You might be using a free paystub generator online for quite a long or maybe you’re a newbie. Even if it seems an easy task to pay employees, some common yet costly mistakes can still happen.
Erroneous paychecks affect a company’s reputation and might get the firm into trouble with the IRS.
We’ve thus pointed out some common mistakes and also provided ways to avoid them. Here you go!
New User Offer: Get $4.99 OFF on your 1st Paystub Order
Seven Common Mistakes to avoid with Paystub Creator
Paying Incorrect Amounts
You may feel like this is common sense to pay the right amount to the employees and which employer will pay more or less mistakenly? But yes, it happens more easily than you can think.
Two things should be taken care of: the paid amount & the hours worked. This should be initially set up correctly in the system else the paycheck can turn out to be an error.
Not sure about the Pay Period
Most US states have a law regarding the minimum pay period and employers are required to pay according to the frequency. The pay could be given more often instead of paying less frequently. As a firm, you can have a payroll schedule according to your cash flow and operations. Just make sure that you stick to it.
Create Pay Stubs in minutes
Incorrect identification of Employees vs. Contractors
This issue arises more with small businesses that have many independent contractors serving them temporarily. It is an actual legal classification to designate an individual either as an employee or contractor.
Businesses that misclassify the employees as a contractor might have to pay retroactive payroll taxes.
Failing to Pay Overtime
Not just the employees feel disappointed for not being recognized to work extra, but it’s also illegal to not pay overtime to them. The employees who are deemed to be nonexempt must be paid 1.5x their hourly wages for the total hours worked if they exceed 40 hours in a workweek.
Not maintaining the Payroll Records
Every business owner must maintain a payroll record accurately. This record includes W2-Forms, pay stubs, timesheets, etc that are required for audit. Though the requirements may vary according to the states, it is recommended to keep records for at least 4 years.
You may like to check out free check stub template
Waving the Pay for Work-Injury Period
If an employee gets injured while at work, they are eligible to be paid for the time that they have spent waiting to be treated for the same. This has been stated by FLSA too. Such instances should be considered similar to normal working hours.
Getting outdated with Payroll Rules, Laws & Regulations
There may be changes in the existing rules and regulations of Payroll. Thus, any type of business or individuals concerned with payroll must keep themselves updated with the same. Else, their valuable time might be spent amending the mistakes. To stay assured, you may create a calendar to check for payroll regulations and law updates.
If you’ve been doing such mistakes, make sure to avoid them from now onwards.
Meanwhile, you may use one of the best check stub creators now!
Related Article: How Freelancers should Record Income with Paystub Creator?
What are some common payroll mistakes that small businesses make?
Some common payroll mistakes include misclassifying employees as independent contractors, failing to withhold and remit payroll taxes on time, miscalculating overtime pay, failing to document and report employee earnings properly, and failing to comply with labor laws and regulations.
How can small businesses avoid making payroll mistakes?
Small businesses can avoid payroll mistakes by implementing proper payroll procedures, such as accurately tracking employee hours, classifying employees correctly, regularly reviewing and reconciling payroll records, and seeking guidance from a payroll professional or software program.
What are the potential consequences of making payroll mistakes?
The consequences of payroll mistakes can vary depending on the severity and frequency of the errors. Some potential consequences include financial penalties and fines, legal liabilities, employee dissatisfaction and turnover, and damage to the business's reputation.