Payroll Mistakes in Preparation and Maintenance

Payroll mistakes do occur during data correction, preparation, transmission and maintenance of employee data.

Payroll is just as the name suggest, a roll maintained by the employer showing what an employee is entitled to and any deductions made thereof.

Maintaining a good and accurate payroll is important and will go along way in enhancing employee efficiency.

However while maintaining payrolls, organizations make certain payroll mistakes which might prove costly to the firm.

Some common payroll mistakes are as indicated below.

1. Timeliness.

It is imperative that you mark your payroll date that is timely and convenient. Late payment of taxes and statutory returns can result in penalties and interest charges.

2. Misclassifying workers.

Because of the growing number of temporary employees, consultants, and other independent contractors, it is essential that you properly determine the classification of everyone working for your company so you can determine how to report payroll information for tax purposes.

3. Neglecting to file T9 forms.

All companies are required by the income tax act to file the T9 forms with the revenue authority by 30 June following the year under consideration.the failure to file the forms might result in heavy penalties and interests .

4. Poor record keeping and data entry.

Mismatching names, pin numbers,national Social Security fund (NSSF) and national hospital insurance fund(NHIF) numbers. Numerous data entry mistakes, including poor records of employee hours, cost companies millions of shillings annually and can result in government penalties.

5. Not properly handling garnishments, levies, or child support.

Employees may owe money by way of a court order to other parties or college loans. This means whoever is handling payroll will be responsible for sending the payment to the appropriate recipient.

6. Miscalculating overtime pay.

There are guidelines that must be followed when determining overtime pay and miscalculations can be costly. Litigation has been increasing in recent years claiming that employees who were treated as "exempt" employees and therefore not entitled to overtime were misclassified.

7. Leaving too much responsibility to the software program.

There are several excellent programs available for doing payroll such as QuickBooks. However, the old garbage-in, garbage-out theory still applies. Too many people neglect to enter all of the data or assume that the program can perform calculations without all of the necessary information.

8. Not saving payroll records.

Payroll records just like any other record needs to be preserved. Typically records, including time sheets, cancelled checks, and W-4 forms, need to be held for anywhere from four to six years.

9. Not maintaining confidentiality.

Payroll information should not be disclosed to anyone outside of the payroll department or the senior management team. It is important that such confidentiality be maintained and that payroll is handled in a secure environment.

10. Not having adequate backup.

Should the individual responsible for payroll be away or sick, the government and statutory deduction institutions still need to receive payments on time as do employees waiting for paychecks. There needs to be more than one person capable of both understanding and handling the payroll functions. In addition, if the computer is "down" for whatever reason, you need to have a manual backup system for handling all payroll functions.

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