Payroll management is one aspect of a business that gets tougher as your business grows. It's also one of the most error-prone aspects of every business. To properly manage payroll, you have to ensure that your employees get their correct payments in due time and in conformity with certain rules. However, mistakes occur and even the littlest of mistakes could be ghastly. In this article, we'll be looking at frequent payroll problems and how each can affect employee pay.

Pay Miscalculation

An inaccurate paycheck will frustrate any employee, especially if this mistake leads to missed payments. Miscalculating employee pay is also time-consuming, as you have to dedicate a significant amount of time to analyse and correct these mistakes. A study conducted by the American Productivity & Quality Center (APQC) states that companies take between two to 10 days to correct a payroll miscalculation. In the time it will take an employer to solve this problem, employees will grow frustrated.

Late Payments

As an employer, you must pay your employees on time, and you have to process payroll early so employees' salaries don't get delayed. A late payment could be frustrating for an employee and could reduce productivity and morale. Late payments will also lead to other issues such as you missing tax filing periods. Your company could face certain fees and regulatory payments also.

Regulatory Changes

Several laws control the procession of payroll. For example, companies might have to comply with certain taxes, record-keeping obligations, and payment schedules. When employers fail to comply with these regulations, they not only risk noncompliance with the governing tax agency but also risk overpaying or underpaying employees.

Failure to Track Overtime and Working Hours

Logging an incorrect overtime hour could result in inaccurate overtime payments. This will lead to corrections that will span across several tax years. It will take an employer time to correct this specific issue and this can be frustrating for employees. Paying overtime isn't just paying the normal 1.5 times their regular pay rate after they have worked 40 hours in one week. Other scenarios could result in overtime payment mistakes, such as:

• When employees neglect break times to work.
• When employees expend work hours moving between work locations.
• When employees have to take part in activities beyond normal hours, for instance, in company parties, team building, training, and more.

Employee Misclassification

Misclassifying employees will also lead to incorrect pay, therefore, resulting in underpayment or overpayment of salary. A common misclassification mistake is making an inaccurate determination on whether certain employees should be exempted from overtime. According to the Fair Labor Standards Act (FLSA), all employees must be paid overtime for any additional hours worked beyond 40 hours weekly, except they are categorised as exempt. However, if you classify a non-exempt as exempt, you are not only attracting FLSA-related fees and penalties but also making a hardworking employee miss overtime earnings.