Every business owner who hires employees has to ensure that they are managing their payroll accurately. For employers who hire just a few employees, such as less than ten, payroll can be simple. You simply have to ensure that you pay each employee their correct wage during a certain time every month. But if your business hires thousands of employees, or if you have employees being paid at different rates, this can become complicated.
Business owners need to pay their employees on time, but their obligations don’t stop there. Alongside managing paychecks, owners also need to ensure that they are paying their payroll taxes in time. Business owners can turn to payroll management strategies to ensure that they have met all their financial obligations, as far as their employees are concerned.
Why do you need a payroll system?
Many business owners find that doing their payroll management can be tedious and confusing. There are large numbers to crunch, and a single mistake could lead to the employee being paid the wrong wage. Employees also need to be paid within the date that their employees told them they would get paid in. So if you told your employees you would pay them within the tenth of every month, then you should consider following this schedule. This is as your employee can legally sue you for non-payment of wages. This is where using a payroll management system can help you.
If you don’t want to do your payroll, and many business owners don’t, then consider a payroll management system. Alternative ways to manage payroll also include outsourcing payroll management. In this, an external individual or business that specializes in handling payroll, takes over payroll management for you, in return for a fee.
If you fail to ensure that a proper payroll system is in place, you may find that there are errors. Errors in your employee payroll records and financial statements can affect your accounts. Not paying your payroll taxes in time could also result in penalties.
Here’s how you can best manage payroll for your business:
1. Create a payroll schedule
A payroll schedule tells you when you should pay your employees. Businesses stick to a consistent payment schedule. This helps not just the business, but also the employee, as they can expect a regular salary within a period of time.
There are four kinds of payroll schedules that are normally used. These are monthly, bi-monthly, weekly, or bi-weekly. Some businesses can also opt for other payroll schedules, such as daily pay. However, these four remain the most commonly used payroll schedules among businesses.
Once you’ve set the schedule, you should communicate this information to employees. This ensures that they’re aware of when they can expect to be paid every month. This can be useful for business owners. If an employee feels that they haven’t been paid, they can sue the business. Giving them a date ensures that everyone knows when to give out, as well as to expect, paychecks.
2. Automate calculating paychecks
You won’t always be paying all your employees the same amount. Businesses that hire only a few employees and lay them the same salary don’t need to opt for an automated process. But as how businesses hire employees has changed, the need for automated paycheck calculation systems has increased.
Businesses are increasingly using hybrid models of hiring. Some businesses hire permanent as well as freelance employees. Others outsource certain jobs and pay on a per-job or hourly basis. This can create confusion when it comes to payroll management.
Instead, owners can turn to automated payroll calculation systems. These keep track of what is owed to which employee, making handling payroll easier. Some systems also track time as well.
3. Tracking time and work hours
If your business pays employees at an hourly rate, then you need to ensure that employees are turning up. When a business has a large number of employees, even twelve or fifteen, then monitoring this can become more difficult. To ensure that employees are working during their assigned hours, a time tracking system can be helpful.
It monitors when an employee checks in, as well as the hours, put into work. Time tracking is also used by businesses that don’t pay wages at an hourly rate, but instead want to monitor employee attendance.
4. Payroll taxes
Payroll taxes can seem intimidating. There are a large number of forms that a business owner needs to be aware of. This holds especially true if you’re an owner who is managing your payroll by yourself. Making a mistake when it comes to taxes can cause problems later on. This is why many businesses choose to either hire a tax consultant to manage their taxes or outsource the work.
Owners should have an Employer Identification Number (EIN), as this number helps a business be identified for tax-related purposes. In some states, owners may require both a federal and a local number.
Some forms you do need to be aware of include the W-4 and the W-2. A W-4 form must be signed by all employees when you first hire them. Inside this firm, employees should detail the number of dependents they have. This form helps reduce the amount due in taxes for the employee. Their allowances should also be included in the form.
The W-4 form has an effect on the paycheck an employee reduces, so getting them filled out is essential. Owners also have to provide employees with a W-2 form at the end of the year. You should also be aware of your employer’s federal tax returns, as well as state and local tax returns.
5. Maintain employee payroll records
Consider keeping all documents related to payroll safe and secure. These documents may be required later on. Say an employee sues a business over non-payment of wages. Under such circumstances, these records can showcase the truth.
You may also be asked to show your payroll records by the government, so keeping them safe and easily available can help you access them easily.
Handling payroll can become much easier with these simple yet effective tips. You can also think about investing in payroll software to handle payroll management for you. Without monitoring payroll and ensuring that it flows smoothly, errors can negatively affect business income. It can also lead to mistakes in accounts and bookkeeping, leading to further problems later down the road.
But with these payroll management tips, you can handle payroll easily and effectively. Another tip for protecting your business and your employees is to get business insurance. The right business insurance policies can protect your business from various business risks, such as legal battles and claims. If you want to learn more about insurance for business owners, then click here.