Eleven Common Payroll Mistakes: Critical Strategies for Prevention, Part 2  

Most business owners understand that the payroll process is one of their most critical responsibilities.  Paying employees for their hours worked every pay period is the most basic contract between employer and employee.  Beyond compensating for employees’ work, an organization must also run payroll in compliance with payroll tax laws.  Not paying required employment taxes at the necessary tax rate could result in legal consequences, steep fines, and damage to an employer’s reputation. Currently, the Department of Labor (DOL) is conducting more wage and hour audits than ever. In part two of this two-part series, MP’s HR and payroll experts share five of the most common payroll mistakes– and how to prevent them.   

5 Common Payroll Mistakes 

1. Noncompliance with, or mishandling, a wage garnishment. 

The laws governing garnishments and how they’re deducted from wages (and overtime wages) for employee hours are complicated. These laws also vary from state to state and even from employee to employee. specific requirements for wage garnishment deductions and their legality can vary significantly depending on the type of debt (e.g., child support, student loans). For example, if a worker makes only minimum wage, there are instances in which it may be illegal to deduct a garnishment from their paycheck. Noncompliance with wage garnishments may trigger steep penalties and interest, or maybe even legal action. (In some scenarios, employers are responsible for the total amount of a wage garnishment if they mishandle it.)  To ensure compliance, an organization should consider using payroll software such as MP’s. Comprehensive payroll software won’t just maintain payroll records. It also offers tools for calculating, documenting, and applying a wage garnishment. Organizations may also want to consult with an employment lawyer or HR expert (like the ones at MP) to ensure their approach to a wage garnishment is in compliance and doesn’t damage employee morale.  

2. Not being up-to-date on payroll regulation changes. 

Employers should be aware that their pay practices may need to change to maintain compliance with applicable state and federal laws.  In the last five years, states have passed new laws to prevent misclassifying employees, changing minimum wage amounts, and more.  An organization may want to work with HR and payroll experts, such as the ones at MP, to periodically review their payroll records and pay practices to ensure updated compliance.  This is especially true for employers with staff who work remotely or from offices in multiple states.   

3. Setting up inadequate backups. 

Employers should always ensure they have backup payroll processing team members. If the typical members are sick or have a family emergency, a staff member should be ready to perform payroll processing for that pay period. An organization should also have technological backup options for its payroll processing. One way to ensure backup is to utilize cloud-based payroll software, such as MP’s. This method will automate the payroll process, so it’s user-friendly and easy to train staff. Because it’s cloud-based, it will always be ready and available, no matter what device payroll is run on. Payroll data is safe and secure, unlike on a single excel file or somebody’s personal computer.  

4. Data entry errors. 

Payroll is full of data: employees’ bank account numbers, addresses, contribution, garnishment, and deduction amounts, etc. This data must be perfectly accurate, or grievous consequences may occur.  For example: 

• Employees’ money is deposited into the wrong bank accounts 
• Employees’ W-2s are sent to the wrong address 
• Employees’ contribution amounts are not what they requested 

To avoid this mistake, employers should consider using payroll software like MP’s. It has a self-service option, which allows employees to key in their own data. This option increases the likelihood of accuracy because employees are not spending hours entering meaningless data into a system. It’s just their own personal payroll data. They will also be motivated to enter their payroll data accurately because they will bear the consequences of a mistake. Lastly, a self-service option allows for quick and easy corrections. Employees may log in anywhere and anytime to make changes to their payroll information. They will treat the change with as much urgency as they feel it deserves—because it’s for them. 

5. Not maintaining comprehensive, compliant payroll records. 

Employers must maintain updated, organized payroll records that are kept confidential and only easily accessible to payroll employees. If employers use payroll software, employees may be able to see their own data—but nobody else’s, of course. With so many cyberattacks in the past five years, employers must ensure employee data is secure and safe from the hands of hackers. Every payroll document must be kept on record for a specific number of years, which may vary from state to state. Organizations need to be able to pull records in the event of an audit. Payroll software, such as MP’s, will help prevent these issues. Employee payroll records and data will remain updated as the employee needs with self-service tools. The system is secure and easily accessible for payroll and HR staff whenever necessary because it’s cloud-based. Payroll software like MP’s also auto-populates data.  This means an employee may change their address or name, and the information will be updated wherever necessary. Lastly, the software ensures information is organized and kept in a comprehensive, user-friendly system. MP’s payroll software also offers easily customized reporting, so it’s simple to pull payroll data for taxes, year-end reporting, etc.  

Conclusion

The regulatory landscape surrounding payroll is constantly evolving. While this blog highlights some common pitfalls, staying current on the latest changes is key to avoiding costly mistakes and ensuring compliance. Don’t hesitate to seek professional guidance from HR or payroll experts at MP-HR for complex situations or when navigating unfamiliar territory. Their expertise can provide invaluable peace of mind and safeguard your business from unnecessary burdens.

Remember, this is just a glimpse into the possibilities. MP-HR’s solutions are highly customizable, and our knowledgeable team can help you tailor features to address your specific industry challenges and workflow needs. Contact us today for a free consultation and discover how MP-HR can streamline your payroll, empower your workforce, and propel your business forward.