Common Mistakes People Make In Payroll Calculations
Calculating the payroll can prove to be a tedious affair due to the intricacies and complexities involved regarding overtime wages, vacation pay, statutory holiday pay amount, minimum hours of work, etc. Moreover, the process can further lead to a resultant loss, a heavy penalty, or a legal claim in case you commit a blunder while handling the payroll activities. While using automated software makes the entire process easier, many decide to do the payroll calculations themselves. If you decide on completing the process of payroll calculation by yourself, you should steer clear of the potential payroll errors that could endanger your business. To help you avoid these and compute the payroll precisely and accurately, Payroll Connected has a compiled a list of the most common mistakes people make in payroll calculations that you should avoid.
1. Calculating the wrong amount of vacation pay
Often when an hourly employee takes time off, the employer will just pay them their regular rate of pay for that time away. However, labor standards are very specific about how their pay is determined. In all provinces, it’s determined by a Vacation Pay Rate, which ends up being significantly different than an employee’s hourly rate. By paying the employee their regular’s day pay, it will either end up shortchanging the employee (if they always work an eight-hour shift), or shortchange the company, but certainly will almost never result in the Vacation Pay the employee is actually entitled to. You can get this done by using reliable software, but if you’re going to track it yourself, then be sure to read your provincial labor standards and follow their direction.
2. Paying the wrong statutory holiday pay amount
Again, it’s tempting just to pay the employee eight hours at their regular rate, and call it a day. However, this will again end up costing the company more money, and possibly even shortchanging an employee if they earn wages at different rates. Like vacation pay, each province has its own unique labor standards that outline how to calculate vacation pay. In all provinces, it involves some tabulation of shifts during the past month(s) and a calculation thereon, so be sure to keep a schedule handy. Or use the services of software to do it automatically.
3. Minimum hours of work
Though a commonly unknown rule, it is written in each province what the minimum number of hours an employee can be scheduled to work is. Even if you schedule them in for training, the minimum hour rule must often be adhered to. In most provinces, it’s either two or three hours, so again, be sure to read your labor standards. Is there a way around it? Sort of. After the training or if the business is slow, you can give them the option to leave early. If they choose to do so, then it’s fine. However, if they choose to stay for the full minimum shift, they must be allowed to work it, or they must be at least paid for the full minimum shift time (in case you really need to make that tee time!)
4. Not keeping a schedule
This may seem like more of a nuisance than a benefit, but you never know when this will come in handy. For this reason (and others), a scheduler is an integral part of the software that offers payroll calculations services. For instance, let’s say an RCMP officer needs to know the whereabouts of an employee three years ago as part of an investigation. If the schedule says they were at work, then maybe they got the wrong person. To cite another example, let’s assume a CRA is questioning the earning of a current or former employee, so they send you a Request For Information (RFI). An RFI asks what an employee worked every week over a period of time. Do these seem like far fetched examples? You might be surprised, but at Payroll Connected, I’ve experienced both. Keeping a reasonable schedule of work is the easiest way to keep out of trouble.
5. Overtime - are you doing it right?
It may seem straight forward, but depending on your province, Overtime might be a real gotcha! For example, in Alberta, Daily Overtime is anything over eight hours, and Weekly Overtime is anything over forty-four hours, but once you add them both up, compare one to the other and only pay out the larger amount! If Daily Overtime is larger than Weekly Overtime, the Weekly Overtime goes back to being regular hours. In British Columbia, Daily Overtime is anything over eight hours, Double Overtime is daily hours over twelve, Weekly Overtime is regular hours over forty, and lastly, if an employee doesn’t get a thirty-two-hour break from work in a week, they get a WHOLE DAY at an overtime rate! So no seven days shifting for you! Ensure that you calculate overtime wages effectively to avoid resultant losses.
To avoid these and other mistakes related to payroll calculations, reach out to us at Payroll Connected. We offer online payroll software that calculates the payroll automatically and accurately. By signing up to use our software, you can rest assured that the payroll will be generated without any errors after you input the details making the entire process more manageable. If you haven’t signed up with us yet, be sure to consult your provincial labor standards and learn about all the rules and regulations thoroughly.
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