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Benefits , Claim , Contractors

Reducing Errors in Workers’ Comp and Payroll Processing: A Proactive Approach

Workers’ compensation and payroll processing can be two of the most time-consuming and necessary aspects of running a business. If someone is injured on the job, workers’ compensation is in place to financially protect both the injured employee and you as the business owner. Additionally, ensuring that your workers are paid accurately and on time is crucial in keeping your team happy and your company thriving.


Workers’ comp and payroll can be complex tasks, so it isn’t uncommon to make mistakes. Taking a proactive approach to reduce errors can help you save time and money over time. Let’s take a look at 5 ways to be proactive when it comes to reducing errors in workers’ compensation and payroll processing.

1. Be sure to accurately classify your employees

Before diving into the workers’ compensation and payroll process, it’s important to first accurately classify your employees. Do your team members work on a contract-by-contract basis, or do they earn an annual salary? Are they seasonal employees or part-time?


If you’re unsure of how to classify your workers, there are some factors to consider, according to the Department of Labor. What’s the degree of permanence of the job? Is the duration of the work continuous or sporadic? How much control does the worker have over their job, including the work itself as well as the economic aspect?


If the job is considered permanent or continuous in nature, it’s likely that the worker could be deemed as an employee. On the other hand, if the worker has more freedom and control over their work, including their schedule and pay, they could be considered an independent contractor.

2. Keep detailed records for each employee

Keeping detailed records for each employee is crucial for correctly calculating payroll and workers’ compensation. If for any reason you need to refer back to time cards, paychecks, or benefits, it’s important to be able to readily access that information.


Each state has its own rules and regulations around retaining employee records. Typically though, the requirement is at least a few years. Be sure to check what timeframe applies to your state before getting rid of documentation.

3. Take fringe benefits into account

According to the IRS, a fringe benefit is a form of pay for the performance of services—such as tuition assistance, personal use of a company vehicle, or childcare reimbursement. Knowing how this will play a role in workers’ compensation and payroll will be dependent on how your workers are classified. For employees, fringe benefits may be taxable, while for independent contractors, they likely won’t be.

4. Automate your workers’ compensation and payroll process

In some cases, small errors can lead to big issues when it comes to calculating workers’ compensation and payroll. Using automation software can be hugely beneficial in streamlining the process. Even if you aren’t handling workers’ comp and payroll manually, however, automating your services will only be as accurate as the data you input.


Keeping accurate records for your employees can help serve as a reference when inputting data for payroll or workers’ compensation.


It’s also important to note that by automating the process, you’re not only taking a proactive approach to accuracy, but also to timeliness when it comes to paying your workers.

5. Work with an experienced PEO to handle workers’ comp and payroll

Professional employer organizations (PEOs) are great for creating space for you as the business owner to focus on growth and strategy by taking care of the administrative tasks necessary to run your business.


PEOs handle everything behind the scenes when it comes to payroll and workers’ compensation—from tax filing and getting your employees paid to managing workers’ comp claims and calculating premiums. Workers’ compensation and payroll processing can be tedious and complex. Allowing experienced professionals to handle the process for you is a good way to help reduce errors.


When you take a proactive approach to reduce errors in your workers’ compensation and payroll processes, you not only save time and money for your business, but you also help boost employee morale by getting your workers compensated accurately and on time.