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How to Manage Payroll? Tips for Small Businesses
Payroll processing is one of the most monotonous and time-consuming aspects of every business. You have to compute employees’ wages based on their time cards or their outputs.
The payroll management process is difficult but necessary. It is a process that requires time and focus because a small mistake can lead to a big problem. It is imperative to be very detailed with payroll. You have to look out for several things, such as minimum wage, overtime, PTO, breaks, payroll tax, etc. And due to many other reasons, every business owner is always looking for ways to make their payroll process more efficient and accurate.
Here are some tips that you can use to manage and improve your company’s payroll process successfully.
Tip 1: Outline Payroll Processes – Create a Clear Payroll Policy
Know and follow labor laws. Be up-to-date to make sure that you are not violating any laws. Ensure that your business is also compliant with the IRS. Establishing a payroll policy even before you run that first payroll ensures that everyone comprehends how payroll works, what they can expect as remuneration, what the payroll period is, and employee benefits (salary structure, paid leaves, etc.)
Tip 2: Set up a Payroll System
Either you go for manual, outsourced, or automated, payroll systems can help you to calculate and manage your employees’ paychecks. Some businesses, especially small ones, manage to have their payroll manually done. However, this is time-consuming and more prone to errors. Automating payroll saves you time and energy as it’s the most accurate of all methods; there’s no need for you to double-check. If you have a staff shortage, acquire payroll outsourcing services for your company.
Make sure each of your employees fills a W-4 form once they start the job. W-4 form details employee information such as allowances, rates, and the number of dependents that they have. To follow state laws, you may have to withhold and pay some of your employee taxes. W-4 forms give you ideas on how much taxes you should pay for each employee. This may depend on the number of dependents on your employee and how much they earn.
Tip 3: Categorize Your Employees Correctly
Small businesses must categorize their employees as either employees or independent contractors. With employees, you need to pay taxes, follow the minimum wage law, and pay overtime if required. For independent contractors, this not necessary as the individual is responsible for it on their own. Each state may also have its own requirements; thus, check with your state regarding any specific rules needed to be followed.
Tip 4: Have a Uniform Pay Schedule
Having a uniform pay schedule for all of your employees can make your payroll management process more efficient and accurate. A consistent pay schedule is a lot easier to maintain and is less prone to errors. You also have to decide your payment schedule. Decide if you’ll be paying an hourly rate every week, a monthly salary, tip, or commission. It may be best to make a uniform schedule for all your employees to avoid confusion.
Make sure each employee is aware of the schedule as they resume in your workplace. If you have a lot of workers, you should consider classifying them based on their hourly rate or salary and their W-4 information.
Tip 5: Link Payments to Bank Accounts or Payment Systems
Transfer funds directly to your employees’ bank account or using a payment system can save you time going to the bank; additionally, employees can easily check online if their wages have been made. Bank transfers or direct bank deposits may be simpler than issuing checks.
Tip 6: Go Paperless
Opting for a paperless payroll management process will help you save time, money, and trees. You might want to invest in payroll software. The right software can assist in deciding your employee tax deduction and social program payments. You can integrate this with time tracking and attendance software and other vital metrics.
There are several payroll software available, and you need to learn about them before choosing the one that will meet your needs. Cloud-based solutions are commonly recommended. With software as a service product, you generally pay less; it’s always available, accessible from any device, and usually very easy to use. Some of the available software are Rippling, Paychex Flex, and APS, all of which are capable in their own right. However, it’s just a matter of choosing one that will suit your company’s needs best.
Tip 7: Use a Time-Tracking App or Software
A time-tracking application or software is best used to track your employee’s productivity and get real-time data of their attendance that can automatically be downloaded or linked to your payroll software. This part of the process consumes a lot of time; hence, making it automated will reduce your effort. Having biometrics will make your attendance tracking a lot easier but make sure to ask the employees to manually track their attendance, just in case there are system mishaps.
Tip 8: Be Consistent in Their Hourly/Daily Rates and Keep Them Informed
This will avoid conflicts among employees and the company. If there are some changes regarding their current rates, make sure to inform them before the calculation for payroll comes and have it written in black and white so that if confusion comes, you have proof that you informed them about the changes and also to be on the safe side.
Overtime is also another thing you need to look out for. Check with your department of labor if overtime is calculated on just anything over 40 hours a week or if an employee who works over 8 hours a shift is also eligible for overtime. Some states allow longer shifts for shorter workweeks as long as you still maintain less than 40 hours, but the employees have to vote on it, and it has to be submitted to the state in order for it to be allowed for your business.
Tip 9: Keep Accuracy a Priority and Pay Your Employees on Time
Small business owners who have hourly staff rely on accurate, prompt payroll to ensure that their workers are employed and retained. It would allow payroll processing quicker, more reliable, and more effective by providing a fully automated program that instantly moves working hours through a central accounting framework.
One of the most significant investments you can make in your small company is an automated scheduling and payroll program that guarantees that workers are compensated quickly. In turn, this inspires your employees to trust and rely on their schedules and treat your business as they were their own.
Tip 10: Determine your Payroll Budget
Having a budget is critical when planning a payroll. You must ensure that taxes and wages to be paid are included in the budget, along with social security, medicare, and employment taxes. Having a plan for these expenses will help you avoid issues in the long run.
Some small business owners view payroll as a rather fixed expense. But it really isn’t, and therefore, you need to create a budget for it and track it appropriately. Remember, there’s overtime, bonuses and commissions, and plenty of other variables that affect overall payroll costs. Therefore, create a budget, compare it to your actuals each month, and see if you need to cut back, or better yet, if you can spend more to grow your business.
Tip 11: Make sure to have ample time to Process their Payrolls
Assign a cut-off period monthly so that you don’t have to rush the payroll process. This will help a lot because it will prevent the possibilities of miscalculation that might cause the employees to get disappointed. Also, setting a cut-off will manage their expectations but make sure to provide their salary on the dates you promised to avoid questions that you will face because of late salaries.
Tip 12: Consider Outsourcing
The payroll management process requires time and focus. So, if you don’t have the time or if you don’t have a team to focus on the payroll management process, it will be best to consider outsourcing your payroll management process. Payroll is complicated and potentially far more time-consuming than it needs to be if you don’t know exactly what you’re doing. Getting it wrong also has far-reaching implications, such as failing to comply with the law and upsetting your team. Thus, outsourcing can be a strategic and cost-effective option, especially for small businesses.
Tip 13: Ask feedback from your staff and employees
Communication is always the key in every organization; thus, it is best to ask your employees feedback to gauge your current payroll system’s effectiveness. They might be able to give suggestions on how the company can improve their experience.
Considering everything suggested above, two effective ways you can improve your company’s payroll in less time are software and outsourcing. By choosing an option that is scalable for your business ambition (such as a cloud solution or a managed service), you can guarantee accurate and hassle-free payroll processing. Besides, payroll solutions that offer the option to integrate with HR systems will be a life savior when your business grows.
Another way to manage employee payroll processes at a growing company is to tap into the power of payroll outsourcing service providers offering quality services to small and medium-sized businesses. By outsourcing your payroll and placing it in the hands of professionals, you’ll be able to manage employees’ paychecks, payroll tax filing, health benefits, etc., efficiently and have real-time reports.
Not all small business owners are payroll experts, and it can be a confusing and cumbersome topic. For this reason alone, you might want to consider outsourcing it. At Cogneesol, we are experts in processing payroll accurately on time. We can take away your workload and stress caused by multiple responsibilities you manage simultaneously. Our professional team remains well versed and updated with changes done in payroll tax laws and can help you meet compliance requirements.
Know more about our payroll processing services, call us today at +1-646-688-2821 or email at firstname.lastname@example.org.
List of Contributors:
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