As the year comes to a close, businesses often find themselves rushing to complete payroll tasks while juggling other year-end responsibilities. However, this time of year is when payroll mistakes are most likely to occur, and the consequences can be costly—both financially and in employee trust.
In this blog, we’ll explore the top 3 payroll mistakes to avoid before the new year and how to address them effectively. By recognizing and correcting these issues, you can ensure accurate payroll processing, maintain compliance, and start the new year on the right foot.
Mistake #1: Missing Payroll Deadlines
Missing payroll deadlines is one of the most common payroll errors businesses face, particularly during the busy holiday season. According to the American Payroll Association (APA), late payroll can lead to fines, penalties, and strained relationships with employees.
Why This Happens
- Manual Processes: Businesses relying on outdated payroll systems often face inefficiencies that delay processing.
- Complex Schedules: The end of the year includes holidays, bonuses, and tax considerations that complicate payroll timelines.
How to Avoid It
- Automate Your Payroll: Automated payroll solutions, like Axiom’s services powered by UKG, streamline processes, ensuring timely submissions.
- Plan Ahead: Establish a clear payroll calendar that accounts for year-end adjustments and holiday schedules.
- Communicate with Employees: Proactively inform employees of deadlines for submitting timesheets or adjustments to avoid last-minute changes.
Mistake #2: Payroll Tax Errors and Compliance Issues
Payroll tax errors and compliance problems are among the most critical payroll mistakes to avoid. Miscalculations, missed filings, or outdated tax information can lead to hefty fines from agencies like the IRS. In fact, IRS data shows that businesses pay billions annually in payroll tax penalties.
Why This Happens
- Outdated Systems: Businesses using manual or antiquated payroll systems are more prone to errors.
- Frequent Tax Changes: Each year brings updates to tax rates, minimum wage laws, and other compliance requirements that may go unnoticed.
How to Avoid It
- Use Payroll Software with Automated Tax Updates: Axiom’s payroll services, powered by UKG, include automated updates to ensure compliance with federal, state, and local tax laws.
- Double-Check End-of-Year Adjustments: Ensure that year-to-date earnings, benefits, and tax deductions are accurate before filing.
- Partner with Experts: Working with a payroll provider like Axiom gives you access to compliance specialists who monitor regulatory changes and help keep your business in check.
Mistake #3: Failing to Process Bonuses and Year-End Adjustments Properly
Year-end bonuses and adjustments are a great way to reward employees, but they can quickly complicate payroll if not handled correctly. Miscalculations in bonus tax withholding or forgetting to include adjustments can frustrate employees and create additional administrative headaches.
Why This Happens
- Lack of Planning: Last-minute bonus decisions leave payroll teams scrambling to make adjustments.
- Incorrect Withholding: Bonuses are subject to supplemental tax rates, which some payroll systems fail to account for.
How to Avoid It
- Plan Bonuses Early: Decide on bonus amounts and disbursement dates well in advance to avoid payroll delays.
- Understand Tax Requirements: Use payroll solutions that automatically calculate bonus taxes and provide transparency to employees.
- Reconcile Year-End Adjustments: Review all employee records for accuracy, including unused PTO payouts, benefits adjustments, and any final earnings.
The Role of Modern Payroll Solutions in Avoiding These Mistakes
The good news is that most payroll mistakes can be avoided with the right tools and processes in place. Here’s how a modern payroll solution, like Axiom’s payroll services powered by UKG, can help:
1. Automation for Accuracy
Automated payroll systems eliminate the manual errors that often lead to missed deadlines and compliance issues. Features like automatic tax updates and real-time processing ensure your payroll runs smoothly.
2. Compliance Support
With changing tax regulations and labor laws, staying compliant can feel overwhelming. Axiom’s payroll services include proactive compliance alerts, helping you avoid penalties and fines.
3. Dedicated Support
At Axiom, you’re not just using software—you’re supported by humans who care. Our dedicated team is available to guide you through year-end processes, ensuring accuracy and peace of mind.
Final Checklist: End-of-Year Payroll Best Practices
Here’s a quick checklist to help you wrap up payroll and avoid common pitfalls:
- Review Year-to-Date Reports: Ensure all wages, taxes, and deductions are accurate.
- Prepare W-2s and 1099s: Verify that employee and contractor information is complete and accurate for tax forms.
- Update Employee Records: Confirm any address or personal detail changes.
- Communicate with Employees: Notify your team about holiday schedules, year-end adjustments, and bonuses.
Start the New Year with Simpler, Stress-Free Payroll
Avoiding these common payroll mistakes will save you time, money, and stress as the new year approaches. Whether it’s automating processes, staying compliant, or managing bonuses, Axiom’s payroll services are designed to make your life easier.
