This was not how you expected your company’s start to go. But after you messed up the payroll process, your new employees are already debating jumping ship and you’ve been spending all your time flipping through papers trying to fix it rather than attending to your fledgling business.
All this chaos could have been avoided had you not made the common mistakes associated with managing payrolls. But what are these mistakes so you can avert disaster?
Well, you’re in luck. We’re here to give you the top 5 common startup payroll mistakes and how to avoid them! So without further ado, let’s get started!
1099’s? Never Heard of Them
One common mistake startup companies make concerning their payroll is failing to get their 1099 forms out to any independent contractors you hired to do $600 or more worth of work for your company. This statement is vital for the contractor’s tax calculations, and failing to send it will make the IRS hit your company with serious financial penalties.
On a similar note, make sure to differentiate the payroll records between your in-house employees and outside contractors. This is because different tax rules apply to each, and mixing them up will prove disastrous in the long run.
The King of Startup Payroll Mistakes
One of the biggest mistakes companies make with their payroll process is poor record-keeping practices. Storing employee records out in the open can lead to the private information of employees being leaked throughout the company. In addition, not knowing how to keep all your data in one place could lead to you either underpaying or overpaying your employees because you can’t find the documentation you need.
To avoid this, consider contracting a paystub maker. These companies handle all the data collection for your payment information and handle all the tax calculations.
One Man Army
Another critical mistake you can make is having only one person in your organization who knows how the payroll process goes. This is because if that person leaves or is out that day, you’ll be left scrambling to meet the deadlines set by organizations like the IRS with no guide.
To counter this, make sure multiple people in your business are aware of how your payroll processes work and have a manual backup for handling these in case there’s a power outage.
Handling the Extras
For some employees, payroll is not as simple as giving them a set amount of money. Some will have child support bills that get subtracted out of their wages, some will owe money from their wages due to legal battles…the list goes on. To make sure you don’t lose valuable time correcting any payroll errors that go against these systems, make sure to record any fees imposed on your employees for these types of cases.
Absences? What Absences?
Finally, keeping track of when your employees call out often proves challenging for companies. It’s difficult to manually enter employee absences on a day-to-day basis when you’re busy running your company. Plus, keeping track of these absences also helps you plan your work schedule and production expectations.
So, try to implement an automated system to run your employee attendance. Whether this is a paystub maker or an outside software, this will save you a big headache down the line.
Payment For All
And there you have it! Now that you know all about the top 5 common startup payroll mistakes, you’re ready to dodge them at every turn! And for more on keeping your company running smoothly, be sure to check out the other articles on our blog!