It takes a lot of effort to keep a new company running. For many small business owners, they got into their line of work because they wanted to offer a certain product or service that wasn’t available elsewhere. However, your passion for your product or service doesn’t always make you a master at HR functions.
When your company is just starting out, you may find yourself making one or several mistakes when processing payroll. Rather than making these mistakes, many new companies choose to outsource their payroll to a professional employer organization (PEO).
If you’re interested in learning how a PEO can help you avoid these payroll mistakes but don’t know how to find the right HR outsourcing service, contact NetPEO. Our PEO brokers are here to help answer all your PEO questions. Simply call us at (678) 376-1212 or submit your contact information on this website.
Inputting Your Workers into the System Incorrectly
Depending on your business model, it may be clear when one of your workers is an employee and when they are instead independent contractors. However, for many businesses, the line between employee and an independent contractor may seem to feel blurred. In many cases, employees are mistakenly classified in their company’s payroll system as independent contractors.
Misclassifying your workers can cause a huge headache for both you and your workers. A failure to properly classify your employees can mean that the wrong amount of taxes is withheld from the worker’s paycheck. Not only will the worker have trouble when tax season rolls around, but you may be facing legal repercussions from the IRS.
Not Paying Your Employees the Correct Amount
Calculating the exact amount each employee is owed isn’t always as simple as multiplying their hourly rate by the number of hours they worked in a pay period. Sometimes, it’s a matter of incorrectly entering the worker’s hours. Other times, misclassification of the employee means withholding too much or too little for tax purposes. There may be other garnishments that affect how much money your employee takes home as well.
Not Accounting for Gifts
Say you had a better than expected third quarter and wanted to reward your staff with a generous bonus. Rather than give them cash, you decided to give them gift cards to a local restaurant.
While this simple is gesture is very kind, the people running new companies often forget that gifts from employers must be counted as income. This means that the workers who receive the gift, whether it’s in the form of a gift card or a cash bonus, is liable to pay taxes on that amount. For gift cards or other non-cash gifts, the amount assessed to the employee must be a fair market value.
Consequences for Payroll Mistakes
As mentioned previously, many common payroll mistakes can bring the ire of the IRS on you or your workers. While this can be a huge problem on its own, you also may run afoul of state or federal labor laws. You don’t need both the IRS and the Department of Labor coming after your business. If they do, you could be looking at high legal costs and protracted legal troubles.
Payroll Services Offered by PEOs
Payroll outsourcing is one common service new companies seek from PEOs. Depending on the PEO, they may offer supplemental services designed to make the process easier, or they may be able to handle all payroll functions on your behalf. A PEO may be able to:
- Log employee hours
- Calculate tax withholdings
- Submit taxes to state and federal agencies
- Cut paychecks
With a PEO, you are trusting payroll professionals to lend their expertise to help your business.
As part of the partnership, you sign a co-employment agreement when you agree to use a PEO. This agreement makes the PEO the employer of record for your workers. This allows the PEO to handle the necessary payroll functions, but it also transfers some legal liability to the PEO. If some problem does manage to manifest, the professionals at your PEO will be on top of the issue.
NetPEO Will Connect You with a PEO to Avoid Payroll Mistakes
New companies can use all the help they can get. Finding the right PEO for your business can be difficult. According to industry statistics gathered by the National Association of Professional Employer Organizations (NAPEO), there are more than 900 options available nationwide, with many more likely to come in the following years.
NetPEO’s brokers are here to help you navigate the PEO industry. We will help you find the right PEO who has the right experience and services to handle your business’s payroll needs. To get started, all you have to do is fill out the form on the right or call us at (678) 376-1212.