Three Common Payroll Problems

Three Common Payroll Problems

April 8, 2022By admin

Many small businesses fail to establish a well-maintained payroll system despite its immense importance. A great payroll system can help you avoid legal trouble and improve employee morale. Failure to address payroll problems could lead to expensive fines, employee dissatisfaction, and a loss of reputation. Thankfully, most common payroll errors are easy to fix. Here are three common payroll problems many small businesses face when getting their operations up and running. 

  • Misclassification of Employees

It’s important to correctly identify your employees to prevent expensive costs to your business and cause frustrations amongst your staff. For example, if most of your team members classify as independent contractors, they’ll fill out a 1099 tax form instead of W2s. It’s incredibly important to understand the difference between these two employee types. W2s come with protections provided by the Fair Labor Standards Act, while 1099 employees don’t receive the same benefits; this is a simple example of what can happen when employees are misclassified, but there any many other missteps that occur if employees are not registered correctly. 

  • Inaccurate Tracking of Hours

As a small business owner, you need to keep track of all your team members’ hours, when they’re absent, and whether or not they worked overtime. Failing to determine how many team members are working on a shift could negatively impact your business productivity. By law, you need to understand if any non-exempt employees are working overtime. To ensure enough team members are available for each shift and to pay all your non-exempt employees for overtime work, implement a system that allows team members to provide this information right away for tracking and documentation purposes.

  • Faulty Record Keeping

It’s very common for small start-up businesses to improperly record-keep payroll information. Unfortunately, this can lead to negative consequences when you need to track down important information related to your company’s payroll. Failing to record payroll information properly could lead to hefty fines, putting your business at additional risk. As a general rule, always keep payroll records for at least three years to prevent potential conflicts with the IRS. 

Do You Have Payroll Problems? Improve Your Payroll, Now!

Are you a small business owner and having trouble keeping tabs and running payroll? Brabo Payroll can help you! We pride ourselves on being one of Massachusetts’s best local payroll companies for small businesses, and Brabo provides payroll service solutions. Our staff has extensive experience providing HR systems solutions, multi-state payroll services, remote onboarding, employee benefits, etc.

Contact us to learn more about our other fantastic support services for small businesses!