Payroll is one of the key drivers of a successful business. It’s a vital part of doing any business as it determines the services you deliver to your customers. For most businesses, it’s one of the largest expenses they incur. But, with the right team and digital tools like a payroll app, business owners are sure their employees can receive correct salaries on time.
That makes the whole difference between scraping by and success. This comprehensive guide was designed to ensure your hard-working team gets paid. Completing payroll correctly also means that your company pays all the taxes required by the law. Let’s discover the top five payroll tips for small business owners.
Have a Payroll Policy in Place
Your business requires a single source of truth that administrators can trust. That is none other than a payroll policy. A good payroll policy provides the correct set of guidelines that your company needs to complete various tasks efficiently and correctly.
A professionally designed and created payroll policy ensures all workers clearly understand your company’s system and must have the following:
- Guidelines for how to calculate promotions and salaries
- Earnable vacation time levels
- Procedures and instructions for resolving payroll errors
- Determining factors for wages and salaries
- Reporting obligations for workers
- An outline of the entire payroll process
- Employee classification specifications
This isn’t the entire list of what you need to include in your payroll policy. Without a payroll policy, you’ll have disorganized, inefficient processes, leading to costly mistakes.
Establish a Payroll Budget
One of the most significant expenses that is greater than what most business owners expect is payroll. It is critical that you balance all your payroll expenses against general company costs to make sure that you have enough funds required to compensate workers.
Do you know that workers are lawfully responsible for certain deductions like Medicare and Social Security? You need to consider such things when setting your payroll budget. To make sure that your spending will not have a detrimental effect on the finances of your business, you need to budget by calculating the total payroll cost as a revenue proportion.
Classify Your Employees Properly
It is vital to classify your employees properly. Employees vs independent contractors is a common misconception. And it’s absolutely important that you assess employee classifications properly.
If you don’t get everything right, federal and state agencies will suffer serious repercussions. Employee misclassifications cause state and federal government agencies to be deprived of payroll tax revenues that are lawfully theirs. The authorities require these taxes to offer benefits such as unemployment insurance and public services.
Categorize Your Workers as Salaried or Hourly
By now, you must have classified your workers accurately because that has been discussed in the section above. It’s now the perfect time to categorize your workers further by determining whether they belong to the salaried or hourly category, a task that a payroll software performs excellently. You only need to feed in the required details.
Hourly workers are those who work and receive their payments per hour. These workers must receive compensation in terms of overtime if they work extra hours per week. Salaried workers are those employed full-time.
Create and Keep Track of Your Payroll Calendar
Tracking your payroll schedule and being able to enforce it will create a time-structured workflow, resulting in a more favorable working environment for your payroll success. With excellent payroll calendar management, you can comfortably handle unpredicted events, reduce mistakes, and boost worker satisfaction with the service offered.
It doesn’t matter whether your pay frequency is once per week or bi-weekly; developing and maintaining a payroll calendar can help you, as a company owner, to better define the ongoing monthly payroll process stages. It’s also important as it is closely associated with holiday pay.
Payroll management is challenging and time-consuming. Processing payroll manually or using traditional systems can lead to more mistakes while at the same consuming a lot of time. That is why a top payroll app is vital.
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