Payroll is the one thing employers need to get right every time. Employees don’t pay much attention to the handbook but they will make noise if their check is incorrect. Chris Mabe of Payday Payroll is my go-to person when I have a payroll question. She sat with me recently to share her wisdom.
Anne-Lise: What are the most common payroll mistakes made by small businesses?
Chris Mabe: There are two basic mistakes many small businesses make.
The first mistake is entrusting the payroll to a single person. This can lead to serious problems from embezzlement to covering up mistakes to preserve their job. There are too many moving parts and responsibilities for a single person to handle payroll alone. It’s just not good for internal controls.
The second mistake is entrusting the payroll to someone who isn’t a payroll professional. This creates the potential for non-compliance with any number of government agencies from the Department of Labor to the IRS. Too often we see payroll put into the hands of someone that knows how to enter numbers into QB without understanding what happens after they enter the data.
Even when the payroll person is knowledgeable, court-mandated withholding (child support, garnishments) are not easy to implement. Court documents are confusing. There are a number of rules associated with garnishments like making sure the employee’s rate of pay doesn’t fall below a certain minimum. When those are not followed or the withholdings are not done properly, it creates a risk to the business.
Employee benefits and retirement plans bring additional complexities. For example, are the benefits with pre-tax dollars or post-tax dollars? Setting this up incorrectly can cause a myriad of issues from paychecks being calculated incorrectly to insurance policies not paying out during times of need.
Even accounting for accrued PTO in hourly increments for non-standard work hours can be challenging.
Anne-Lise: Do you have any tips to make payroll painless?
Chris Mabe: Employers with non-exempt and hourly employees need to keep a very accurate count of hours worked. Non-exempt employees need to be paid overtime. When Time & Attendance integrates with payroll, it is both a time saver and ensures accurate payment of wages.
Integration and automation are particularly important for mid-size employers who have to comply with the Affordable Care Act. The lookback period, the number of hours worked, it all comes into play through payroll. Again good data is really important for compliance.
Anne-Lise: When should a business transition from in-house payroll to third party processor?
Chris Mabe: There is no right answer. Some businesses never process their payroll internally. They get started with us from day one. Even owners in an S-Corporation need to be employees of their corporation and need to pay payroll taxes.
Most business owners don’t have time to worry about the complexities of payroll and tax regulations. They need to focus on their business and make money.
The IRS doesn’t care that employers don’t understand the law. There is no “grey” area when it comes to paying Federal and State Payroll Taxes. Businesses are required to withhold Social Security, Medicare, Federal and State taxes as well as the matching employer taxes. Making IRS and State payments, filing tax returns accurately and on time, it’s really important. And let’s not forget W-2’s, 1099’s and the dreaded 1095C. Payroll truly requires specialized knowledge and on-going education to be done right every time.
By using a third-party processor, employers also get the power of a complete payroll department at a fraction of the cost. Having a payroll company on your side brings peace of mind.
It is worth noting that employers remain accountable for their business filings. We always encourage our clients to “check behind us.”
Anne-Lise: Any recommendation for employers looking to outsource payroll?
Chris Mabe: All payroll processors should have a strong grasp of basic payroll and tax regulations. They should provide a variety of services beyond simply calculating paychecks. For the most part, we all perform the mechanical aspects of payroll the same.
Payroll happens every week or every two weeks for most businesses. That means you’re going to interact with your payroll company quite a bit. Look for a payroll company that treats you the way you treat your customers.
At Payday Payroll, our clients never leave a voicemail during business hours. They dial our number and speak with a real, live person in our Virginia Beach office within 3 rings. The average tenure of our support staff is about 8 years. So we get to know you and your business very well. We take our job seriously because we know employees’ paychecks are important, and so is your time.
Cost is another consideration. Make sure you understand not only about the cost of processing payroll but also if there are additional charges for fixing problems, payroll re-runs, IRS filing and transacting funds to third party providers. Those less obvious costs add up quickly. What might look like a low-cost payroll provider might turn into an expensive service.
Payday Payroll provides comprehensive payroll and HR services. Payday is based in Virginia, has offices in Florida and serves clients across the country. In addition to payroll services, they provide ACA administration, benefits uploads, and Workers’ Comp pay as you go. Find more about their services at www.paydaypayroll.com
