People go to work with the intention of getting paid, making payroll processing an integral role in a company. Problems with payroll create a ripple effect, resulting in a slew of negative consequences for your business.

To keep a positive reputation and loyal employees, you want to avoid these common payroll mistakes.


Admins have several things to track when calculating employee pay, like deductions, PTO, and overtime. If you don’t have a reliable payroll automation system, you may end up with a payroll overpayment or underpayment to deal with.

While deductions are often voluntary, failure to take them out before withholding taxes leads to overpayment. States have different rules about overtime pay, but it is often time and a half for anything over 40 hours.

Consider using a paystub maker to provide your employees with paystubs to see the breakdown of their pay. This will give them confidence that deductions, PTO, and overtime pay calculations were correct.

Neglecting To Send Tax Forms

Not only do you want to be sure you are paying the correct tax rate at year’s end, but you must send out tax forms to your employees. Regular employees receive W-2 forms, while independent contracts earning more than $600 receive a 1099 form.

Failure to send these forms results in hefty fines for each missed form. These can spell trouble for an employer because of the steep maximum dollar amount for these penalties.

Missing Deadlines

Timing is everything with employee payroll. No employee wants to miss a paycheck, and any inconsistencies can lead to negative views about a company.

Aside from breaking employee trust, many states have laws surrounding pay frequency. If you pay too late or less often than you should, you may face penalties.

Tax deadlines are another important timeline to be mindful of when you process payroll. Missing these will lead to penalties but could also get you into legal trouble.

Poor Data Entry

If you rely on a paper system for your payroll services, the likelihood of data entry errors increases. Data entry errors include misreported hours, incorrect social security numbers, or name and address errors.

These mistakes can cost employers a lot of money and result in government penalties. Consider switching over to a to avoid errors and steer clear of fines.

Misclassification Of Workers

Over time, minimum wage and other benefits are required for most employees under the law except for independent contractors. If you classify one of your regular workers as a contractor, you could deny them benefits they depend on.

Misclassification also leads to tax issues for your employees, as independent contractors do not have income taxes deducted from their paychecks. These errors may lead to costly penalties or even back taxes.

Avoid Payroll Processing Mistakes

Mistakes in payroll processing can result in costly fines for your company and unhappy employees. Invest in the right systems to help prevent these mistakes from happening and catch errors before they become a bigger issue.

Read our other articles for more helpful business information.

Write A Comment