What Every Small Business Owner Should Know About Payroll Mistakes

Dealing with personnel issues can be complicated, particularly when it comes to employee pay. Whether you're contracting a payroll service or handling it on your own, there's always a chance of mistakes happening. Understanding this risk and being prepared to deal with mistakes will help you maintain control over your company's finances and ensure payroll accuracy. Here's a look at what you should know about dealing with payroll mistakes.

What Kinds Of Things Cause Payroll Mistakes?

Payroll mistakes can happen for many reasons. Some mistakes occur after an employee miscalculated their hours or made an error on their timecard. Others occur due to data entry issues. You can avoid some of these things by instituting a validation process. Require managers to validate timecards, and have your payroll processing audited and signed off each week before it is transmitted to the bank. This may help prevent many of the mistakes, but won't necessarily stop all of them.

What Is The Best Way To Address Payroll Mistakes?

When a payroll mistake does happen, it is important that you respond appropriately. Here are a few tips to help you tackle the process without causing undue stress or other problems.

  • Respond Quickly - As soon as you identify an error, you should reach out to the employee immediately. No employee is going to want to hear that their payroll was incorrect, but the sooner you address it, the easier the process is likely to be.
  • Explain It Thoroughly - While you may be tempted to just adjust the payment error on the next payroll cycle without saying anything, it's important that you clearly explain to the employee what happened and how it happened, if possible. The more information the employee has about the mistake, the easier it will be for them to understand the corrective actions.
  • Be Reasonable About The Resolution - Any time you're dealing with financial issues, you should proceed with a bit of restraint. Take time to talk with the employee about how you plan to resolve the problem, whether you're looking to deduct the funds from their account or simply adjust it from the next payroll cycle. Remember that there's always time to be firm in your response later if the employee hesitates to resolve it, but your initial response will make a big difference in how your employee views the relationship and their work environment.

Although the goal is to avoid payroll mistakes entirely, it's important to understand that they can happen and need to be handled with caution. With these tips and the help of a professional payroll service, you can ensure the accuracy of your payroll records. For more information, contact a payroll service like Blueback Accounting.