Payroll: Sum up the hours worked by an individual for a fixed period of time, multiply the hours by an hourly rate, pay that person the result, less a few taxes. So what's the big deal?
Regardless of how they do it, employers must pay their employees - on time and correctly. And each pay period, employers are required to calculate, deduct, and pay federal and state taxes, unemployment insurance, workers’ compensation, retirement plans, 401(K) remittances, benefits, sick time, vacation accruals, and garnishments (for child care or student loans), and other forms of compensation, such as commissions.
There is some more. In several industries, employers are responsible for tracking different wage rates on a variety of jobs, each with its own craft and fringe benefit requirements, different unions, and different workers’ compensation codes all in one pay period or for one employee. Restaurant payrolls are complicated by tips and gratuities, banquet tips and service charges. In addition, multi-state businesses must comply with all the tax codes in every state in which they operate.
Payroll is an essential part of any business, but managing it can be cumbrous and time-consuming. What’s more, the payroll burden continues to grow. With the new government regulations and requirements, appear new traps, and new risks of penalties and fines.
Payroll preparation is not an easy job and mistakes cost a lot. According to IRS statistics, almost 33% of employers make payroll errors costing them billions of dollars annually in penalties. With the new tax laws expected, there is even greater risk for payroll errors.
Besides penalties for late payment/underpayment of tax liabilities, payroll errors can sharply reduce employee morale and, even lead to costly and embarrassing law suits. Last November, the San Francisco Chronicle reported that two nurses and a medical clerk sued Alameda.
At least 280 county hospital employees reported about payroll errors. Michael Smart, the chief executive officer of medical center could only say: "I don't know the cause. We have a very complicated payroll system." The lawsuit sought back wages plus damages, as well as a complete accounting of all back pay due and an injunction preventing the medical center from withholding pay. This is a situation that no employer wants to deal with.
With the trend toward automation, more and more companies are bringing advanced technology into the workplace – using computers to handle inventory, accounting, word processing, and a multitude of other back office functions.
1. Human Error
Get to know how to decrease the 8% error level during payroll preparation.
Here you will find the table that shows the amount of yearly overpayment.
How to Avoid Payroll Mistakes
With the help of this article you will decide which payroll system to choose, the benefits of different systems and some other tips.