Payroll errors cost businesses thousands each year. Most problems start with an incorrect payroll setup. Here are the top mistakes and how to avoid them.
1. Missing or Incorrect Employee Data
- Wrong SSN, bank info, or tax status
- Causes rejected filings and failed payments
- Fix: Use digital onboarding and verify data
2. Misclassifying Employees vs. Contractors
- Leads to back taxes and penalties
- Fix: Follow IRS worker guidelines
3. Incorrect Tax Withholding Setup
- Common cause of IRS fines
- Fix: Update W-4s yearly; use automated tax updates
4. Wrong Overtime Rules
- Exempt vs. non-exempt confusion
- Fix: Follow state and federal rules
5. No Time-Tracking Integration
- Manual entry causes errors and compliance issues
- Fix: Sync time tracking with payroll
6. Multi-State & Remote Worker Errors
- Unregistered work states = penalties
- Fix: Track work locations and register as needed
7. Not Updating Employee Changes
- Missed raises, deductions, or role updates
- Fix: Update payroll after every change
8. Wrong Benefits & Deduction Setup
- Incorrect pre-tax/post-tax settings
- Fix: Audit deductions monthly
9. Weak Payroll Security
- Risk of fraud or data breaches
- Fix: Use MFA and role-based access
10. No Payroll Audits
- Errors go unnoticed for months
- Fix: Run quarterly audits
Protect Your Business
A proper payroll setup prevents penalties and saves time.
