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5 Common Payroll Errors and How to Avoid Them

June 10, 2016

Payroll processing should be as pain-free as possible.

At Loyalhanna, we help ease our client’s mind by providing friendly, knowledgeable payroll processing.  We use technology that has the capabilities to capture and import time, provide custom reporting and file appropriate payroll tax documents in an accurate and timely manner.

Our friendly and knowledgeable customer service is something we pride ourselves on. 

Many times, we get new clients who had negative experiences relating to their prior payroll processing.   Sometimes those negative experiences have related to payroll errors that they did not know they were making.

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Here are some common payroll errors and how to avoid them:

  1. Not retaining payroll records– “I have a payroll processor, I don’t need to maintain payroll records.” All too often, businesses rely on their payroll vendor as a source of reference for all of their payroll records. Most payroll records need maintained for 7 years (varying by state), and this should include documents such as employee time sheets, payroll schedules, payroll details, tax forms and tax filings.
  2. Not filing taxes appropriately or missing filing deadlines– “What’s the local service tax, do I really need to file that?” Each state has different tax requirements. Loyalhanna services all states and is located in Greensburg, Pennsylvania.  Pennsylvania has specific tax rules that relate to Act 32 that vary by taxing districts.  Common errors can be withholding the wrong amounts, filing the tax payments late, or missing the withholding and filing all together.
  3. Misclassifying workers– “I pay everybody salary.” If someone is paid salary, it does not necessarily mean that they are exempt from overtime. There are certain tests governed by the Fair Labor Standards Act that determines if one is exempt from overtime pay.  If someone does not prove to be exempt, they need to be paid overtime even if they receive a salary payment when working more than 40 regular hours in a work week.  This is an error that can be very costly and lead to fines, penalties and back pay.
  4. Miscalculating overtime pay– “Do I have to pay overtime?” The fair labor standards act details who and how one should be compensated for overtime pay. This can be a common error.  Most payroll processors process based off of the information provided to them.  It is important to ensure that overtime is calculated accurately for all employees who are non-exempt.
  5. Data-entering incorrect information– “Garbage in Garbage out.” Most payroll processors only process off of the information provided. If information is inaccurately provided, then information will be inaccurately processed.  A way to prevent this is to look at your internal processes to capture employee time.  How are you capturing time? Is their manual work in these processes that can be reduced?  Does technology need updated?

If you are experiencing any of these common payroll errors and would like to find some resolution.  Call us at Loyalhanna, we would be happy to help! 724-672-4300 or