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Top 10 Payroll Mistakes

Top 10 Payroll Mistakes . Emily McIlwain Wendy Brock . Why should we identify the Top 10 Payroll Mistakes. Improper Record Keeping. Payroll Record Retention IRS Guidelines Department of Labor. IRS r equires a 4 year retention on…. Personal Identifiable Information for each employee

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Top 10 Payroll Mistakes

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  1. Top 10 Payroll Mistakes Emily McIlwain Wendy Brock

  2. Why should we identify the Top 10 Payroll Mistakes

  3. Improper Record Keeping • Payroll Record Retention • IRS Guidelines • Department of Labor

  4. IRS requires a 4 year retention on… • Personal Identifiable Information for each employee • Total Compensation • Difference between total & taxable compensation • Employees’ W-4 Forms • Dates of employment • Employee Tip Records • Tax Adjustments, Settlements and Deposits • Copies of all Returns Filed

  5. DOL requires a 3 year retention on… • Employee Information • Information on Hours and Pay Periods • Total Sales Volume and Goods Purchased • Ordering, shipping and billing records • Wage Tables & Piece Rate Schedules • Work Schedules

  6. Improper Record Keeping • I-9’s • W-4’s • The Employment Standards Act • Maintaining Employee Files & Documents

  7. Calculating Pay Incorrectly • Executive Exemption • Administrative Exemption • Professional Exemption • Computer Employee Exemption • Outside Sales Exemption • Highly Compensated Employees Exempt vs. Non-Exempt

  8. Calculating Pay Incorrectly Bob is paid $10 per hour and worked 45 hours this week. Example #2 40.0 x $10 = $400 $10 x 1.50 = $15 5 (OT Hours) x $15 = $75 $400 + $75 = $475 Gross Example #1 45.0 x $10 = $450 $10 x .50 = $5 5 (OT Hours) x $5 = $25 $450 + $25 = $475 Gross Overtime

  9. Calculating Pay Incorrectly • Tip Make Up and Overtime • Termination Pay

  10. Failing to Ensure Confidentiality • PII Security • What information can be emailed to your employees? What permission must you obtain from them first? • Password Protecting Documents • Check Fraud If you have employees cashing checks off your account it is recommended to have Positive Pay (Posi Pay) on your checks and ACH.

  11. Unclear Written Pay Policies • When do employees get paid • How are employees receiving their pay stubs • When and how are raises and bonuses given • How are pay corrections handled • Termination Pay • Time Off Accruals • Employee Benefits • Outstanding Employee Loans Employee Handbooks

  12. Taxes • Not meeting tax deadlines • Paying on the correct Federal/State Filing Frequency • Staying informed about tax law changes • FUTA Credits • Taxing employees in the correct state • Staying current on your State Unemployment Rate • Ignoring agency notices

  13. Classifying Workers Improperly W2 Employee vs. 1099 Independent Contractor

  14. What is the difference? 1099 Independent Contractor Operates under a Business Name Has their own employees Invoices for work completed Has more than one client Has their own tools Sets their own hours W2 Employee • Required to comply with employers instructions about when, where and how to work • Is given training for work to be done • Works for only one employer

  15. Penalties If you are paying employees incorrectly, back wages and taxes could be assessed. This requires the company to amend their Quarterly Reports, W2’s, 1099’s, 1040’s. This also causes late taxes penalties for the company.

  16. Handling Garnishments Improperly • Types of Garnishments • Handling multiple garnishments • Example: Child Supports and Taxing Agencies

  17. Time Keeping Errors • Cost associated with manual calculations • Human Error • Tips: it is the employer’s responsibilities for ensuring the employees are recording all tips properly • Buddy Punching • Embellishing Hours • Mismanaging Payroll • Reduce compliance risk • DOL Audits

  18. Inadequate Payroll Backup Plan • Who has your back? • Relying on automation. • What happens if your software goes down? • What happens if your bank software goes down?

  19. Claiming Ignorance Johari Window What you don’t know can hurt you.

  20. Top 10 Payroll Errors Improper Record Keeping Calculating Pay Incorrectly Failing to Ensure Confidentiality Unclear Written Pay Policies Taxes Classifying Workers Improperly Handling Garnishments Time Keeping Errors Inadequate Payroll Backup Plan Claiming Ignorance

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