7 Common Payroll Errors and How to Prevent Them

Running a successful payroll is like navigating a labyrinth of obstacles that never quit.

You have a destination that you’re trying to reach, but you find yourself facing hardships at every turn.

From tax calculations to legal adherences, staying updated feels like a job in and of itself.

Yes, doing it alone is scary—but with proper guidance, it can be something you don’t ever have to worry or stress about.

As long as you have concrete methods for addressing the various problems that may arise along the way, you’ll be set.

The more you practice these methods, the less intimidating payroll becomes.

So without further ado, let’s dive into the seven most common payroll mistakes that you can make—and practical ways you can prevent them from happening.

1. Making Payroll Miscalculations

Even the tiniest miscalculation can ruin an entire payroll, and that’s what makes it so stressful.

Balancing gross pay, tax deductions, FICA, 401(k), and countless other things complicates the process more than most people can handle.

In the world of payroll, there is no margin for error—but as humans, we’re naturally programmed to make mistakes.

In order to combat this, make sure you have at least two people review the calculations. It’s common for one person to make a mistake, but very unlikely that two employees will miss it.

An even better solution is to utilize modern digital payroll software. PayDeck 2.0, created by Brand’s Payroll, handles calculations with airtight precision.

It also has an AI-supported Payroll Assistant that catches any miscalculations before validation.

2. Not Complying With Tax Laws

Tax laws are so incredibly complex and they’re constantly changing.

If you’re not staying updated you could get in trouble with the IRS, Department of Labor, or other tax authorities.

Federal and state income taxes, FICA taxes, and more, must be deducted accurately. You also need to ensure that the W-2 and 1099 forms you submit are reported correctly.

If that kind of pressure doesn’t sound stressful to you, we don’t know what does.

Here are some solutions you can try:

Set a time for yourself each week to brush up on any tax updates. You can also subscribe to legal newsletters that’ll inform you if there’s ever a significant change.

But if all that seems too taxing (no pun intended), you can acquire outsourced help. PayDeck 2.0 is constantly synced up with local tax laws and calculates your payroll accordingly—so you’ll never have to worry about tax inaccuracies.

3. Making Direct Deposit Errors

It’s the most basic aspect of payroll: where you’re sending the actual money to.

Before you get to deductions or even salary for that matter, you can’t just simply rush through the bank details.

Because while it may seem less intimidating than other aspects of payroll, it’s also one of the most important.

If you accidentally send a check to the wrong destination, you’ll run into a whole other slew of issues that you definitely don't want to be dealing with.

The solution here is to constantly double-check your data input. When possible, have a fellow employee look over it as well.

However, if you’d rather avoid all of that headache, you can just use a payroll service to handle these issues.

4. Misclassifying Your Employees

Another common mistake that business owners make is misclassifying their employees.

Some employers do this in order to avoid paying overtime, but most do it simply out of innocent misunderstanding.

The FLSA (Fair Labor Standards Act) enables non-exempt employees to receive overtime pay, so if you misclassify them as exempt you’re effectively taking money out of their pocket.

Another mistake you might make is mix up regular employees with independent contractors. This, too, is a huge oversight because each of these worker types are paid under vastly different legal regulations.

Misclassification is both illegal and frustrating to the employees.

Educating yourself on common labor laws will help you avoid these issues. Hiring outside professional help will keep you protected, but it’s still good to know the basics.

5. Miscalculating Overtime Payments

Let’s say you’ve done your homework and classified all of your employees appropriately.

You’re still not out of the woods, because now you have overtime payments to calculate.

Your non-exempt employees will have their eyes fixated on every overtime dime they get, especially because working overtime is that much more demanding than normal hours.

Not just that, but for every overtime hour they work they’re entitled to 1.5 times their normal pay, by FLSA mandate. So you’d better make sure it's on point.

In case you haven’t noticed by now, so many potential payroll pitfalls are about simple miscalculations.

Are you triple-checking the numbers? Are you working with a team? Are you outsourcing?

These actions will undeniably remove errors from your payroll, and you’ll sleep better at night as a result.

6. Mishandling Garnishments and Fringe Benefits

Understanding how to handle garnishments and fringe benefits is crucial to completing a successful payroll.

They are a unique branch of tax deductions that must be treated with care and precision, lest you suffer legal consequences.

Garnishments are court-ordered deductions that you must withhold from an employee’s check, while fringe benefits are employee perks that the IRS legally renders taxable.

This is just the tip of the iceberg, and that’s why you’ll have a big task handling it all by yourself.

You can give it the old college try or simply let us take care of it. Our software, PayDeck 2.0, handles garnishment deductions with effortless ease so you don’t have to.

7. Not Keeping Compliant Legal Records

Many business owners who handle their own payroll aren’t always on top of their payroll records.

They understand its practical importance, but not from a legal standpoint—and unfortunately, that’s where it really matters.

Indeed, employers are often legally required to keep three years of payroll records that include data points such as employee information, payment dates, payment rates, and hours worked.

This is one of the hardest things to fix if you’re already behind—and it’s where an outside payroll service provider really shines.

The best thing you can do for your peace of mind is to invest in adequate record-keeping, and we offer that in spades.

PayDeck 2.0 keeps a comprehensive account of your payroll records by default, so you won’t ever have to think about it.

The Common Denominator

You may have noticed that there’s one common thread for all of these solutions.

It’s not hyperbole to say that outsourced payroll software is the future.

And PayDeck 2.0 is on the front lines.

It expertly calculates tax deductions.

It stays up to date with tax laws and legal requirements.

It uses AI to prevent every possible error you can think of.

By doing this, it keeps you protected from legal trouble at all times.

It keeps all of your payroll information for safekeeping.

Oh yeah, and it does all of this without breaking a sweat—swiftly and seamlessly.

If you’d like to try it out, speak to one of our experts and book a consultation.