Payroll is a complex and often the largest expense for business owners. ‘How to avoid payroll errors’ is a common question field service business owners find themselves asking too. With the right tools and resources, payroll automation can transform into a growth opportunity for firms.

A study by EY reveals that each payroll mistake costs a company an average of $291. If these errors are frequent, the financial impact can quickly escalate, potentially costing your company thousands of dollars annually.

While the cost of a few payroll mistakes might seem steep, these discrepancies can set off a chain reaction of additional problems that carry their own expenses.

Beyond the immediate costs, like overcompensating an employee, payroll errors can lead to other significant burdens on a company. These can include-

• An overextended HR department
• Potential legal complications due to non compliance of the Fair Labor Standards Act (FLSA). 
• Long-term cost of harming employee relationships.
  

Companies that rely on traditional, manual payroll methods are more prone to errors, leading to overpayment for field staff who may submit inaccurate timesheets. 

One effective solution is adopting a consolidated system for end-to-end workforce management. This approach smoothens business processes by-

• Centralizing all workforce-related activities—such as time tracking, job scheduling, electronic visit verification etc.
  
• Enhancing accuracy in the context of payroll processing such as overtime calculation, shift differentials, dynamic pay rate etc.
  
• Reducing administrative burden by automating repetitive tasks such as cross checking timesheet errors.
  

With all data integrated into a single platform, businesses can streamline operations, minimize the risk of errors, and ensure an efficient payroll process.

To address these issues, it’s crucial to understand common payroll mistakes. Let’s take a look at some of the common challenges in payroll processing, and how they can be resolved.

3 Simple Ways to Avoid Common Payroll Errors

A survey on the “Future of Payroll” revealed that 85% of respondents encountered issues with payroll technologies, and 69% faced problems with payroll data. This means a substantial portion of the American workforce is dealing with some or the other challenges in payroll processing.

The unfortunate reality? Most of these errors are entirely preventable. Here’s how.

1. Correct Employee Classification

The challenge: Employees and independent contractors might perform the same tasks within your company, but the law defines their job roles differently. The same holds true for exempt and non-exempt workers.

Under the FLSA, workers classified as employees are entitled to benefits like overtime pay and minimum wage, which are not available to independent contractors. Additionally, employers are required to pay a portion of payroll taxes on behalf of their employees.

However, accurately classifying employees is one of the most challenging aspects of payroll due to the following reasons:

• Job titles don’t always align with employees’ actual duties.
• Worker classifications vary by country and jurisdiction.
• U.S. laws are complex, and their interpretations frequently change.
  

The solution: Consulting a labor law attorney is a wise investment—paying a little now can save you from hefty fines later on.

Another option is partnering with a professional employer organization (PEO). You can also benefit from HR or employment practices liability insurance (EPLI) hotlines that assist with employee classification.

However, the ideal solution is using payroll software that integrates seamlessly with the tools you already use for time tracking, scheduling, or GPS tracking. This ensures compliance while streamlining your operations.

For example, Deel Shield offers robust classification tools and assumes compliance risk for employee classification, making it a strong recommendation for companies hiring contractors in international territories with complex regulations.

2. Synchronize employee tracking data with the payroll system

The challenge: Firms often use payroll software solutions such as ADP, Gusto, Quickbooks, Paychex etc. 

Yet, inaccuracies happen due to manually moving data from attendance apps, time tracking devices, clock in-clock out solutions as well as the employee’s work device such as a laptop or mobile phone.

This is due to the inability of field management, attendance and location tracking software to integrate seamlessly with top payroll solutions like those mentioned above.

This leads to loss of time cost in moving data from one platform to another. In turn, it creates a hurdle in seamless data flow between the payroll platform and the other.

The solution: The best solutions need to work in-tandem with the payroll management software. Integration between all your reimbursement logs or time tracking data and the payroll system ensures that data can move seamlessly. 

Time tracking data can be sent to the payroll system while it provides information about pay codes that correspond to different pay rates. 

allGeo’s seamless integration with top payroll platforms guarantees accuracy across all aspects, from timesheets to shift differentials, overtime, and mileage reimbursement. Eliminate payroll errors and concentrate on what truly matters – your core business.

3. Accurate work hours and overtime calculation 

The challenge: Calculating employee hours and wages may appear straightforward, but it can be surprisingly complex. When factoring in union rules and prevailing wages, errors are common. These include miscalculating overtime for salaried employees or those who primarily earn commissions.

If your workforce has a mix of pay structures, this complexity increases with each payroll cycle. Such mistakes can result in unhappy employees, legal issues, and significant financial losses.

These errors often stem from relying on manual methods. If you’re managing payroll through spreadsheets, you’re not operating as efficiently as you could be. These mistakes are likely causing frustrations for everyone involved—payroll, accounting, and your employees alike.

The solution: Integrating your payroll tools ensures a seamless flow of accurate data, eliminating manual errors and automating workflows. By automating complex calculations, such as overtime wages and employment taxes, with the right payroll integrations, you can move beyond the limitations of spreadsheets and manual methods. 

By automating payroll processes and integrating them with other HR functions and reporting, you can avoid common payroll mistakes and enjoy several key benefits:

• Ensure that employee pay aligns with your business needs like dynamic pay rates, overtime pay etc. which supports accurate classification of employees and their compensation.
  
• Use a single system for tracking employee hours and calculating overtime, thereby reducing errors in reporting and payments.
  
• Consolidate reporting to manage your workforce from a single platform, enabling real-time visibility into discrepancies and payroll changes.
  

allGeo’s user-friendly interface simplifies timesheet approvals, exports, and audits, while offering features like accurate mileage reporting and granular job costing. This allows you to easily break down costs, from overtime to shift differentials, for comprehensive and precise financial reporting.

Conclusion

Avoiding payroll errors is crucial for maintaining employee satisfaction and ensuring compliance with employment and tax laws. Common payroll mistakes, such as miscalculating wages or failing to adhere to legal requirements, can lead to significant consequences. These may include reduced employee morale, legal penalties, and financial setbacks. The challenges in payroll processing are often exacerbated by manual methods, which are prone to errors and inefficiencies.

Adopting a fully-automated payroll system that integrates with your time tracking and HR tools is essential to avoid payroll errors. Schedule a demo to understand how this approach reduces the likelihood of errors and enhances productivity across your organization. By ensuring accurate data flow between systems, you can prevent the biggest payroll errors and efficiently manage wage compliance.