Small business owners know that positioning their business to operate in the smartest, most efficient way possible is paramount in creating sustained, long-term success — and at the heart of it, one of the biggest keys to success is efficiency.

With that said, a common oversight that hurts a business’s and business owner’s efficiency is payroll, the catalyst keeping your company moving forward.

Here are 7 of the biggest payroll mistakes that small business owners make – and how to address them.

1. Manually Calculating Payroll

While doing payroll manually can save money in the short term, the consequences of doing it by hand almost invariably lead to back wages, taxes, penalties, and sometimes even legal fees.

As well as being prone to human error(s), manual payroll is time consuming. HR departments can often spend up to 35% of their time on payroll – hurting a business’s efficiency in the long-term. Automating payroll processes can alleviate time inefficiencies, allowing for better, and more profitable usage of an employees’ time.

2. Missing Important Payroll Dates and Payment Deadlines

Ah, yes. Nothing quite says excellent company culture like no-payment Fridays.

Your employees work hard and clock their hours because they’re committed to your business, but also because they expect payment at the end of a given pay period.

Missing payments decrease employee morale and productivity, leading to poor employee retention. As well, amending missing payments is costly and time consuming.

Regardless of where you live, you’ll need to take the time to rectify missing payments quickly, take the time to document the errors and ensure accurate payroll records, and potentially face penalties from the CRA as well. 

3. Underpaying Taxes and Misclassifying Employee Payments

Underpaying taxes and misclassifying employee payments leads to an array of problems.

These problems can come in the form of penalties, retroactive pay, back taxes, and other unfortunate repercussions.

You may even find your business becoming more closely watched over by the CRA – taking even more time away from a business’s ability to better focus its time on growth and profitability.

4. Overpaying Employees

Over $865 billion is paid in wages to Canadians every year. It’s inevitable that somewhere in that enormous sum that mistakes are made while distributing it.  When an employer overpays an employee, it’s not only uncomfortable and awkward – it’s costly as well.

In the case that an employer overpays an employee, they can either choose to make arrangements with the employee to have the amount repaid, or accept the overpayment. In the event of the latter, the employer must also take the time to ensure that the overpayment is reflected on the employee’s employment insurance. 

Overpayment regulations vary by province. In the event of an error, it’s important for business owners to be informed of the rules and regulations that are in place in order to ensure that they are maintaining compliance.

5. Failing to Maintain Payroll & Employee Confidentiality

There is an increasing emphasis on data privacy in the current digital age, so it goes without saying that disclosing an employee’s payroll information to anyone outside the payroll department is a big no-no.

Disclosing this information without an employee’s consent can lead to major headaches, a loss of time, and potential legal troubles.

If you communicate pay information electronically, ensure best security practices (encrypted communications, ensure the data stays within Canada and is not hosted outside the country, etc.) and that any third-party requests for an employee’s pay data – like those from landlords or banks – are well vetted and employee-approved before being disclosed.

6. Not Having Adequate Backup to Ensure Efficient Payroll Processes

If a computer goes down or your go-to payroll person has a sick day, things can go awry quickly.

It is important to have an effective back up plan, be it having more than one person responsible for payroll or implementing a full payroll system to take care of the processes. 

This brings us to the next mistake…

7. Not Using Payroll Software to Eliminate Error & Streamline Efficiency 

As highlighted above, automating and ensuring accurate payroll can save you more on time and business costs than simply eliminating the manual process.

Using a payroll software makes it easy to manage payroll, maintain payment and tax compliance. Eliminating errors and inefficiencies in the payroll process allows for you to have more time to focus on more important tasks that drive the growth of your business.

Furthermore, timely and accurate payroll is also beneficial in reducing the costs associated with errors, as well as potentially improving employee morale and productivity. 

Payroll software is the best way to eliminate errors and streamline your payroll efficiency. 

Add Payroll Software Now!

Are you ready to improve your business’s payroll efficiency and prevent costly, time-consuming mistakes?

PaymentEvolution provides an easy to use service that allows you to accurately pay your employees on time, with minimal effort.

Click here if you would like to learn more about PaymentEvolution’s all-in-one payroll solution.

Sign up today! Our experts are ready to help you every step of the way. 


  • Sam Vassa

    With a passion for technology, Sam looks for ways to help small companies to compete and save money. He's worked in Foreign Affairs for the Government of Canada, geeked out at Digital Equipment Corp and hung out at Microsoft. He founded to help businesses like yours.

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