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Misclassified Employees, Missed Overtime & Changes in Payroll are Hurting Your Business?


You are one of the businesses with several employees, and are required to work your brains out with finer details; so as to see to it that their salaries are deposited in time or cheque are disbursed regularly. But to attain this, the hard work that you have to put in, makes you feel at times that you should be paid extra for these efforts and you always remain stressed out. In 2015, small business taxation survey from the National Small Business Association, inquired with around 650 plus business owners, who opined that administratively and financially, the most burdensome tasks that they as an owner have to handle is — Payroll Taxes. Though businesses are equipped with human resources departments, looking at the unpleasant nature of payrolls, still payroll mistakes are bound to happen.

Misclassifying Employees

If you have middle managers, who oversee approx. 5–10 people then they are considered to be salaried employees. However; if at times they are engaged in physical labor, it makes them hourly and not salaried employees. Misclassifying part-time employees and contractors can also get you in big trouble at the hands of Department of labor. Issuing form 1099 to a vendor or contractor who provides certain amount of hours of services to your business is mandatory.

There are chances that intentionally or unintentionally, you forget to pay overtime to one or some of the employees. Or out of good faith, you procrastinate to pay them in good times and not now; but doing this is absolutely a big no, as you may be playing foul to Fair Labor Standards Act. One of your employees destroyed something really expensive, accidentally and is punished by deducting it from the pay, should not be done ever, says Vaibhav, Director of Bookkeeping and Accounting Solutions at Hi-Tech. Business owners should not forget that laws for wage payment tend to change from state to state, however; at Federal level employers are not allowed to deduct anything from the wages without a written consent by the employee, agreeing to it.

Errors in Paying Overtime

Rules and regulations and compliances in abundance make it more a challenging task for the employers to stay abreast everything. Norms for hospitality industry in New York has made it mandatory for the employer to pay one hour wage extra to all those who work for more than ten hours in a day. Now calculating overtime, along with tips and everything, becomes a daunting task altogether. Using timekeeping system to track hourly employees is one of the solutions to it, however; what about the manual tasks of pulling up reports from this systems and doing calculations accordingly. This is where you need someone who is an expert at payroll processing, so why not hire one?

Changes in Payroll Tax Laws

Tax laws keep on changing at Federal, state and local level. 18th May 2016, is when the U.S. Department of Labor released the revised overtime pay regulations, effective from 1st Dec 2016. This is massive and is going to affect about 4.2 million white collar professionals — nationwide. This new amendment in the law is expected to increase the salary benchmark for overtime exemption straight to $913 a week from mere $455 a week. So here the catch is that if you have salaried professionals who make $47,476 or less, and are employed with you for more than 40 hours a week, you are more likely to pay them overtime. Living with a pre-conceived notion that your payroll software will take care of it, is certainly not a smart move. Instead speak to your payroll solution provider about it.

Leave the Payroll Errors — Behind

Outsource payroll solutions has worked wonders for companies across the globe. It is certainly a smart move to consult a solution provider, instead of paying penalties. Why not stay in good books of IRS? A few thousand dollars to payroll experts could save you millions of dollars and the agony.


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