Mistakes to Avoid when Calculating Salaries of Your Employees
The payroll process is an integral part of business management to keep the company’s financial health on track. Therefore, it needs to be performed with accuracy and efficiency. However, mistakes in the manual payroll process are certain, which can cost you irreparable damages including heavy fines or penalties. But the use of payroll software, salaries calculator, and aggregate bonus tax calculator can rescue you from massive destruction.
Payroll involves a series of hectic steps that require utmost care and attention to be done timely, and accurately. From employees onboarding to data collections and payments calculations to timely delivery all are associated with the payroll process. However, the most important one is the calculation of employees’ salaries. A slight error or single mistake in salary calculations can lead to financial damage and even the loss of potential workers.
Some common mistakes regarding employee salary calculations are listed here.
Miscalculation of Extra wages
Whether small or large scale, all companies have employees and they need to run payroll processes effectively to pay them timely or accurately. The extra work hours policy is an important part of the payroll process. The reason is that each state has strict rules to pay extra for employees working more than 40 hours per week. Commonly companies have to pay 1.5 ×credit hours for extra working hours. However, the extra wages policy is different in different states.
During employee payment calculations often payroll managers skip to consider this policy or ignore the extra hours that cause major problems. Heavy fines, penalties, and a decline in employees’ performance are a few drawbacks of miscalculating extra wages.
Using extra working hours, payment calculators, and a digital system of payroll processing can solve this issue.
Employees onboarding, important data collection, and categorization into different groups are initial but important steps of the payroll process. The reason is that every company pays its employees according to their categories. Commonly employees are classified into,
- Regular employees
- Seasonal employees
- Third-party agents
Payment frequency and amounts are different for different categories. And misplacing a single employee can cause you major troubles including fines or penalties.
The use of reliable payroll software such as Netchex is an ideal solution for this problem.
Missing Important Deadlines
Another mistake that most payroll teams make while calculating employee payments is missing deadlines. And then trying to do all calculations in a hurry to meet deadlines results in calculation mistakes or blunders that prove to be very costly for your company.
Using a payroll system having auto alerts or reminders of deadlines is always the best solution.
Calculating Wrong Tax Rates
Each company has to pay some taxes including federal income tax, federal unemployment tax, state income tax, state unemployment tax, Medicare tax, social security tax, and others. Calculating incorrect tax rates is a blunder that is often done by the payroll team while calculating employees’ payments. It can cause severe damage to a company’s credibility.
The major reason for this mistake is the unawareness of rapidly evolving trends of tax rates or rules. Each tax company changes its tax rates or policies after every year. Keeping track of these changes or using tracking software of a credible company such as Netchex, an excellent Patriot Software alternative, is a time and cost-effective deal to solve this issue.
Incorrect Payment Frequency
Regardless of the size of the business, every company has a unique payment frequency to pay employees’ wages. Some employees are paid weekly, or monthly while some are paid daily. During calculation using incorrect frequency can lead to massive financial loss and higher turnover of employees.
The use of a digital payment calculator is the best solution.
Paying employees timely and accurately is the key to keeping their morale and potential high. And to achieve this milestone it’s crucial to have an effective payroll process. Having awareness of expected payroll mistakes and their solutions can assist you to eradicate or lower the chance of errors in payment calculations