- Misclassification of employees
According to The Fair Labor Standards Act (FLSA), employees are entitled to employment benefits and protections. These include overtime payment, and minimum wage, among others, as prescribed under the law. While employees are beneficiaries of these benefits, independent contractors do not get the same treatment and protections. This means that exempt and nonexempt employees have different legal rights. Misclassification of employees as independent contractors will deny them their legal rights and benefits. The government may miss tax dollars. It may also lead to underpayment or overpayment, which can be costly to an organization.
As an HR professional, always ensure that you identify different employees and classify them correctly to avoid lawsuits and losses in your organization. Doing this will keep your company’s reputation intact and reduce losses resulting from lawsuits or overpayment.
- Miscalculating pay
As a payroll administrator, keep track of aspects such as overtime, commissions, and deductions, among others, when it comes to the calculation of payment for employees. Use the general rule that states that the overtime wages should be 1.5 times that of the regular wage for any time that is beyond 40 hours in a workweek. You should, however, consider the overtime policies of your state. Failure to correctly track time can result in miscalculations of pay. Ensure that you have a reliable way to track employee hours or paid time off since this allows you to avoid overpayment and underpayments.
- Failing to send out tax forms
The beginning and the end of the year are the most challenging times for payroll administrators. It is during this time that payments and taxes that are processed all year long must be submitted in the form of tax forms by an organization to employees. Only the employees need W-2 forms. On the other hand, independent contractors who earn $600 and more need 1099s. The inability or failure to obtain these forms in time will not only inconvenience your employees but may also put your company in trouble.
- Failing to stay up to date on payroll laws and regulations
Payroll laws, rules, and regulations are dynamic and are subject to change. As a payroll administrator, you must spend valuable time reading these laws and trying to understand them. Failing to understand the changes will force you to spend valuable amounts of time amending your mistakes. This failure might also force you to pay a lot of money as legal fees and fines. Always have a habit of checking for payroll regulations and law updates.
- Failing to keep complete records
When it comes to payroll management, one of the most critical components that need utmost attention is keeping every record. This is an area that you can never be too thorough on. FLSA demands that every employer keeps records of up to three years’ worth of pay. The records should include hours worked, rates of payment, and payroll dates, among others. Although this might sound like a cumbersome exercise, some states require even more records and may even demand that you store more data and for a more extended period.
Doing this will not only keep you safe in case of an audit, but it will also help run operations more smoothly. With a lack of proper updates and records, you may end up miscalculating pay, classifying employees in wrong categories, or even making bad management decisions.