Unless you have an in-house bookkeeper, there are two ways to handle payroll in San Diego, CA: hire bookkeeping services to process payroll for you and save you time, or do payroll all on your own, whether manually or with the help of a piece of software. While there are downsides to running your own payroll, it comes with the alluring prospect of making considerable savings on an annual basis.
But considering the fact that California’s labor laws are so strict and so protective in the nation of the employees’ rights, what are the potential pitfalls to look out for? What are the common mistakes you could make when processing payroll in California?
How do you avoid payroll errors?
The common risks of running payroll include:
- Miscalculating overtime
- Misclassifying employees
- Paying employees infrequently
- Mismanaging payroll records
- Payroll audits
The safest way to avoid payroll errors is to give the job to a payroll provider. This will protect you from making payroll mistakes and from mishandling them in a way that could lead to more hardships, business problems and financial losses.
Go with a payroll provider who meets the following criteria:
- A competent payroll provider who will make your payroll a priority: this minimizes the risk of mistakes and gives you a higher level of protection. Even if there are mistakes, they will not go unnoticed for long. Using enormous corporations for payroll seems convenient and risk-free, but they have hundreds of clients just like you which increases the risk of something going wrong.
- A local payroll provider you can meet face to face: you need to be able to build a rapport with your payroll provider so they will look out for you and your best interests, as well as stay on the lookout for any discrepancies which may put your business in jeopardy.
To further minimize the risk of error:
- Be diligent about checking the data and do a double or triple check before you submit your data.
- Set deadlines and do all the submissions in a timely manner so as not to disrupt the payroll process. In the majority of cases, it is the deadline slippage and the resulting rushed payroll that causes payroll errors.
How long does an employer have to correct a payroll mistake?
An employee could report the employer to California’s Labor Commissioner’s Office for failure to correct payroll mistakes in a timely manner. Employers should correct any payroll mistakes as soon as possible, even in the case of final paychecks.
Who is responsible for payroll errors?
The responsibility for payroll errors could be borne by the employer or their bookkeeping or payroll service provider, depending on the circumstances. There is always the risk that someone will make an honest mistake or something will slip under the radar, which is nothing to worry about if the mistake has been pointed out and resolved in time.
How do I fix payroll mistakes?
If an underpayment has occurred and you paid your employee less than the money they were owed, resolve the situation as soon as possible to avoid facing consequences such as reports and penalties. In some states, these mistakes can be easily corrected using the retroactive pay option on the next pay cycle.
But in California, underpayment constitutes a violation of the Labor Code, and you need to issue the employee an internal check right away to avoid potential repercussions and complications. The only exception concerns unscheduled overtime hours: the payment for these may be delayed to the next pay cycle.
If you make the mistake of overpaying an employee in California, you cannot simply solve the problem by withholding the same amount of money from their paycheck at a later time. California is strict about that and allows few deductions: basic tax withholding, wage garnishments, and voluntary contributions to retirement funds or health insurance contributions.
Always consult a professional in the field of finances, bookkeeping or accounting before taking action to fix payroll mistakes on your own.
Book time-saving bookkeeping services in San Diego, CA
On the surface, payroll processing sounds simple and straightforward. It takes time, concentration and patience, but you can manage it all by yourself. However, there are labor laws and various regulations to keep up with and take into account, which makes the process more complicated.
We are here to manage these complexities on your behalf and make sure you are compliant with labor laws and other applicable regulations. As your go-to bookkeeping and payroll provider, we are here to free you of these functions and let you focus on what matters most: your business operations. We will set everything up so you can finally free up some time for a casual day at Imperial Beach. Set up an appointment today!