Yahoo Finance 9 Paycheck Mistakes Employers Make That You Should Watch For
When it comes to getting paid, the last thing you should have to worry about is payroll errors that could be affecting your paycheck. Even small errors could lead to undue stress, a lower check or other problems with your compensation and benefits.
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While employers generally make a concerted effort to avoid such mistakes, they can still happen — even in the most established or organized companies. From incorrectly calculated pay to misclassifying contractors and employees, these are some common paycheck mistakes to watch out for.
Miscalculating Hours and Rates
“There are a few common mistakes that employers make when doing payroll that should be addressed to prevent legal penalties or financial liabilities,” said Scott Lieberman, human resources expert and the founder of Touchdown Money.
One of the biggest errors? “Not correctly calculating the hours the employee worked or miscalculating their rates of pay and deductions,” he said.
Miscalculating pay can lead to issues like underpayment or overpayment. It can also result in retroactive payments — or a demand to refund any overpaid amount. It can even lead to errors in deducting benefits or cause issues with those receiving disability or other types of leave.
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Not Pulling Enough for Taxes
Sometimes, employers don’t withhold enough from the employee’s paycheck for federal and state taxes. So, it’s important to double-check this whenever you get paid.
“While it may seem nice to have a higher paycheck now, the last thing you want is to be hit with a surprisingly high bill come tax season,” said Erika Kullberg, an attorney, personal finance expert and founder of Erika.com.
“Facing a surprisingly large tax bill can be detrimental to your financial plans for the year. Maybe you don’t have enough cash to cover the bill,” she continued. “Perhaps you were relying on a refund to cover an auto repair. Chances are, you had financial plans that did not involve handing over more money to the IRS. It’s better to overpay a bit and be surprised with a nice tax return than a bill.”
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Forgetting Bonuses and Other Perks
“Bonuses, overtime pay and other extras sometimes get overlooked, leaving us with smaller paychecks than we deserve,” said Kraig Kleeman, CEO of Z-Branding, The New Workforce and Kraig Kleeman Live. Other extras may include bonus awards, gift cards or other taxable income.
There are several issues with this.
The most obvious one is the smaller paycheck. Along with this, the longer it takes for your employer to notice their mistake, the more complicated going back to fix it will be. Any errors in compensation could also affect your tax burden when the time comes to file, potentially leading to a higher tax bill than expected.
Failing To Keep Accurate Records of Time Off
According to Lieberman, another common payroll error comes from failing to keep accurate records of the employees’ paid sick time, vacation time or bonuses. Missing any of these things could cause an employer to send out smaller paychecks.
When it comes to paid sick leave and vacation time, employees generally get a limited amount of each. If these aren’t accurately reported on your paycheck, you could even end up losing paid time off that you didn’t actually take.
Misclassifying Employees
“Sometimes, bosses label us [as] independent contractors when we’re employees or vice versa,” said Kleeman. “This mix-up can mean missing out on perks like overtime pay or health benefits.”
Employees and independent contractors tend to get different benefits and rights when working with — or for — a company. Being incorrectly classified could further lead to errors in wages, workers’ compensation, Social Security and retirement account contributions, and more.
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Misallocating Hours
“For companies that pay workers compensation insurance coverage based on hours of work per risk class, allocating hours correctly is an important part of maintaining an accurate payroll journal,” said Kaustubh Deo, president of Blooma Tree Experts.
Misallocating hours could lead to smaller checks or late payments. This can result in greater financial stress until the issue is resolved.
Not Keeping Up with Tax Laws
Another common paycheck mistake comes when employers don’t keep up with the changes to tax codes or laws.
“Employers must follow the rules about minimum wage, overtime pay and taxes,” said Kleeman. “If they don’t, it can cause us legal trouble and financial losses.”
Tax codes are regularly adjusted based on individual circumstances. If you’re remote, a new hire, a hybrid worker or furloughed, these can all play a role in how you’re taxed. Even a tiny mistake could result in some serious tax implications later on.
Late Payments
Anything from an incorrectly punched in number to a misspelled name could cause your paycheck to come in late. This isn’t just stressful. It can also affect your ability to pay the bills on time.
“Waiting for your paycheck when bills are due? It’s stressful,” said Kleeman. “Delays in getting paid can mess with our finances, leading to fees or late payments.”
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Misclassifying Benefits
“Errors in benefits administration can have significant consequences. For instance, if an employer fails to enroll an employee in a retirement plan or health insurance coverage as promised, it can jeopardize the employee’s financial security in the long term,” said Jonathan Rosenfeld, founder at Rosenfeld Injury Lawyers. “Likewise, inaccuracies in calculating bonuses, commissions or other incentives can lead to missed opportunities for additional income.”
This can also affect your short-term finances and long-term savings goals.
Fix Any Errors as Soon as Possible
If you can, verify every paycheck and document you receive to ensure everything’s in order. If anything looks off, reach out to your human resources or payroll department to get it sorted. The sooner you can catch and resolve these errors, the better off you’ll be.
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This article originally appeared on GOBankingRates.com: 9 Paycheck Mistakes Employers Make That You Should Watch For
