The High Cost of Payroll Mistakes

Proper Payroll ManagementPayroll administration may be a mundane task, but it’s one that can create some serious repercussions if it’s ever done wrong. Monetary penalties for things like non-remittance or late remittance of taxes, incorrect calculation of overtime pay and improper retention of records can be severe, and can be especially harmful for small business with fewer resources to fall back on.

Almost as frustrating and harmful as wasting money on penalties or fines is spending irreplaceable time fixing payroll mistakes. And there are other consequences, harder to measure but very real, of botching employee payroll, such as added stress, the possibility of increased scrutiny from taxing authorities, loss of employee goodwill and – in the extreme – jail time.

Payroll processing is complicated because it’s affected not just by the complex tax codes at the federal, state and sometimes local levels, but also by regulations of the U.S. Department of Labor. One accounting firm estimates that there are about 100 DOL rules that affect payroll management. State labor departments and state insurance commissioners may also have regulations that pertain to payroll.

In addition to making the proper withholdings and deductions for taxes and benefits, employers may also be ordered to garnish wages for things like child support, back taxes, criminal restitution, student loans and private debts. Employers who fail to comply with wage garnishment orders can be held liable for the employee’s financial obligation, as well as collections costs and legal fees, not to mention punitive fines.

Some other complexities that payroll managers may have to handle accurately in order to avoid harsh consequences are:

  • Calculating and paying overtime correctly. Overtime wages due but not properly paid not only have to be reimbursed to the employee, but there can be government penalties of up to 100 percent.
  • Accounting for and allocating tip income.
  • Properly classifying workers as employees or independent contractors – and paying the applicable back taxes and penalties for illegally treating an employee as a contractor.
  • Remitting taxes and the proper tax forms in a timely way. The later taxes are paid, the more penalties and interest accrue.
  • Retaining complete payroll records for at least three years, or facing a fine up to $10,000. Repeat offenses can result in jail time.

What’s the best way to avoid these severe sanctions? Consider the alternative that an ever-increasing number of small businesses are making the move to – payroll outsourcing. By using an experienced contract payroll service, you’ll have the peace of mind of knowing that this important business function is being handled by payroll specialists who understand and keep current on all the relevant legislation and regulations.

Get the assurance of having your company’s payroll done by a specialized professional from Padgett Payroll Services. We’ve been providing small business payroll services for more than four decades, and we serve thousands of companies from coast to coast. Call Padgett Payroll today at 877-244-5842.

Payroll Tax Rates for 2012 – Uncertainty Continues Amid Dueling Proposals

Social Security Payroll TaxThe payroll tax that funds the Social Security program will go up on January 1, 2012. That is, unless it goes down. Or possibly stays the same. Unfortunately for payroll managers, that’s about as clear as the payroll tax situation has gotten with 2011 winding to a close and automatic rate increases ready to kick in when the new year begins.

The Obama administration proposed reductions in the Social Security tax rate for both employers and employees back in September. The latest Republican counterproposal to the administration plan was just laid out on December 9. If a compromise can’t be reached soon, the Social Security tax rate on employee payroll will automatically jump from 4.2 percent back up to the usual 6.2 percent when a temporary rate cut expires on December 31. The 2 percentage point reduction for 2011 was intended as a stimulus measure to put more money into workers’ pockets. For a person earning $50,000 in 2011, the cut equated to $1,000 more in take-home pay during the year.

The administration’s proposed American Jobs Act provided for the rate to be cut even further, down to 3.1 percent, for employers and employees. The employer rate is currently 6.2%, so the AJA provisions would have cut the employer contribution in half for 2012. Under the Obama plan, employers would also get a tax credit to essentially offset increased Social Security taxes paid as a result of wage increases. The Republican bill just introduced would only lock in the current temporarily reduced rate of 4.2 percent for employees for another year. Social Security advocates, meanwhile, are concerned about even that reduction becoming permanent and leading to eventual insolvency in the benefits program.

With the political and economic debate over the Social Security tax rate still ongoing and any change to the law likely to come down to a last-minute vote in Congress, payroll processors will need to stay on top of the situation to make sure that they’re aware of the correct tax rates to use come January. The continual flux in tax levies is one reason that it may be wise to have an experienced payroll specialist handle your company’s payroll. Through payroll outsourcing, you can not only free up valuable time that can be invested in making your business improve and grow, you can also avoid mistakes that can be costly in both time and money.

Padgett Payroll Services can handle your company’s payroll administration duties, including accurate calculation and timely remittance of all payroll and withholding taxes at the federal, state and local levels. Call Padgett today at 877-244-5842 to find out more about how we can help simplify the job of running your small business.

Payroll Outsourcing Eases Small Business Paperwork Burden

Payroll ProcessingSmall businesses employ tens of millions of workers in the United States and Canada. That’s tens of millions of paychecks amounting to billions of dollars going out every month. While that’s a great contribution to the economic engines of our countries, the routine of calculating payroll, taxes and deductions isn’t the most inspiring task in a business person’s schedule. Time is an irreplaceable commodity, and payroll chores eat up hours that most entrepreneurs would rather spend innovating and strategizing. Payroll outsourcing can be a cost-effective option that frees up valuable staff time that’s better spent in other ways.

Outsourcing to a payroll administration specialist instead of devoting in-house labor to such a mundane job amounts to nothing less than an investment in your company. When you choose to have a payroll management firm take this burden off of your shoulders, you’re literally buying time, time that you in turn can invest in improving product quality, streamlining your businesses processes, developing new products and services, paying sales calls and marketing to potential new customers.

Because a payroll specialist focuses on just one aspect of your business, you can be assured that their expertise will bring extreme accuracy to your payroll function. Having payroll done right the first time, every time potentially saves frustration and yet more precious time that otherwise may be wasted on fixing errors. Employees consider few things as important as being paid accurately and on time, so hiring a professional payroll processor also contributes to employee satisfaction.

Any company you consider outsourcing your payroll to should offer these services:

  • Online entry of payroll data
  • Recordkeeping, accruals and payroll calculation
  • Cutting and distribution of payroll checks
  • Direct deposit option
  • Payroll tax calculation and remittance
  • W-2 preparation and distribution
  • Payroll withholding
  • Workers’ compensation calculations
  • Federal, state and local government compliance

Padgett Payroll Services is a payroll outsourcing company that offers all of these convenient services and options at an affordable price for small businesses. Padgett Payroll is dedicated to helping small businesses minimize the hassle of payroll preparation so that today’s entrepreneurs and their staffs can focus on more important and exciting aspects of their companies that lead to success and growth. Padgett Payroll Services is a division of Padgett Business Services, which has served small business since 1966. Consult with one of our representatives to learn more about the benefits of having Padgett, the payroll specialist, working for you. Call us today at 877-244-5842.