The Real Costs Of Payroll Errors

It’s not uncommon for salaries to be the single largest expense in any business. Your employees are an investment and, profitable or not, that investment comes at the price of their salaries.

When a payroll error occurs, the expenses can add up quickly, sometimes becoming bigger than the salaries themselves.

Here are some costs you might run into if your pay system gets away from you:

Man Hours For Error Correction

Over the course of the payroll process, we should correct every single error as soon as possible. Beyond being good to your employees, your financial records have to be accurate to retain favor with the IRS.

All of which sounds reasonable, until you account for employees who stop their work and to work on corrections instead. This amounts to a loss of valuable labor in various departments.

Sometimes, this loss of man-hours won’t impact your bottom line too badly. Others, it can actually add up to more than the salaries you’re paying in the first place. It can be difficult to identify errors, let alone fix them. But inaction can have a negative effect on your bottom line.

Compliance Failure Issues

Maintaining compliance with the laws governing businesses in your state or industry can be difficult on the best of days. But, difficult or not, non-compliance penalties can add up to significant costs.

These laws tend to focus on payroll processes, making this one of the most important areas in which to take precautions. Making late or incorrect payments even due to unexpected payroll errors or submitting incorrect employee information can all result in fines and lead to other problems.

Retroactive Taxes and Misclassified Employees

When an employee is classified as an employee, the company is responsible for handling overtime, workers’ compensation insurance, some taxes, and benefits. There is also the question of their potential unemployment benefits, for which the company is also responsible.

Employees who are classified as independent contractors are a different matter, and the company is not held responsible for these processes. However, when companies classify an employee as an independent contractor but treat them like employees, the results can be expensive.

It’s important for companies to pay and compensate their employees according to their real classifications. Otherwise, they could have to present retroactive overtime pay and even pay back taxes, as enforced by the Department of Labor and OSHA.

Payroll Errors: Never Again

Payroll software systems services like those available from Vision HR can help prevent potential payroll errors and their associated costs. The business world has moved on from manual salary calculations, which are prone to errors. Visit us today to discover for expert payroll management services, and save yourself potential payroll-related headaches down the road.