What You Need to Know About Payroll Record Keeping.
The payroll department of an organization is always charged with the great responsibility of recording a range of the company’s workforce records.
This payroll record keeping is necessary for many reasons and goes far beyond meeting the state or federal legal ramifications. The information is crucial to employees as well as the business for many reasons; as it contains the personal details of all the current and ex-employees in terms of their wages, worked hours, paid or unpaid days, and dates of employment, pension, annuity and even the amount of reported tips.
The Basics of Employees’ Payroll Record Keeping
Maintaining accurate payroll records is a daunting task if not carried out with the use of adequate tools, it can be time-consuming as well as inaccurate – something that is crucial for a business.
In order to maintain records and adhere to the legal requirements, organizations now take advantage of advanced tools which include direct deposits, cloud storage, timekeeping software or by far the most useful tool, efficient payroll software.
As per the laws, the employee tax and payroll records must be maintained for up to 3 years. For payroll record keeping purposes, the records must include the fringe benefits given to the employee, social security numbers, special payments in terms of sick pay or leave payments, travel vouchers, and other reimbursements etc.
The most common thing which employers get wrong is the payroll record keeping. And these are some of the common mistakes they made;
- Not updating the record regularly
- Not storing records for long enough
- Starting payroll record keeping as a reactive approach towards payroll fraud
- Not having adequate information or the updated information of the employee
- Outsourcing the payroll and providing inaccurate details
The Need for Employees’ Payroll Record Keeping
There are many reasons for an employer or business to maintain the payroll records of employees, as required by the law. Some of these reasons are shared below;
- In the case of not maintaining employee payroll records, the Fair Work Inspectors may issue a fine to the employers, known as infringement notice.
- If a business does not maintain the payroll records or fails to present the record at the time of inspection, they may need to face the court and prove that they are not underpaying the employee.
- Inaccurate record keeping may result in over payment or underpayment to the employees due to payroll errors, which will also affect the taxation in terms of income.
- Proper maintenance of payroll record keeping is also linked with the business expenses and inaccurate information will eventually affect the business’s accounts.
- Most importantly, accurate payroll record keeping is necessary to meet the legalities and to ensure compliance with the company policies. This helps the employees and employers in maintaining transparency and integrity in their actions and provides the business with a clear picture.
Accurate record keeping is important, but the same goes for keeping a backup to meet unforeseen contingencies. Moreover, make sure you store these copies or backup at a different location. All in all, payroll record keeping is a tedious task that must always be carried out in the best possible manner.