New Employers: Avoid The Top 3 Payroll Mistakes
The article advises new business owners to avoid three major payroll mistakes—failing to pay payroll taxes, which can lead to severe legal penalties including imprisonment; inaccurate time cards, often caused by manual timekeeping errors or employee dishonesty; and a third mistake not fully detailed in the excerpt—emphasizing the critical importance of proper payroll management to ensure legal compliance and business success.
Owning a business after being an employee can be very satisfying. You are the captain of the ship and can chart your course without having to answer to anyone else. When you get to the point where you need employees, however, it’s indispensable to realize that being an employer can be involved when it comes to payroll. To ensure the best chance of success, be sure you avoid prevalent payroll mistakes:
1. Failing to Pay Payroll Taxes
We list this one first because there are heavy penalties attached. Brand-new small business owners may mistakenly think that failing to pay payroll taxes is akin to not paying personal income taxes. This is a hazardous error.
If you get in a cash pinch, DO NOT delay paying your payroll taxes as a stopgap measure.
This is what the Dept. of Justice has to say about withholding payroll taxes (trust fund money) and not turning it over to the IRS:
“An individual’s failure to comply with employment-tax obligations is not simply a civil matter. Employers who view amounts withheld from employee wages as a personal slush fund, treat withheld employment taxes as a loan from the government that can be repaid if and when they see fit, or whose business model is based on a continued failure to pay employment tax, are engaging in criminal conduct and face prosecution, imprisonment, monetary fines and restitution. According to statistics provided by IRS Criminal Investigation, in the 2015 fiscal year, individuals convicted of employment tax crimes were sentenced to an average of 24 months in prison.” Source
2. Inaccurate Time Cards
Manual timekeeping operations that require staff members to enter hours on a paper timesheet are liable to errors that are both intentional and unintentional. Employees often log their authorized starting time even when arriving late and do the opposite when leaving early. Even your most reliable staff member can have trouble accurately recalling hours when filling out a time card several days after the fact. Inaccurate time cards increase costs of labor unnecessarily and burden your HR staff (which may just be you) who have to gather information to correct the time cards.
Paying employees a few minutes here and there for time not worked can really add up. Consider the following example. If you have 25 employees who guesstimate their hours with an additional 8 minutes of time each day for which they were not on the job, you will overpay:
- $184 weekly
- $367 biweekly
- $794 monthly
3. Misclassifying Employees
It is tempting for an employer to define an employee as an independent contractor. In most cases, employers are not legally required to withhold and pay Social Security, unemployment, and Medicare taxes for money paid to workers classified as independent contractors. Furthermore, employee classification affects a host of other things including benefits eligibility, minimum wage provisions, overtime pay eligibility, and workers’ comp eligibility. Employers who misclassify are in danger of state and federal penalties and should consult the comprehensive DOL guidance on the matter to be safe. The nature of an employer-employee relationship can also evolve over time and sling the classification. It’s important to review the relationships periodically.
Swipeclock serves hundreds of organizations like yours and can help you avoid these typical pitfalls. Call us today at 888.223.3450.
Swipeclock offers WorkforceHub, the unified Human Resources portal that makes it easy to optimize the performance of your supervisors, employees, and organization.
WorkforceHub includes TimeWorksPlus, TimeSimplicity, and TimeWorks Mobile. We’ve just added onboarding, benefits enrollment, performance reviews, and employee engagement! WorkforceHub is created for busy employers like you who need to streamline scheduling, automate time and attendance tracking, maintain regulatory compliance, and decrease labor costs.
We can get you up and running with WorkforceHub immediately. Contact us today to request a demo.
Or are you interested in becoming a reseller? Check out the Swipeclock partner advantage now.
Related
3 Payroll Errors That Can Sink Your Company
The article highlights three critical payroll errors that can jeopardize a company—using inaccurate manual time cards leading to overpayment and administrative burdens, misclassifying employees which risks legal penalties and affects benefits and wages, and failing to timely pay payroll taxes which can cause serious financial and legal consequences—while recommending WorkforceHub’s tools like TimeWorksTouch to ensure precise time tracking, proper employee classification, and compliance with tax obligations.
Employee Recordkeeping: Are You In Compliance?
Proper employee recordkeeping is essential for regulatory compliance under over 20 laws, including the FLSA, which mandates detailed documentation of employee information, work hours, wages, and payroll data for specified retention periods to avoid legal penalties and ensure records can withstand Department of Labor audits.
Workforce Management Blog
The Workforce Management Blog highlights Swipeclock's recent Base Camp Live 2025 event, introduces a new WorkforceHub dashboard to streamline client navigation, showcases how PEOs leverage Swipeclock for payroll and compliance, emphasizes modern timekeeping software as a competitive growth tool for PEOs, outlines the costly risks of manual timekeeping like employee time theft, and promotes TimeWorksPlus as an affordable solution for small business workforce planning and cost control.
Wage Hour Recordkeeping: Are You In Compliance?
The article emphasizes the critical importance of meticulous wage hour recordkeeping for employers to ensure compliance with over 20 applicable laws, detailing specific employee data required under the FLSA, recommended retention periods for various records, and warning that inadequate documentation can lead to legal penalties even if the employer is otherwise compliant.
FLSA Overtime Threshold Changes and the Effect on Your Clients
The Department of Labor's final overtime rule, effective July 1, 2024, raises the salary thresholds for exempt executive, professional, outside sales, and computer employees under the FLSA, requiring employers to either reclassify affected employees as non-exempt with overtime pay or increase their salaries, and necessitating proper time tracking solutions like WorkforceHub to ensure compliance.
Case Study: Small Manufacturing Business
This case study details how a U.S.-based custom cabinet shop serving the high-end residential market survived economic challenges by adopting lean manufacturing principles, initially improving production and later streamlining HR processes through WorkforceHub's TimeWorksPlus timekeeping and scheduling modules, which automated redundant manual timecard handling, reduced non-billable administrative time, enhanced data-driven profitability, and improved document management.