Feb 14, 2025

Payroll Myths Exploded

As a small-business owner, it's highly likely that you've caught wind of payroll myths, and if you believe them without realizing they are mythical, then these nonfactual ideas might influence your approach to payroll. Read through to realize that it's possible to evade payroll myths instead of falling victim to these lies.

Are there any misconceptions that you've had about payroll? Did you end up finding out the reality of the situation after experiencing a series of unfortunate events? Hopefully, your answer is no, but whether you have been duped by nonfactual information or not, staying informed is the key to protecting yourself. So, keep reading for a chance to separate fact from fiction when running payroll for your business. Let's get started!

Myth 1: All salary employees are exempt from the rules of overtime pay.

This is not always the case. Try not to assume that one person in particular is exempt from the rules of overtime pay just because he or she holds a certain job title. Remember that the misclassification of employees — whether intentional or accidental — can unleash countless issues, from back wages and attorney fees to fines and additional taxes. Avoid misclassifying employees at all costs, and ensure that all employees benefit from overtime pay when applicable.

Myth 2: You have to meet an exact PTO quota at all times.

Provided time off is a versatile employment benefit. While certain companies are abandoning formalized accruals in favor of paid time off, others are opting for unlimited PTO policies. It's recommended that you maintain some level of documentation without making the process overly cumbersome. That way, employees can make use of this benefit with ease.

Myth 3: It's impossible for vendors to work with small businesses.

Contrary to a few decades ago, whether your workforce entails five or 1,000 people, there is little to no difference. Payroll service providers possess reporting capabilities that may surpass those of your firm, no matter the size of your company. Vendors employ professionals who are well-versed in payroll management, automatic tax transactions, filings, direct deposits and so much more. The determining factor will not be the size of your company but rather whether outsourcing payroll aligns with your business objectives.

Myth 4: Smaller companies have an easier time running payroll by using an in-house team than larger businesses do.

This is not the case. Procedures remain consistent whether your workforce is made up of 20 or several hundred workers. From interns and operational staff to strategists and senior management, all employees/workers require personalized attention. After all, scaling up only comes with a marginal increase in time and effort anyway.

Myth 5: If you hire employees who are laid-back, you don't have to take payroll as seriously. 

Even devoted employees are prone to reporting payroll discrepancies and departing from the company if pay is consistently delayed. Do not take advantage of your employees in this regard, as everyone has a breaking point.

Myth 6: If your company employs fewer than 10 people, you have to follow a different set of rules than bigger businesses do.

Every business must adhere to a standardized set of payroll regulations that are mandated by the federal government. While state-specific variations do exist, the overall framework remains consistent across the board, even if your workforce only consists of one employee.

Myth 7: Your business can handle taxation internally.

Aligning your payroll procedures with taxation is important. The same is true when it comes to synchronizing incoming and outgoing expenses that result in a seamless tax administration system. This system automatically incorporates updates from federal, state, local and regulatory agencies, which mitigates the risk of oversight.

Myth 8: It's legal to pay seasonal hires under the table.

While seasonal hiring can involve reaching out to family or friends when your business needs additional help, the work they perform for you still needs to be documented. In the absence of documentation, both you and your workers will be deprived of well-deserved benefits. Even something as seemingly small as failing to pay minimum wage is a significant concern that can have lasting repercussions.

Myth 9: If you outsource your payroll process, you'll get trapped with the same vendor with no way out.

Initially, you'll discover that dedicating six to 12 hours per month to payroll tasks is the norm. Contrary to the belief that engaging a third-party provider implies a long-term commitment, modern-day options offer user-friendly interfaces with no lock-in periods. Many of these solutions provide demos, free trials and personalized pilots to help you make a well-informed decision. And if at any point you do not wish to continue forward with a third-party payroll provider, you can end the partnership at your discretion.

Myth 10: Experience with payroll means you'll never run into compliance issues.

A reputable payroll provider serves as a safeguard that will protect your business from penalties that could otherwise stem from the complexities of government rules and regulations.

No matter who you are, running payroll is often stressful. It requires a lot of concentration and, even when you stay as focused as possible, human error is always a possibility. Even so, whether you have one part-time employee or 50 full timers, payroll can become the easiest part of your business.

All it takes is allocating payroll to the proper party so that you can free up time on your end, which you can then allocate toward back-office tasks instead. Consider what is best for your company and go from there.

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