You wouldn’t drive a car without car insurance or buy a home without property insurance. Are you taking on unnecessary risks running payroll without payroll insurance?
Insurance is one of those costs that feels like nothing but a drain on your resources… until it isn’t. You gripe about paying a few hundred bucks a month in health insurance… until you need a surprise surgery that would have cost thousands of dollars without it.
What is payroll insurance? Is it necessary for your business? Can it save you in the long run, or is it just a waste of resources?
This post will answer the question, what is payroll insurance? We’ll also discuss three mistakes organizations make related to payroll liabilities and how you can avoid them.
Payroll liabilities are payments related to payroll that your business owes but hasn’t paid yet. They include:
- Wages you owe an employee
- Withheld payroll taxes
- Payroll service costs
- Health insurance contributions
- Paid time off
- Retirement contributions
- Wage garnishments
What is Payroll Insurance?
Payroll insurance is related to errors and omissions insurance. If you make mistakes during the course of business operations, it’s essential to have E & O coverage. Errors and omissions insurance covers legal costs and more that occur when you/your team makes an error or omission during payroll processing.
Additionally, you may have workers’ compensation insurance and employer liability insurance. It’s best practice to carry worker’s compensation insurance in every state that your active employees are working out of.
It makes sense to carry payroll insurance to protect your business and help you grow.
At ConnectPay, you’ll get a relationship with us, not our voicemail. We'll connect you with local insurance brokers who can tell you the coverage you need without breaking the bank.
Mistake #1: Missing Out on Crucial Coverage
There are other types of insurance related to payroll:
Workers’ Comp Insurance
Workers’ comp insurance helps employees recover so they can get back to work faster when they injure themselves on the job or suffer from work-related illnesses. Benefits help:
- Cover medical care and treatment
- Replace missed wages
- Provide disability benefits
- Death benefits
Workers’ comp is beneficial to your employees but also to you. If your employee chooses workers’ comp, they are usually unable to sue your company.
Finding a workers’ comp plan through a local insurance agent ensures you understand the local rules and regulations pertinent to you. It also gives you access to someone who can walk you through any issues instead of phoning a helpline.
Local agents can help you navigate fraud prevention, claims management, carrier negotiations, surcharge reductions, and misclassification solutions.
Employer Liability Insurance
Employer liability insurance can save the day if an employee suffers a job-related sickness or accident that isn’t covered by workers’ comp. It protects you from financial damages such as settlements and attorney fees.
You can often purchase employer liability insurance with workers’ comp, but it’s best to check your state regulations, as some states require you to get it separately.
Other Related Types of Coverage
- General Liability Insurance: Small or large, every business needs general liability coverage to protect against claims of property damage or personal injury resulting from your services.
- Property Insurance: Covers damage to property your business owns. Property insurance covers damage to your building, inventory, tech, office supplies, and more. Some plans also cover theft and fire and include coverage for lost earnings due to interruptions in business operations.
- Professional Liability Insurance: Not every business needs it, but if you provide legal advice or consulting to clients, you might need professional liability insurance.
Mistake #2: Failing to Track Liabilities
We’ve mentioned payroll liabilities–expenses you owe but haven’t paid. Most items don’t remain a payroll liability for that long, so how do you best track them? It’s easy to forget about payments you need to make at a later date.
If you don’t track payroll liabilities, you won’t be able to create a budget or accurately estimate labor costs. You’ll also face penalties and fines if you miss deadlines.
You need a reliable system to run payroll. With the right payroll software, you don’t need to worry about wages or tax calculations; you can automate them. A full-service payroll company will even deposit payroll taxes.
You must keep accurate records, including timesheets, pay rates, tax forms, and direct deposit information. You could even open a separate bank account for payroll to ensure funds are available.
Lastly, using a payroll schedule and setting reminders is a great way to eliminate human error and ensure you pay your employees the right amount at the right time and never miss tax deadlines or due dates.
Mistake #3: Using Inefficient Payroll Solutions
Sometimes it takes something going wrong before you realize you’re running inefficient payroll processes. You might receive a penalty for a breach, delays in a payroll run, or a fine for missing a deadline. For a small business, penalties can be devastating.
Manual payroll might suffice if you have a few employees and use a spreadsheet, but it takes more time and is prone to error, but outsourcing payroll processing can help lower your risk of errors and omissions.
Automated payroll allows you to set payroll schedules, pay employees by direct deposit, and provide benefits. Many payroll solutions integrate with accounting software.
With many payroll solutions to choose from, at ConnectPay, we believe in going one step further. Our Connected Model puts relationships with clients above selling them services they don’t need. We’re experts in payroll and tax processing alone and only seek to provide support to your business.
Health insurance, retirement savings, and workers’ comp require proven, specialized guides to best serve your goals.
We’ll connect you with local brokers and advisors who know the ins and outs of rules and regulations in your area and help tailor support to your unique situation.
Efficient payroll saves time and unnecessary spending, freeing you to work on driving your business forward.
What is Payroll Insurance? Proactively Limiting Payroll Liability
Payroll insurance shouldn’t be the beginning and end of your plans.
Instead, you can proactively limit your payroll liabilities related to errors and omissions by educating yourself and your team on the ins and outs of small business payroll.
Our free resource, the Connected Guide to Small Business Payroll, provides you with insights and information on everything from time clocking to Workers’ Compensation.
You may also choose to reach out to a Connected Service Representative to see if outsourcing your payroll processing to ConnectPay is the right path for your business.