Top 3 Common Payroll Compliance Errors made by SMBs


SMB owners are often so focused on growing their business that they neglect an important issue – payroll compliance. From payroll and benefits to hiring processes, employee relations and risk and safety, SMBs must adhere to regulations or else run the risk of being penalized. According to the Department of Labor, a massive 80% of employers have some degree of non-compliance with wage-hour laws and the wage and hour division collected more than $266 million in back wages for more than 280,000 employees in 2016

In this blog, we will highlight the top 3 common payroll compliance errors made by SMBs


  • 1. Exemption Classification Errors
    Often employers improperly classify workers as exempt and fail to pay overtime wages which results in penalties and legal trouble. Some of the roles excluded from receiving overtime pay are ‘white-collar exemptions’ for executive, administrative and professional employees. To be eligible in this category, the employee must be paid a salary (not hourly), earn minimum annual pay of $23,660, and regularly performs certain duties. Nonexempt employees who do not qualify for an exemption must be paid 1.5 times their regular pay rate for all hours worked beyond 40 in a workweek.
  • 2. Disregarding Pay Equality
    The Equal Pay Act dictates that men and women receive equal pay for equal work and if a wage inequality between men and women is discovered, the employer cannot reduce the wages of either party to equalize pay. Despite that, unequal pay for substantially equal work exists across a wide spectrum of occupations regardless of the educational level or geographical location and is a contributing factor to the persistent gender wage gap.


According to the U.S. Census Bureau, on average, women working full-time and year-round earn 78 cents for every dollar earned by men

SMBs should ensure that they are adhering to the Equal Pay Act to avoid risk of non-compliance.

  • 3. Workers’ Compensation Insurance
    The most common example of employer violations include failure to accurately complete forms, not paying benefits to injured or ill employees and not paying the correct amount of benefits. Every state has a unique workers’ compensation program to provide compensation to the employees who are injured on the job or are ill and keeping up-to-date on any changes in these areas is essential, especially if the business has multiple locations.


Of late, there is a trend in the market, where SMBs are partnering with trusted service providers who can provide them with cost-effective, customized payroll and HRIS services that helps them stay compliant and automates back office processes, thereby enabling them to focus on the growth of their business.

At Quatrro, we strive for nothing less than the highest level of customer satisfaction in the industry by providing SMBs, best-in-class accounts payable, accounts receivable, account/bank reconciliation and payroll/HRIS services.


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