When a business is incorporated, more times than not, the one thing that gets forgotten is the payroll system.
Even when you have the best HR software, meeting deadlines and handling paperwork can leave the payroll tasks neglected more often if considering it as a chore.
While it may seem like a straightforward task at first, problems too may grow with the growth of the company to a considerable size. Despite the suspicions, we conceive about the federal fines, the real picture in some cases is even worse.
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Almost 54% of the workforce is affected by mismanaging the employees’ payrolls, let alone in America. A recent survey by The Workforce Institute at Kronos stated that more than 49% of employees would switch to a new job after facing at most two issues with their paychecks.
Something even as careless as classifying an employee under the wrong class can wreak havoc on you in the long run. Hence, using the best payroll practices will ensure that your payroll management works smoothly for the coming year.
Best Payroll Practices to Definitely Work
To be ahead of the curve of businesses that rely on the industry’s best HR software, you can use some help. The following are a few tips you can use in your maiden entrepreneurial journey when it comes down to payroll:
1. Classify Employees Correctly
One of the biggest challenges in the payroll management system is the correct classification of employees. If you do not classify your employees correctly, you might just be getting ready to shoot yourself in the foot since your revenues and profits will never be in order.
It can even lead to problems with the IRS if you misclassify your employees. Further, this can lead to dwindling revenues also; the taxes and fines are relatively high. Classifying a low-level employee as a high-level one or vice versa is like an open invitation to the party.
2. Maintain Cash Flow For Payroll
A general rule of thumb is to ensure you have ample cash flow and expenses left to take on employees. Since you will have to pay them regularly irrespective of your business’ health, always have a positive cash flow.
While you may have an idea, come up with an exact number you want to spend as payroll expense. Unless you have to, make sure that you set aside only about 30% of your total revenue as payroll expense.
To stay on top of things, always have a buffer where you want to inflate or deflate the payroll amount. It will help you have a cushion to fall back on when an employee leaves or when your company grows. This could turn out to be one of the payroll benchmarking best practices to help manage employees’ entry and exit.
3. Keep Track Of Dates & Deadlines
Unless you have a set of deadlines strictly adhered to when it comes to employees’ payrolls, you are all set to incur many fines from the IRS. The IRS has a strict norm to be adhered to when it comes to times and deadlines of the employees’ payments.
These revolve around but are not limited to taxes, pension amounts, retirement bonuses, salaries, and even pay stubs.
These are proofs that you are paying the employees the requisite amount on set intervals and adhering to the guidelines. Furthermore, according to the government’s mandate, a business owner should hold on to an employee’s data for up to 6 years after leaving the company.
4. Set Payroll Notifications and Reminders
The finance and accounts departments are responsible for handling your money matters most. So it is only natural that they also set up a notification, reminder, and deadline calendar to stay on top of things.
You can either have physical calendars with thumbtacks pointing things for specific dates or just employ a cloud-based system to make things more manageable. The same task can be completed by using an HR system that automatically reminds you about upcoming deadlines.
This way, your employees will love you, and you will also stay ahead of your compliances with the various government bodies.
5. Use Direct Deposit
Gone are the days when you had to slog through manual labor hours to fulfill your employees’ salary needs. Thanks to the almost mass adoption of Direct Deposit, payroll management has become a breeze.
Use Direct Deposits, which will automatically help you eliminate the work of actually handing out the salaries. Furthermore, this will also help in year-end reporting, where you will have to jot down all the expenses. As a result, your HR, Accounts, and Finance departments are free to service your business’s other pressing matters to help it grow.
6. Use Online Payroll Software
There are no two ways to maintain employee records as it is a tough job. Significantly when your company is growing, and you are taking on more employees. Investing in an online payroll software or an HR system can be a boon in disguise.
Once past the learning curve, Payroll Software can automatically fetch the employee’s details and complete the salary process. The most significant benefit of these payroll practices is the immense level of customizability you get. Ranging from the kind of bonuses to making changes in their payslips, everyone receives a win-win.
7. Create An HR Handbook
While the job of HRs might be considered an “add-on” it is so much more.
HR can bring insights to the table about what other things would be included. Even FAQs can be added to the handbook, which are questions that employees ask daily. However, an essential section it should have should be about payroll.
Making employees informed about the payroll standards and the dates they receive their salary will let them know what to expect and plan accordingly.
8. Have Organized Payroll Records
When you are at the IRS filing taxes at the end of the financial year, you need specifics about payroll. Each penny spent has to be accounted for in the firm. Having an organized payroll record, whether it’s full-time, overtime, or fluctuations, a system for everything goes a long way.
Depending on your business practices, needs, and the actual work itself, you will need immediate access to an employee’s records as well. The IRS has separate compliances for different requirements, and hence organized payroll records make things convenient for the very least. While most of the documents are demolished after three years, the IRS has extended this period to 6 years in some conglomerates.
9. Protect Your Online Payroll Data
Online malware, phishing, and cyber-attacks are the new reality we live in today’s world. Since data is the most valuable asset globally, it only fits to invest in a system to protect it. Whether it is employee data, company data, assets, or anything else, encryption or a tier-wise safety measure can be adopted.
Nowadays, smart security systems will automatically update themselves to offer a lag-free and problem-free experience. Protecting your business employees in the real world and protecting them at work from the office is valid.
Get equipped with these tips and tricks in your arsenal. Ensure that your payroll needs are handled, and none of your employees ever find a reason for me to come back. Furthermore, this covers a lot of the office practicality, as well.
Let us know if we missed any of the payroll practices you might be successfully following in the comments below.