August 18, 2020 | 4-minute read (754 words)
Whether you’re handling payroll yourself, you’ve got a team taking care of it or you’ve outsourced your payroll responsibilities, every entrepreneur should stay on top of their company’s payroll processes.
Here’s why: If your payroll processing is performed in a non-compliant way, your business could be at significant risk of fines, paybacks or other implications. Plus, many entrepreneurs are watching every penny, and payroll mistakes can be expensive.
Therefore, we’ve compiled a list of five payroll processing tips that can help entrepreneurs stay on top of this very important responsibility and keep payroll flowing smoothly and compliantly.
1. Check How Employees Are Classified
When it comes to your requirement to pay overtime, you must be able to differentiate exempt from non-exempt employees, and that comes down to how your staff members are classified in your payroll processing system. The Fair Labor Standards Act (FLSA) states that employers must pay overtime at the rate of time and a half “for all hours worked over 40 hours in a workweek.” However, the law provides an exemption for those employees classified in certain positions who earn at least $684 per week.
Therefore, the way you classify your employees in your system is of paramount importance, since it will dictate whether staff members are eligible for overtime pay or not. If you have any confusion about whether particular employees are exempt or not, consult an attorney or accounting professional who can help you make that determination.
2. Make Sure You Collect and Pay Taxes
Even if you’re just putting your business together and you don’t know all of the nuances of entrepreneurship, you must comply with all government regulations about tax collection and payment. The government doesn’t care if you “simply didn’t know” about the payroll and income tax regulations. It’s your job to know how this works, so this step is essential when it comes to payroll processing.
Talk to your accountant or payroll team about which taxes you’re required to withhold from your employees’ paychecks. Typically this includes federal, state and local income taxes, as well as FICA and potentially other taxes.
In addition to withholding taxes from staff members’ paychecks, you must also pay the government your tax payments in a timely manner. This often comes as a surprise to new entrepreneurs, but the reality is that these aren’t all due on April 15 like personal income taxes are. Instead, you’ll have to get a tax payment schedule to stay on track, since some taxes (like FICA) will be due on a monthly on semi-weekly basis, while you may pay federal unemployment taxes every quarter.
3. Stay on Top of Changing Requirements
As important as it is to comply with all laws and regulations regarding payroll processing, it’s just as essential to pay close attention to these rules, since they do change regularly. For instance, the minimum weekly salary that allows you to classify employees as “exempt” changed earlier this year from $455 to $684.
Other changes that come about periodically include tax rate adjustments, deadline changes and additional shifts, so if you don’t have the time to keep an eye on the ever-changing payroll rules, work with a company that is able to do that for you.
4. Ensure Employee Self-Service
One thing that can really slow down a payroll department is constantly spending time answering employee questions about their payments. Salaries and wages are incredibly important to your staff members, so these issues deserve high priority, but you may not have the time to deal with these questions. Therefore, it’s imperative for your staff members to have access to their payroll data via self-service portals.
Staff members should be able to review their pay stubs, future payments, time off requests, withholdings and more information through a secure portal. This gives them the security of accessing their personal data whenever they’d like, and frees up your team to handle other responsibilities.
5. Go Digital
The more of your paperwork you can handle digitally instead of via paper, the more efficient and streamlined your processes will be. Not only does reducing paper allow you to save the environment and get organized, it can also save you a significant amount of money. This spans across the cost of printing and processing paperwork, as well as creating, mailing and depositing checks. Upgrading your payment systems to electronic checks and payroll services can only boost your efficiency in the future.