Four Common Payroll Mistakes
Introduction
One of the critical behind-the-scenes processes all architectural and construction firms deal with is payroll. Whether running payroll in-house or outsourcing it to a (sometimes-hard-to-find) competent payroll company, it remains a complicated task full of inherent pitfalls and traps.
As a trusted partner to architectural firms, the team at Royal Engineering understands the unique payroll challenges you face. From managing a mix of salaried and hourly workers to properly accounting for employees’ billable hours on multiple projects, payroll is more complex in the architecture world than it may seem. That’s why it’s crucial to get payroll right from the start.
Things to Look For
There are so many moving components to track and account for that we are probably just happy to get it done on-time without employees asking us to correct something. Even if you think your method is flawless, it is well worth the time to recurrently assess it. Here are some of the more inconspicuous mistakes that can lurk in your payroll process:
- Are you giving employees an extra check? If you have salaried employees on a biweekly pay schedule, watch out for this one. Many accountants will simply take the gross annual salary and divide by 26 payrolls to calculate the biweekly pay. This would work fine if there are always 26 paydays in a year, but sometimes there are 27! The proper way to calculate a biweekly salary is to divide the annual salary by 365 (use 366 for leap years) and then multiply by the 14 days in the pay period. If you use the method of dividing by 26, you will pay all of your salaried employees the equivalent of an extra check on years with 27 payrolls.
- Who’s supposed to file that? If you are working in part with or completely relying on a payroll company, remember that every payroll service provider is different. Some have funny policies on what forms and paperwork they will and will not file for you. (My last payroll company filed state paperwork for new hires, but not for rehires.) Make sure to review their terms of service when it comes to filing and reporting, and know what tasks are your responsibility. Send all notices involving payroll to your service provider and make sure they respond.
- Audit Each Payroll: Your employees should have the utmost trust that their paycheck is accurate, but there are so many opportunities for errors. Even if your records are infallible, someone else can mess it up down the line. Importing records between various systems can reduce this risk, but it is always a good idea to audit your payrolls. My current system is to have someone audit a payroll before submitting it to the payroll company. It is then doubled check as it is entered into our system after it clears the bank. If your accounting team is a solo operation, you can still double check that what the payroll company is paying and deducting matches what you told them. No time for that? Try spot checking each payroll.
- Legal Landmines: If you handle payroll by yourself, know your state and local laws. If you have a payroll or HR company you can rely on, let them know any scenario that strays from normal. I once had a boss, at a previous employer, send an employee home at noon as a disciplinary action. He wanted the employee to only be paid for half the day, but the law in that state would not allow it; the employee ended up getting a free afternoon paid as his punishment. Businesses should ensure that all payroll anomalies are good and legal, as fees for payroll law violations can compound quickly if an employee ever files a complaint.
Conclusion
Odds are, your payroll process is polished and humming like a well-oiled machine, but with so many moving parts, it’s a good idea to make sure things are really running as well as they seem to be. Continuous improvement is key to any successful business.
Don’t let payroll problems undermine your firm’s reputation for design excellence. Take a proactive approach to getting payroll right so you can focus on what you do best – creating innovative architectural solutions that inspire and endure.
