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  • Processing payroll can be an overwhelming and challenging responsibility for business owners. The process is complex, time-consuming, and requires attention to detail in order to avoid errors. While managing payroll is complicated, it can be even more difficult without an automated system to send out pay stubs, calculate deductions, store employee information, and track employee work hours. If you’re uncertain about switching to an automatic payroll system, keep reading to discover four signs that indicate it’s time to implement automatic payroll software. 

    Growing workforce

    As your workforce grows, managing payroll becomes increasingly complex. Juggling multiple paychecks, varying pay schedules, and different deduction amounts can quickly overwhelm you, leading to potential calculation errors and delays. Implementing an automatic system to process employee paychecks will help ensure timely payments, compliance with laws and regulations, and correct payment amounts. It can also streamline your payroll process, saving you time, money, and increasing efficiency.

    Time-consuming process 

    Being a business owner means you constantly have a long list of tasks to manage and deadlines to meet. While processing payroll is a critical responsibility, it can also be very time-consuming, distracting you from developing or growing your business. An automated system can give business owners their time back, reducing the hours spent manually calculating pay stubs, tracking employee hours, and performing other administrative tasks. 

    Frequent errors 

    Manually running payroll leaves your company open to human error. A miscalculation or delay in payment can lead to a variety of problems for the employer and the employee.  While a payroll error is not uncommon, it can be costly. 53% of companies have incurred payroll penalties in the last five years for non-compliance. Mistakes can also lead to unhappy employees, legal issues, and negatively impact your company’s reputation. If your company is consistently making payroll errors, it may be time to consider an automatic option.  

    Lack of security

    Employee information should always be kept safe and secure. Manual systems often involve physical documents and spreadsheets, which can easily be lost, stolen, or accessed by unauthorized individuals. While some business owners may feel safer having the physical documents in front of them, it puts the employer and the employee at greater risk than digitally storing them. Automatic payroll systems have a variety of security measures and capabilities that ensure the safety and privacy of employee records and payroll information.  

    GMS Connect: A Payroll Solution  

    Switching to an automated payroll system can save you time, reduce errors, ensure compliance, and improve employee satisfaction. 

    Group Management Services (GMS) offers GMS Connect, a comprehensive payroll software solution designed to simplify payroll management for business owners. This software streamlines the entire payroll process, from payroll processing and tax management to providing employees with easy access to their payroll information anytime, anywhere.  

    By automating these tasks, GMS’ payroll software reduces the risk of errors, ensures compliance with regulations, and saves valuable time that business owners can redirect towards growing their business. With GMS’ payroll software, business owners can enjoy a stress-free payroll experience and focus on growing their business. 

    Contact us to learn more about how we can help streamline your payroll process! 

  • Even the most organized payroll process can experience occasional hiccups. Whether it’s an underpayment, overpayment, or a tax withholding mistake, payroll errors can affect your employees’ trust and your business’s compliance if not handled quickly and correctly. 

    Here’s what to do when you discover a payroll error and how partnering with Group Management Services (GMS) can help prevent these issues from happening in the first place.

     

    Act quickly and communicate openly 

    Timing is everything. As soon as you discover an error, confirm who is affected and to what extent. Notify the impacted employees promptly, explaining what happened and the steps you’re taking to rectify the issue. Transparent communication helps maintain employee confidence and shows that you take their pay seriously. 

    At GMS, our Payroll Specialists and built-in audit tools in GMS Connect help clients catch discrepancies early, so most issues are resolved before payroll is finalized. 

    Find out why it happened 

    After you identify the mistake, dig into the root cause. Was it a simple data entry issue? A misclassified employee? An outdated pay rate? Understanding what went wrong helps you put safeguards in place to stop it from happening again. GMS guides clients through complex payroll compliance areas, such as employee classification and benefits deductions, so they can focus on running their business without worrying about hidden payroll pitfalls. 

    Correct the error carefully 

    Once you know the cause, fix the numbers promptly and accurately. For underpayments, issue an off-cycle payment as soon as possible. For overpayments, work with the employee to arrange repayment that follows federal and state wage laws. If the mistake involves taxes, adjust your payroll records and file any necessary amendments. 

    GMS handles these corrections on behalf of our clients, ensuring that payments and tax filings remain compliant and accurate. 

    Document everything 

    Keep a clear paper trail of what happened, when the mistake was discovered, how it was fixed, and any communication with employees. Documentation protects your business during audits and helps resolve any future questions that may arise. With GMS, all payroll changes, adjustments, and reports are securely stored, ensuring you always have the necessary records. 

    Strengthen your payroll process moving forward 

    Transform mistakes into learning opportunities by reviewing payroll workflows and incorporating checks, such as approval processes or automated alerts. Investing in modern payroll software or working with a payroll partner can significantly reduce human error. 

    At GMS, we combine advanced payroll technology with experienced payroll professionals to give businesses confidence in every payroll run. We’re not just processing payroll; we’re building proactive strategies that keep your business compliant, and your employees paid accurately and on time. 

    Payroll errors don’t have to define your business 

    By acting quickly, remaining transparent, and learning from past mistakes, you can rectify errors and safeguard your team’s trust. But the best strategy is prevention. Partnering with GMS means more than handing off payroll tasks. It means gaining a team dedicated to accuracy, compliance, and continuous improvement, so your business can focus on growth instead of payroll headaches. 

    Our online payroll software, GMS Connect, gives you the ability to complete payroll in minutes as well as manage and access payroll information anywhere there’s an internet connection. Additionally, our payroll software integrates with other platforms, enabling us to calculate and apply deductions for health insurance and other employee benefits seamlessly. Ready to see how GMS can make payroll simpler and more reliable? Contact us today to learn more. 

  • Technology is constantly changing in today’s workplace environment. New technology innovation impacts how employees communicate, collaborate, and work more efficiently. Technology is associated with every aspect of your business, from recruiting and hiring to payroll. Payroll has remained largely immune to innovation.

    Importance Of Payroll Technology

    Payroll software helps in the process of calculating and processing employee taxes, meeting regulations, tracking work hours, employee benefits, and much more. Implementing a process of this nature will allow you to stand out from your competitors.

    As a business owner, your time is essential. The time saved during the payroll process using an automated system can be spent accelerating other areas of your business. The following are the benefits of payroll technology:

    • Track work hours accurately 
    • Save time and money
    • Provide more control over confidential business information
    • Automate payroll tax calculation and filing

    In addition, payroll software gives employees more control and access to their employee portals, allowing them to see their paystubs. As more and more companies have introduced software of this kind in their business, they’ve noticed fewer payroll errors which have ultimately reduced the costs and administrative work for payroll teams.

    Improve Your Payroll Processing Now

    Research shows us that it takes only a few paycheck errors for an employee to look for a new position elsewhere. It’s imperative that you take the proper steps to ensure you don’t lose quality talent to an error that could have been avoided. By partnering with GMS, we can save you time and give you peace of mind through our online payroll software, GMS Connect. Stop worrying about payroll and let us take on the responsibility. Get a quote today.

  • In a move to promote wage equity and improve transparency in the hiring process, the City of Cleveland passed a new pay equity ordinance that imposes salary disclosure requirements and restricts the use of salary history in hiring decisions. The ordinance was signed into law by Mayor Justin Bibb on April 28, 2025, and is scheduled to take effect six months later, giving employers time to prepare. 

    Who Must Comply 

    The ordinance applies to employers with 15 or more employees operating within the City of Cleveland. This includes private employers, as well as city contractors and vendors who provide services to the city. Importantly, the law focuses on positions that are physically located in Cleveland, even if the broader organization operates outside the city limits. Remote positions may also fall under this ordinance if they are tied to a Cleveland-based office or if the employer is headquartered in the city. 

    Covered Individuals 

    The ordinance covers job applicants and employees working in Cleveland. It is designed to protect individuals applying for new positions, promotions, or transfers within organizations that fall under the ordinance’s scope. 

    Key Requirements for Employers 

    Employers who are covered by this new ordinance must adhere to two core obligations: 

    1. Salary range disclosure: Employers are now required to disclose the salary range or pay scale for any open position in job postings. This range must reflect what the employer reasonably expects to pay for the position, taking into account internal compensation structures and market rates. This applies to postings for new roles, internal promotions, and transfers.
    2. Ban on salary history inquiries: Employers may no longer request or rely on an applicant’s wage or salary history when making hiring decisions. That means removing questions about prior compensation from applications, interviews, and background checks. Employers also cannot retaliate against applicants who choose not to disclose their salary history voluntarily. 

    Why This Matters 

    Pay transparency laws are part of a growing national movement to close gender and racial wage gaps. Historically, basing offers on past salary can perpetuate inequities, especially for women and people of color. By requiring employers to publish salary ranges and disregard salary history, Cleveland’s ordinance seeks to level the playing field for all job seekers. 

    Steps Employers Should Take Now 

    With the ordinance taking effect in late 2025, employers have a limited window to get their processes in order. Here are key steps to consider: 

    • Review and update job postings: Ensure every job listing includes a legitimate and reasonable salary range that reflects internal standards and market data. 
    • Eliminate salary history questions: Remove any questions about previous compensation from applications, interviews, and screening processes. Update related templates and forms accordingly. 
    • Revise internal policies: Update employee handbooks, hiring policies, and manager training materials to align with the ordinance. Clear guidance helps ensure compliance across all levels of the organization. 
    • Train HR and hiring teams: Provide focused training on the ordinance to recruiters, managers, and anyone involved in the hiring process so they understand what can and cannot be asked. 

    How GMS Can Support Compliance and Recruiting Success 

    Cleveland’s new pay equity ordinance is part of a larger trend taking hold across the country. From California to New York, and now right here in Ohio, more cities and states are adopting salary transparency laws and restricting the use of salary history in hiring. For employers, this means staying compliant isn’t just a one-time effort; it’s an ongoing process that requires attention to local, state, and federal employment regulations. 

    At Group Management Services (GMS), we support businesses nationwide by helping them navigate complex and evolving compliance requirements, no matter where they operate. Whether you’re hiring in Cleveland, Chicago, or across multiple states, we can help you: 

    • Craft legally compliant and competitive job descriptions 
    • Update employee handbooks to reflect city- or state-specific mandates 
    • Align recruitment strategies with pay transparency laws 
    • Train your HR and hiring teams to follow best practices and avoid risk 

    Don’t let local ordinances catch you off guard. With GMS as your partner, you can focus on growing your business while we handle the heavy lifting of compliance everywhere you hire. 

  • Managing a business comes with many moving parts, and two of the most critical functions are payroll and human resources (HR), which often operate in separate systems. This separation can lead to inefficiencies, data discrepancies, and administrative headaches. However, by integrating payroll with HR, businesses can streamline operations, improve data accuracy, and enhance the overall employee experience. 

     

    In today’s fast-paced business environment, leveraging an integrated payroll and HR system like a Human Resources Information System (HRIS) can help companies simplify workforce management while staying compliant with labor laws and payroll regulations. Let’s explore the benefits of integration, key considerations, and how your business can successfully implement a unified system. 

     

    The Benefits of Integrating Payroll with HR 

     

    Improved data accuracy and compliance

    Keeping payroll and HR data in separate systems increases the risk of human error, such as duplicate entries, miscalculations, or outdated employee records. An integrated system ensures that data flows seamlessly between payroll, benefits, time tracking, and employee records, reducing manual data entry and improving accuracy. 

    • Reduces payroll errors that could result in compliance violations or wage disputes
    • Ensures tax withholdings, benefits deductions, and overtime calculations are precise
    • Keeps businesses aligned with state and federal labor laws by automatically updating compliance regulations

    With GMS Connect, our cloud-based HRIS, businesses benefit from real-time data updates, reducing compliance risks and payroll discrepancies. 

     

    Increased efficiency and time savings

    Manual payroll processing and HR administration take up valuable time that could be spent on strategic initiatives. By automating these functions through an integrated system, businesses can eliminate redundant tasks, reduce paperwork, and optimize workforce management.  

    • Automating employee onboarding, ensuring payroll and benefits enrollment happen simultaneously
    • Syncing time-tracking data with payroll, reducing processing time, and ensuring employees are paid accurately
    • Generating reports quickly, giving HR and finance teams a clearer picture of labor costs and workforce trends

     

    Enhanced employee experience

    A well-integrated payroll and HR system simplifies administrative tasks for employees, improving engagement and satisfaction. Employees can access their payroll information, benefits, and HR documents through a single self-service portal. 

    • Easy access to pay stubs, tax forms, and benefits information
    • Streamlined paid time off (PTO) requests and approvals, ensuring accurate payroll processing
    • Faster issue resolution with automated workflows and HR support in one place

    With GMS Connect, employees have 24/7 access to their payroll and HR information, empowering them to manage their own data without waiting on HR. 

     

    Cost savings and better financial planning

    By eliminating redundancies and improving efficiency, businesses can reduce administrative costs associated with payroll processing and HR management. Additionally, integrated payroll and HR systems provide better workforce insights, allowing companies to make data-driven financial decisions. 

    • Minimizes costs associated with payroll errors, compliance penalties, and inefficiencies
    • Provides real-time labor cost analytics to optimize budgeting and staffing decisions
    • Reduces reliance on third-party payroll processors or outdated manual systems

    How to Successfully Integrate Payroll and HR 

    1. Choose the right technology: Invest in a robust HRIS that integrates payroll, HR, benefits administration, and compliance management. GMS Connect offers an all-in-one solution designed to simplify workforce management for businesses of all sizes.

    2. Ensure a smooth data migration: Migrating from separate payroll and HR systems requires careful planning. Work with an experienced provider like GMS to transfer data securely, ensuring accuracy during the transition.

    3. Train your HR and payroll teams: To maximize the benefits of integration, your HR and payroll teams need proper training. GMS provides dedicated customer support to help businesses navigate system implementation and optimize usage.

    4. Communicate with employees: Inform employees about the new system and how it will improve their access to payroll and HR information. Offer training sessions or user guides to help them navigate the new platform. 

     

    Streamline Your Business with GMS Connect 

     

    Integrating payroll with HR is no longer a luxury; it’s a necessity for businesses looking to improve efficiency, compliance, and employee satisfaction. With GMS Connect, you can unify your HR and payroll functions, reduce administrative burdens, and focus on growing your business. 

     

    Ready to see how integration can transform your business? Request a demo of GMS Connect today! 

  • Starting April 9th, 2025, Ohio employers must provide detailed pay statements to their employees under Ohio House Bill 106, known as the Pay Stub Protection Act (PSPA). Previously, Ohio was one of only nine states that did not require employers to issue pay stubs. Now, Ohio business owners must familiarize themselves with this legislation and its requirements. 

    What is the Pay Stub Protection Act? 

    The PSPA is a new Ohio-based law that requires employers to provide their employees with a detailed pay stub for every paycheck they receive. State Representative Dontavius Jarrells states, “With this new law, every hardworking Ohioan will have the documentation they need to verify their wages, hours, and deductions without the burden of legal battles.” This law will help ensure pay transparency across the state while emphasizing the importance of employer accountability and workplace fairness.  

     Whether electronic or paper, the pay stub for salaried employees must include the following information: 

    • The employer’s name 
    • The employee’s name 
    • The employee’s address 
    • The employee’s total gross wages earned during the pay period 
    • The employee’s total net wages for the pay period 
    • A listing of the amount and purpose of each addition to or deduction from the employee’s wages during the pay period 
    • The date the employee was paid and the pay period covered by that payment 

    As for hourly employees, their pay stub must include: 

    • The employer’s name 
    • The employee’s name 
    • The employee’s address 
    • The total number of hours the employee worked in that pay period 
    • The employee’s hourly wage rate 
    • The employee’s overtime hours 

    PSPA Violation 

    If an employer fails to provide an employee with a pay stub, the employee can request a copy from their employer. If the pay stub is still not received within 10 days, the employee can report the issue to the Department of Commerce. The Director of Commerce may then issue a notice to the employer for the violation, which can lead to significant monetary penalties or fines. 

    How GMS Can Help Ohio Employers with PSPA 

    Managing payroll and compliance can be daunting for business owners. That’s why many businesses partner with professional employer organizations (PEOs) like Group Management Services (GMS). With our automated payroll software, GMS Connect employees can easily access all their payroll information, including W-2s, tax deductions, pay stubs, and more. 

    Our payroll team is available to assist with any questions regarding deductions or wage discrepancies, ensuring a smooth payroll process. GMS also helps business owners stay on top of changing rules and regulations, ensuring their compliance and reducing their risk of violations or monetary penalties.  

    If you’re an Ohio-based business that needs assistance with PSPA compliance or payroll automation, contact us today!  

  • Tax season can be an overwhelming time for employers and employees. Between managing health care contribution amounts, ensuring timely and accurate filing, and financial planning, tax season can be challenging for business owners to navigate on their own. However, there are several strategies business owners can implement to save time, reduce their tax burden, and maximize savings. Continue reading to discover the different ways you and your employees can save this tax season.

    File on time

    • One of the easiest ways to save this tax season is by filing your taxes before the deadline. This year’s filing deadline is April 15, 2025. According to the Internal Revenue Service (IRS), for individuals and businesses that fail to file on time, the penalty is five percent of the tax due for each month the return is late. This can accrue up to 25%.

    Take advantage of available deductions and credits

    • There are several tax deductions and credits that individuals can take advantage of to achieve significant cost savings. A tax deduction allows a person to subtract a specific amount from their income when filing taxes, reducing the overall taxable income. This means that deductions can lower the amount of tax you owe. An example of a deductible expense is student loan interest.
    • On the other hand, a tax credit is an amount that you can subtract directly from the taxes you owe, reducing your tax liability and leading to substantial savings. For example, if your income falls under a certain threshold, you may qualify for the Earned Income Tax Credit. Other tax credits available are: 
      1. Work Opportunity Tax Credit (WOTC): This tax credit is available for businesses hiring individuals from targeted groups facing significant barriers to employment. These groups include, but are not limited to, veterans, ex-felons, and others.
      2. Child Tax Credit: This credit helps families with qualifying children to receive a tax break.
      3. Small Business Health Care Tax Credit: If you provide health insurance to your employees, you might be eligible for this credit.

    Invest in a retirement plan

    • Contributing to retirement plans such as 401(k)s, 403(b)s, or traditional IRAs can offer significant tax benefits. Employer contributions are tax-deductible and depending on the type of retirement plan you offer your employees; you may qualify for one or more tax credits for setting up and contributing to the plan.

    Invest and offer HSAs and FSAs

    • Using Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) is an effective way to reduce health care costs. HSAs allow contributions to grow tax-free, and withdrawals for qualified medical expenses are also tax-free. FSAs enable employees to save pre-tax funds for medical expenses, which helps lower their taxable income and Federal Insurance Contributions Act (FICA) Eligible medical expenses include copayments, deductibles, and certain over-the-counter medications. Additionally, offering HSAs and FSAs can serve as valuable tools for employee retention and recruitment, ultimately saving business owners money in the long run.

    Work with a professional employer organization

    • As tax forms, deductions, and laws evolve each year, it is becoming increasingly difficult to manage and file taxes as a business owner. Luckily, there are companies called professional employer organizations (PEOs) that can help. When using a PEO, you have access to tax professionals who can help with accurate contribution calculations and filing. PEOs can also help individuals manage their retirement plans and contributions, helping them find the best plan and contribution amount for their financial goals.

    How GMS Can Help You This Tax Season

    Focusing on tasks like cutting checks, filling out forms, keeping up with regulations, and managing tax deadlines can hinder your business growth. With Group Management Services (GMS), a certified professional  employer organization, you can transform how you navigate tax season.  By leveraging GMS’s advanced technology and the expertise of our seasoned tax professionals, you can save time, energy, and money.  Our team ensures precise tax filing and compliance with federal, state, and local tax laws, along with accurate contribution calculations. Avoid the confusion of tax season and potential financial penalties by partnering with GMS.

  • On March 17, 2025, the U.S. Department of Labor (DOL) will put into effect major updates to its Voluntary Fiduciary Correction Program (VFCP). This program encourages voluntary compliance by self-correcting violations of the law. The changes introduce a new self-correction component (SCC) that streamlines the process for correcting one of the most common fiduciary breaches: the late remittance of participant contributions and loan repayments. This update isn’t just regulatory fine print; it’s a significant development affecting how employers manage employee benefit plans, and it offers practical advantages for those looking to stay compliant without the administrative burden.

    What’s New Under The VFCP Update?

    Instead of submitting a full VFCP application and waiting for a “no-action letter” from the Employee Benefits Security Administration (EBSA), plan sponsors can now self-correct certain delinquencies. Once you submit an electronic SCC notice through EBSA’s online portal, you’ll receive an acknowledgement email confirming the submission.

    Key conditions for use:

    • Timely remittance: Delinquent participant contributions and loan repayments must be deposited within 180 calendar days of the applicable pay date or receipt.
    • Lost earnings limit: The SCC is available only if the “lost earnings” calculated on the principal amount are $1,000 or less. The VFCP online calculator must be used to determine this figure.

    Required documentation:

    • Contact information (including name, email, and employer identification number (EIN))
    • Plan identification details (plan name and number)
    • The principal and lost earnings amounts, along with the relevant dates (pay date and deposit date)
    • The number of participants affected by the correction

    Additionally, supporting documents, such as proof of payment, the VFCP calculator’s printable results, and a penalty of perjury statement, must be retained and provided to the plan administrator.

    How It Differs From The Traditional Process

    No formal no-action letter

    Traditional VFCP applications result in a no-action letter that assures no enforcement action will be taken. In contrast, SCC submissions receive a prompt email acknowledgment that confirms the corrective action has been logged.

    Cost and complexity

    Both the SCC and the traditional VFCP application carry no filing fee. However, for small-dollar corrections, the SCC offers a much more efficient route, reducing both time and administrative complexity.

    Broader regulatory context

    These changes are part of a wide update to the VFCP and the associated prohibited transaction exemption (PTE) 2002-51, reflecting the department’s commitment to encourage timely, voluntary corrections while safeguarding participants’ retirement benefits.

    What This Means For Employers

    As an employer or plan administrator, understanding these changes is crucial. Here’s what you need to consider:

    Improved efficiency

    The SCC process minimizes paperwork and speeds up the correction process, allowing you to resolve issues quickly and move on to other priorities.

    Enhanced compliance

    By meeting the 180-day remittance deadline and staying within the $1,000 lost earnings cap, your business can avoid costly enforcement actions and civil penalties under the Employee Retirement Income Security Act (ERISA).

    Tailored for small-dollar corrections:

    For the most frequent and smaller-scale delinquencies, the SCC offers a simplified alternative to the formal VFCP application process, saving your business valuable time and resources.

    Continued oversight

    Although the process is streamlined, strict documentation and timely submission requirements ensure that the department maintains adequate, keeping fiduciary responsibilities front and center.

    How GMS Can Help

    At Group Management Services (GMS), we understand that regulatory changes can be challenging to navigate. Here’s how we support your business through this transition:

    • Human resources (HR) expertise: We stay on top of regulatory updates like the VFCP changes so you don’t have to. Our team will help ensure your employee benefits plans are compliant with the latest requirements.
    • Streamlined administration: From payroll and tax compliance to risk management and benefits administration, GMS handles the administrative burdens so you can focus on growing your business.
    • Customized support: Whether you need assistance with documenting the SCC process or require an overall review of your HR practices, our dedicated professionals are here to help.
    • Innovation and integrity: At GMS, we champion a culture of innovation and transparent actions, ensuring that our solutions not only meet regulatory requirements but also make your operations simpler, safer, and stronger.

    Contact GMS here if you need assistance positioning your company to benefit from the streamlined self-correction process and continue safeguarding your employees’ retirement security.

  • Managing payroll is one of the most critical responsibilities for business owners. Mistakes can lead to fines, penalties, and disgruntled employees, potentially derailing business operations. As payroll regulations become increasingly complex in 2025, it’s essential to understand and avoid common errors. 

    To navigate the complexities of payroll, many business owners partner with professional employer organizations (PEOs). These organizations possess the expertise and specialized tools to streamline the payroll process while ensuring compliance and efficiency. However, if you choose to manage payroll independently, there are a few common errors you should be aware of. 

    Common Payroll Mistakes To Avoid 

    Failing to stay up-to-date on payroll regulations 

    Payroll laws are constantly evolving. In 2025, new legislation such as the SECURE 2.0 Act and updated state-specific regulations (e.g., California’s retirement savings mandates) require businesses to be proactive. Neglecting to stay informed about changes can lead to compliance issues and hefty fines. 

    How to avoid it: 

    • Partner with payroll experts who monitor and implement regulatory updates. 
    • Regularly review government resources or work with a professional employer organization (PEO) to ensure compliance. 

    Misclassifying employees and contractors 

    Employee classification establishes the legal relationship between a business and its workers, determining their eligibility for benefits, wage protections, and tax obligations. Under the Fair Labor Standards Act (FLSA), employers must classify their employees as exempt or non-exempt.  

    • Exempt employees typically receive a salary and are not subject to overtime and minimum wage laws.  
    • Non-exempt employees are paid hourly and are entitled to overtime pay and minimum wage protections.  
    • Misclassifying employees as independent contractors is a common payroll error that can lead to penalties, back wages, and additional tax liabilities. 

    How to avoid it: 

    • Follow the Internal Revenue Service (IRS) guidelines to classify workers correctly. 
    • Seek guidance from a payroll expert or legal advisor when hiring new team members. 

    Missing payroll deadlines 

    Timely payroll processing is non-negotiable. According to Form 941, employers must make payroll tax payments periodically. The frequency of these payments, whether monthly, semiweekly or on the next day, depends on your total payroll amount and how long your business has been operating. Ensure you understand which depositor category applies to your business and strictly adhere to the corresponding deadlines. Neglecting to meet these payment obligations can result in substantial fines and legal consequences, which could be detrimental to your business. 

    How to avoid it: 

    • Set automated reminders for payroll deadlines. 
    • Use payroll software to streamline and schedule payments. 

    Incorrect tax withholding 

    Ensure you have the proper tax rates, calculate overtime correctly, and understand how deductions should be applied. Mistakes in calculating or withholding taxes, such as Social Security, Medicare, or state income taxes, can lead to IRS penalties and employee dissatisfaction. 

    How to avoid it: 

    • Double-check employee tax forms, including W-4 and state-specific documents. 
    • Perform regular audits of your payroll records. 
    • Integrate benefits management into your payroll system. 

    Neglecting to track paid time off (PTO) and overtime 

    Mismanaging PTO and overtime payments can have serious consequences for businesses, resulting in underpaying employees and violating wage laws. Failure to comply with wage and hour regulations can result in significant financial penalties, back pay obligations, and damage to the company’s reputation. Additionally, such mismanagement can lower employee trust and morale, potentially leading to higher turnover rates and difficulties attracting new talent. 

    How to avoid it: 

    • Automate time-tracking systems to monitor employee hours. 
    • Understand state and federal overtime laws to ensure proper compensation. 

    Failing to provide accurate payroll records 

    Employees have the right to access their payroll records. Failure to provide clear, accurate, and timely information can lead to disputes or legal consequences. Under the FLSA, employers must maintain pay records for at least three years, including hours worked, pay rates, and payroll dates. 

    How to avoid it: 

    • Maintain organized and accessible payroll records. 
    • Invest in a payroll platform with self-service options for employees. 

    Mishandling garnished wages 

    Mishandling wage garnishments can have serious repercussions for businesses. Obligations like fines, taxes, and child support have distinct rules that can vary by state. Incorrectly handling these garnishments, such as neglecting to file or filing improperly, can lead to legal judgments requiring your business to pay the full amount of the employee’s debt. 

    How to avoid it: 

    • Follow the instructions from the issuing authority, such as the IRS, state tax agencies, or the U.S. Department of Education, precisely. 
    • Stay updated on state-specific rules and regulations regarding wage garnishments. 
    • Implement robust payroll systems to ensure accurate and timely processing of garnishments. 

    Why Avoiding Payroll Mistakes Matters In 2025 

    In 2025, payroll and compliance will be more intricate than ever. New technologies, evolving regulations, and employee expectations demand a proactive approach to payroll management. Avoiding these common mistakes will protect your business from penalties and foster trust and satisfaction among your employees. 

    Partner With GMS For Payroll Peace Of Mind 

    Navigating the complexities of payroll can be overwhelming, but you don’t have to do it alone. GMS specializes in payroll management, compliance, and benefits administration, helping business owners focus on growing their businesses while we handle the details. 

    With our expertise in payroll tax filings, time tracking, and employee benefits, we can help you avoid costly mistakes and streamline your payroll process, all within one platform. Contact GMS today to learn how we can help you confidently manage your payroll in 2025 and beyond. 

  • Each year, the Internal Revenue Service (IRS) releases revised forms to help individuals and businesses correctly handle federal income tax withholding. For 2025, the IRS has published updated versions of:

    • Form W-4: Employee’s withholding certificate
    • Form W-4P: Withholding certificate for periodic pension or annuity payments
    • Form W-4R: Withholding certificate for nonperiodic payments and eligible rollover distributions

    Below is an overview of each form, how they differ, and what employers should keep in mind.

    Form W-4: For Employees’ Wage Withholding

    Who uses it: Active employees earning wages or salaries.

    Purpose:

    • Informs an employer how much federal income tax to withhold from each paycheck.
    • Reflects an employee’s filing status, multiple jobs, dependents, and any additional withholding amount.

    2025 updates/reminders:

    • There is a minor tip reminding employees about the IRS tax withholding estimator.
    • The “Multiple Jobs Worksheet” (on page 3) includes updated wage thresholds for 2025.
    • Employees who haven’t adjusted their withholding since 2019 are encouraged to submit a fresh W-4 to help ensure accurate tax withholding.

    Employer tip:

    • Prompt employees to review their Form W-4 annually or whenever significant life changes occur (e.g., marriage, divorce, birth of a child).

    Form W-4P: For Periodic Pension Or Annuity Payments

    Who uses it: Individuals receiving periodic (regularly scheduled) pension or annuity distributions (e.g., monthly retirement benefits).

    Purpose

    • Tells the pension or annuity payer (often a plan administrator) how much federal income tax to withhold from each periodic payment.
    • Mirrors many of the W-4 adjustments but specifically pertains to retirement income streams rather than employee wages.

    2025 updates/reminders:

    • No major changes from the prior year, but the new form includes references to using the IRS’s tax withholding estimator (particularly beneficial for partial-year or more complex retirement scenarios).
    • Starting in 2023, payees had to switch to the “redesigned” W-4P or W-4R. This continues in 2025, so ensure retirees/pensioners are using the correct new version.

    Employer (or Plan Administrator) tip:

    • Clarify for retirees that Form W-4P only applies to periodic pension or annuity distributions. For one-time or lump-sum retirement distributions, see Form W-4R.

    Form W-4R: For Nonperiodic Payments And Rollovers

    Who uses it: Individuals receiving nonperiodic distributions or eligible rollover distributions from qualified retirement plans, IRAs, annuities, etc.

    Purpose:

    • Governs how much federal income tax is withheld from lump sums or other nonperiodic distributions, including rollover distributions (those not being paid out on a recurring schedule).
    • Often associated with a flat percentage approach.

    2025 updates/reminders:

    • Also lightly updated for 2025, with references to the IRS tax withholding estimator for more precise calculations.
    • For many nonperiodic payments, the withholding default rate may be 10% or 20% (depending on the distribution type), unless the payee specifies a different arrangement on Form W-4R.

    Employer (or Plan Administrator) tip:

    • If your business or plan pays out one-time distributions, ensure recipients understand that Form W-4R must be submitted if they wish to adjust from the default withholding percentages.

    Differences At A Glance

    Form

    Primary User

    Payment Type

    Key Notes

    W-4

    Employees with wages

    Regular wages/salaries

    Employees give this to their employers to set paycheck withholding

    W-4P

    Retirees receiving pensions

    Periodic annuity/pension

    Payees file with the plan administrator for ongoing retirement payments

    W-4R

    Recipients of nonperiodic/lump sums

    One-time distributions

    Covers distributions such as lump-sum or rollover from retirement plans

    Tips For Employers

    1. Educate your workforce
      • Provide guidance on which form is relevant. For instance, employees actively working for you submit W-4; retirees collecting monthly pension checks submit W-4P.
    1. Stay current on IRS changes
    1. Encourage updates after major life events
    • Marriage, divorce, or adopting a child may warrant a new Form W-4 or W-4P to ensure proper withholding.
    1. Distinguish between periodic and nonperiodic
    • Periodic = Repeated payments on a set schedule (W-4P).
    • Nonperiodic = One-time or lump-sum distribution (W-4R).
    1. Use reliable collection processes:
    • Keep digital or paper records consistent, and ensure new forms are collected whenever employees or payees want to change withholding amounts.

    Conclusion

    Navigating the IRS’s 2025 updates for Forms W-4, W-4P, and W-4R is crucial to maintaining accurate tax withholding for both wages and retirement distributions. Familiarize yourself with the specific scenarios each form addresses, encourage your employees and retirees to review their withholding decisions, and utilize the IRS’s online tools for best results.

    Even when you have a good understanding of each payroll form, the time and effort it takes to complete them and manage your payroll can put a serious dent in your schedule. That’s why many owners turn to Group Management Services (GMS) to handle payroll administration for their small business. Our experts take an active approach to managing your payroll so that you can spend your time growing your business instead of struggling with forms and tax calculations.

    Need assistance managing withholdings or other payroll processes? Get in touch with GMS today to see how we can support you with a streamlined, comprehensive payroll solution.