Financial Services & Accounting Firms: Payroll Mistakes to Avoid (2026)

Mistake 1: classification

Exempt or non-exempt status for financial advisors and similar staff is based on the duties they actually perform, not on job title or on whether the customer is an end user or an intermediary. An employee whose primary duty is selling financial products does not qualify for the administrative exemption.

Mistake 2: hours and the regular rate

Financial services employees generally meet the administrative exemption duties test when their work includes collecting and analyzing a customer's income, assets, investments or debts, determining which financial products fit, and advising on their advantages and disadvantages. An employee whose primary duty is selling financial products does not qualify for the administrative exemption.

To be exempt as executive, administrative or professional employees, workers must be paid on a salary basis of at least $684 per week, equal to $35,568 per year. The highly compensated employee threshold is $107,432 per year, including at least $684 per week paid on a salary or fee basis.

Mistake 3: the financial services firm tax item

If a nonqualified deferred compensation plan fails section 409A, the deferred amounts become includible in the employee's income, are reported on Form W-2 box 12 code Z, and are subject to an additional 20% income tax plus a premium interest tax, both assessed on the employee. Amounts that are substantially vested and paid no later than March 15 of the following year fall under the short-term deferral exception and are not subject to section 409A.

What catches them

A pay code review at setup, an exemption file per employee, a regular-rate flag on every pay component, and a deposit calendar that does not depend on one person remembering. Failure-to-deposit penalties run 2 to 15 percent; back overtime runs at time and one half plus an equal amount in liquidated damages.