Facebook page and follow us on LinkedIn.