Solving Payroll Pain Points: Expert Tips from Our Latest Webinar

Payroll is a routine part of running a business, but mistakes can lead to serious financial and legal consequences. From costly misclassification mistakes to missed tax deadlines and ever-changing regulations, payroll errors can quickly snowball into legal issues, surprise penalties, or lost time your team doesn’t have.

In our latest webinar, payroll pro Andy Groher from Gusto walked through the most common pitfalls and shared actionable tips to help small businesses stay compliant, save time, and avoid expensive errors. Below are the top insights from the session.

Payroll Tips for Small Businesses

1. Misclassifying Workers is a Costly (and Common) Mistake

One of the most frequent and expensive payroll missteps is getting worker classification wrong. During the webinar, Groher revealed that misclassifying someone as an independent contractor when they should be an employee (or vice versa) can result in penalties, back taxes, and compliance issues with agencies such as the IRS and the Department of Labor.

A quick rule of thumb: employees receive W-2s, and contractors get 1099s. The business typically trains its employees, who use company-provided equipment and follow a set schedule. Contractors, on the other hand, use their own tools, set their own hours, and work independently.

Accurate classification doesn’t just protect you legally – it also helps build employee trust and retention. When people are misclassified, it can result in delayed or reduced pay and benefits, leading to morale issues and even turnover.

Groher explained, “Payroll mistakes also diminish employee satisfaction overall, which can have an impact on customer satisfaction, too.”

2. Payroll Laws are Constantly Changing

If keeping up with tax codes feels overwhelming, that’s because it is. At Gusto, they tracked over 15,000 tax code changes across federal, state, and local governments in just one year.

“In San Francisco, for example, employer payroll taxes can vary by neighborhood, and unemployment tax rates can also vary by business,” Groher said.

These changes affect everything from income tax rates to minimum wage requirements, as well as overtime eligibility thresholds. If you’re not keeping up, you’re at risk of overpaying, underpaying, or facing penalties, which can be time-consuming and costly to rectify.

The good news? Payroll software, like Thryv Workforce Center powered by Gusto, can help manage these complexities for you, from automating tax calculations to flagging potential compliance issues before they become costly.

3. Missing Tax Deadlines Can Derail Your Cash Flow

Late or incorrect tax payments don’t just result in government fines; they can also disrupt your cash flow and overall financial planning.

“Collecting and remitting payroll taxes on time and the correct amount is critical to avoid facing any penalties and helping you maintain a predictable cash flow for your business,” Groher said.

The solution? Groher advised that you should build a payroll calendar that aligns with federal, state, and local deadlines, and automate tax deposits whenever possible. Also, be aware of holidays and banking delays, as they are often the hidden culprits behind missed deadlines.

Bonus Payroll Tips from the Webinar

While the three tips above were key themes, the webinar included several more helpful takeaways to help you run payroll smoothly and stay compliant across the board:

• Track Time Accurately: Inaccurate time tracking can lead to underpaid wages, missed overtime, and legal disputes. You can use reliable digital tools that track clock-ins and clock-outs to ensure your hourly employees are compensated accurately and that your records are reliable in the event of an audit.
• Keep Digital Records: Payroll records aren’t just good practice, they’re required by law. Store timecards, pay stubs, and tax filings digitally so they’re easy to access, secure, and searchable in case of a complaint or audit. Cloud-based payroll platforms make this simple and scalable.
• Clarify Your Pay Schedule: Confusion between biweekly and semi-monthly pay schedules is more common than you’d think. A biweekly schedule includes 26 pay periods per year, whereas a semi-monthly schedule includes only 24. Regardless of which option you choose, be consistent and plan your payroll runs to avoid late payments.
• Don’t Forget Contractor Forms: Even though you don’t withhold taxes from contractor payments, you’re still responsible for filing the correct paperwork. Ensure that you collect W-9s upfront and issue 1099s to any contractor who earns $600 or more during the year.
• Even Gift Cards Count: Offering bonuses like gift cards or cash equivalents? They may feel informal, but they must be reported as taxable income. Failing to do so can lead to reporting errors and compliance issues.
  

These details may seem small, but consistently getting them right protects your business and builds trust with your team. When employees know their pay is accurate and on time, it contributes to stronger morale and smoother operations.

Payroll Software for Small Business

Payroll mistakes are common, but they don’t have to be inevitable. Tools like Thryv Workforce Center, powered by Gusto, are designed to simplify compliance, automate tax filings, and securely store records. They also help you respond to tax notices, track local tax rates, and stay current with regulation changes, without the burden falling entirely on your shoulders.

Whether you’re running payroll for the first time or managing a growing team, staying ahead of these common pitfalls is crucial to maintaining compliance, keeping your team satisfied, and ensuring smooth operations. With the right tools and insights, payroll doesn’t have to be a pain point; it can be a powerful foundation for growth.

Watch the webinar to learn more about how to avoid costly payroll mistakes and streamline your processes with expert-backed strategies.