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Risks to Avoid When Running Your Payroll


Errors which may occur during payroll processing can lead to huge problems ranging from inaccurate payroll allocation to financial losses and poor company reputation. Most businesses can’t afford unnecessary fees or expenses that may occur due to payroll errors.Therefore, it is important to be aware of payroll risks and familiarize yourself with the basics of payroll. It’s equally important to take the necessary steps and measures to know how to avoid these mistakes.

Risks to avoid when running your payroll

Inaccurate overtime exemptions

This happens when you fail to analyze both federal and state laws, and assume that all salaried employees are exempted. It also occurs when companies don’t check employee’s qualification for exemptions.

Misclassifying employees

Payroll errors are likely to happen when you misclassify employees as independent workers and assign contractors tasks that are meant for employees.


Setting payroll for employees at the wrong rates, missed deadlines, and mismanaging payroll documents are possible errors that could occur and can lead to hefty penalties.

Incorrect records

When it comes to running payroll, incorrect recording can be one of the biggest mistakes that can cost a company. This inaccuracy may end up with single incorrect paycheck or inappropriate wages allocation.

System failure or data loss

Some payroll systems do not have a backup system. To avoid such risk, ensure you have the right back up system and test it before use.ConclusionPayroll risks and errors can occur if you are not keen on checking and confirming the payroll data. Some of the risks to avoid when running your payroll include inaccurate overtime exemptions, misclassifying employees, non-compliance, incorrect records, and system failure.Explore our HR and Payroll solution and get a 14-day FREE UNLIMITED ACCESS.

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