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Busting 5 Common Myths About Payroll

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Misconceptions about payroll pose some of the biggest, most costly ramifications to a business owner. Below we have listed five incorrect or outdated things we hear about payroll again and again. Read on to see if you have fallen victim to any of these falsehoods and learn what you can do about it.


Myth #1: Salary employees are always exempt from overtime rules.

Reality: Nope, not always. One of the most persistent payroll myths centers around the “white-collar” exemptions. The fact is, per the Fair Labor Standards Act (FLSA), in order for executive, administrative, professional, computer and outside sales employees to qualify for an exemption they must not only be paid on a salary basis but they also must meet certain job duties tests, and also must be paid the minimum salary for exempt employees (currently $455 per week). The high price of misclassifying employees’ exempt status includes not just back wages for unpaid time but also attorneys’ fees, fines, taxes, and more. Bottom line, never assume someone is exempt based solely on their job title.


Myth #2: Only large companies need to outsource their payroll.

Reality: Even small companies with only 5 employees can benefit from outsourcing their payroll. Think about it, payroll providers have technology, cloud-based platforms, and reporting capabilities that a small business may not otherwise have access to. They also have professionals dedicated strictly to payroll and can help with things like automatic tax payments and filings, direct deposits and more. Finally, many payroll providers are setup to work explicitly in the small business market. Ultimately, it’s not the size of your company that counts but rather if it makes business sense for you to outsource your payroll.


Myth #3: We have a lot of experience doing payroll so we aren’t worried about compliance issues.

Reality: Approximately 40% of small businesses have to pay the IRS an average penalty of $845 a year for late or incorrect filings. This number isn’t surprising once you think about how many local, state and federal policies there are and how often they can change. Let’s be real-- when was the last time you brushed up on the latest labor and tax laws? The odds are it’s been a while, if at all. A good payroll provider is an expert in both payroll and compliance and helps defend your business from penalties caused by confusing government complexities.  


Myth #4: It’s cheaper to do payroll in-house.

Reality: Is it really? Running payroll in-house requires the following:

  • Employee(s) and All Associated Costs (i.e. recruitment, hiring, training, back-up for when people are out of the office)
  • Payroll Software
  • IT Support
  • Security and Disaster Planning & Recovery

In addition to the above costs, don’t forget that time is money. And all that wasted time spent doing repetitive back-office tasks could be better spent on revenue-generating activities and growing the company.


Myth #5: Moving payroll is a nightmare.

Reality: Change is scary. And change involving payroll is especially scary. Luckily, payroll providers know this which is why most of them have entire teams dedicated solely to getting clients up and running and ensuring a smooth transition. So, if you’re worried about the move then communicate your fears and they should be able to give you more information on what the process will be like and who you can turn to for help. While the prospect of moving payroll may seem daunting, in the end it’s more important to focus on the benefits of moving payroll: streamlined functionality with cloud computing, more time, increased compliance, cost savings, and more.


If you're ready to see how you can streamline and grow your business by outsourcing your payroll and compliance, as well as your HR and benefits needs, then request a quote today.


This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal advice. If you have any legal questions regarding this content or related issues, then you should consult with your professional legal advisor.

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Jennifer Eddlemon, aPHR
Jennifer Eddlemon, aPHR
Jennifer is a licensed life and health agent with over a decade of experience in the insurance industry, and an aPHR certification. Outside of the office she loves horseback riding, volunteering, and spending time with her family.

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