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6 Mistakes To Avoid When Outsourcing Your Payroll

Without a doubt, small businesses do spend a considerable amount of resources in order to ensure that their core operations would run smoothly. Though, aside from that, special attention must also be given to peripheral business functions, such as employment law, workplace safety, employee benefit administration, and so on. Even a minuscule mistake in the human resource department could lead to the downfall of the company. To ensure that, extra care should be given and simple attention to the details could often help in avoiding discrepancies when it comes to tax deposits and withdrawals. Below are some of the most common mistakes that should be avoided when outsourcing your payroll.

6 Mistakes To Avoid When Outsourcing Your Payroll

Common Mistake #1: Setup Errors

Believe it or not, even when you carefully calculate your employees' wages or you always say to it that you get payroll right in time of each period, if the payroll operation isn't set up carefully, there's a possibility that you wouldn't get the results you're aiming for. For one, before anything else, it's important to register your business and ensure that you've set your state, federal, and local tax withholding correctly. Also, it's essential that you'll make it a point to classify your employees accordingly. Not following this could have a negative result in your business. You'll be in big trouble with the IRS, especially if you withhold the wrong amount from your employees for local and state income taxes, social security, and Medicare. Furthermore, when it comes to outsourcing, obviously, you don't want to incorrectly classify an employee as an independent contractor or vice versa, because this could really give your business a bad name.

Common Mistake #2: Forgetting to Record the Payments

Try to imagine this: there comes a time that one of your employees requested for a payday advance and you're in a hurry. So, in order to answer his request, you quickly wrote a check and handed it to him. Likewise, during the holiday season, you've made a plan of giving away gift checks instead of their year-end bonuses. The question is, would you record these expenses in the payroll processing system?

Most of the time, a small business finds it hard to balance the books because they often neglect to record a payment or two, thinking it's insignificant. Keep in mind, no matter how small the amount is, it's important to record them because it could affect the system.

Common Mistake #3: Failing to Make Tax Deposits on Time or Correctly

The moment you've set up withholding correctly, as well as being able to take the right amount from both your business and your employees, it's important to be familiar with what you're going to do with the money you've collected.

It's crucial to know when and how often you should deposit your tax payments. Aside from that, know what forms you're going to use and if it's possible to deposit the funds electronically, or you could only do it the old-fashioned way. There are a lot of rules in regard to this, and most of the time, they could be a little confusing. One thing is for sure though, failing to do this properly would affect you negatively.

Outsourcing payroll

Common Mistake #4: Doing a Payroll Late

Most of the time, we can't avoid doing an abrupt payroll calculation, especially when we're quite busy. By doing so, there's a huge risk that you're paying someone too much or too little and this could throw off your books and damage your employee's morale, even though you didn't mean it. Likewise, it's never ideal to do payroll late, or expect your employees complaining about how unprofessional you are. Once this happens, you're going to lose your employees' trust and it's almost impossible to get that back. Also, failing to do the payroll on time could mean late tax deposits, resulting in IRS penalties.

Common Mistake #5: Neglecting to Update State Employment Rates

Your state employment rates change over time. If you got a new rate from your state agency and you didn't even change your payroll system, like how it's supposed to be, this would result to a filing that's misconstrued. The result? You'll need to shoulder a penalty.

Common Mistake #6: Failing to Protect Yourself from Payroll Mistakes

Fortunately, there's an easy way to refrain from committing those payroll mistakes. By outsourcing your payroll services to a professional employer organization, you could ensure that your payroll would always be on its positive condition.

Outsourcing your payroll would help you save a considerable amount of time, that you'd usually spend working on with your payroll. This includes the hours you spent working and worrying if you even did your payroll correctly. Additionally, outsourcing your payroll to a professional is considered to be cheaper as compared to hiring an HR person. Best of all, you don't even need to worry about losing an employee to another company or any kind of troubles related to mismanagement.
 
 
 

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