Payroll’s primary task is to make sure that all employees are paid correctly and that deductions are remitted in a timely manner to the appropriate authorities. 

When it is summed up like that, it sounds like a relatively simple and straightforward task. But there are many tricks and traps in payroll that can result in significant penalties for businesses if they are not compliant. 

Ensuring that your business has payroll solutions and payroll services that are compliant is essential, which is why it is important to recognise some of the simple payroll errors that any HR department could make, including:

Payroll Related Taxes Not Paid on Time

Regularly paying employment taxes is your responsibility as an employer. No matter whether you hire full-time, part-time, or contract employees, employment taxes are an essential obligation and you will be penalised by the ATO if these payments are skipped or not paid on time.

Regularly missed payroll related tax deadlines will not only result in late payment penalties but may also cause undue financial stress. Moreover, it can create distrust among your workers as well as invite serious legal troubles that may damage your company’s reputation.

Compliance Errors Resulting in Penalties

Maintaining compliance with all existing laws governing your business is challenging, but the consequences of non-compliance are significant. Payroll laws affect many aspects of the workplace, so it is crucial to follow them. You may have to pay penalties and other repercussions if payroll errors lead to tax payments late, incorrect amounts paid, or inaccurate employee details reported.

Clean Records Are Not Maintained

A business’s failure to maintain clean payroll records is one of the most common payroll mistakes. It is the responsibility of employers to create and maintain employee records.

It is beneficial for both your employees and your business to keep a clean, accurate set of records, as it keeps you in compliance with your company policies. Employee records are often inaccurately maintained by managers, resulting in confusion and chaos throughout an organisation. 

Keeping clean payroll records can help you avoid government penalties. Additionally, you may be asked for proof that your workers are not being underpaid. Moreover, payroll errors can also cause your employees to be underpaid or overpaid, which can damage your business.

Deductions That Are Unlawful

You can’t legally deduct money from your employee’s wages unless the deduction is reasonable, is for a lawful purpose, and if the employee has agreed to the deduction in writing (they can withdraw their consent at any time). For example, PAYG, child support payments and student loan repayments are examples of legal deductions.

Even though the law is clear, many businesses are mistakenly deducting wages from their employees. A few companies may not be aware of all the legal obligations they have, but there are others that deliberately flout the laws, paying employees fewer hours than they actually work, docking wages for property damage or taking money for reimbursement of visa applications and rent.

Employees can file complaints with the Fair Work Commission when deductions are unlawful, as the law does not differentiate between an employer knowing what deductions are legal and deliberately violating the Fair Work Act.

How to Prevent Payroll Errors

You can prevent payroll errors by using payroll software or a third-party payroll company. If you calculate payroll manually, you are vulnerable to errors and need to stay current with laws through regular research. Payroll companies and payroll software both put you in the hands of experts and make managing payroll simple.

It is challenging to keep accurate payroll records. The automation of payroll systems allows you to streamline the process of maintaining your employees’ pay records, minimising the possibility of errors. Furthermore, payroll software includes useful features such as timekeeping software, cloud storage, and direct deposit to save you time and effort.

Interested in more essential payroll advice? Check out our master guide here!