Payroll may only come every two to four weeks, but it could feel like you’re climbing a mountain in flip-flops just to get it done on time. Then there are all the regulations, both state and federal, that you have to comply with in order to keep the IRS happy. Between one thing and another, very few people can say that they enjoy processing payroll.
The good news? Payroll doesn’t have to be as hard as you think it is. There are numerous tools, tips, and tactics to help you streamline the process and make your life a little easier. As a bonus, employees will probably love the changes as well; the tips below should reduce the frequency of errors in their paychecks.
Some organizations decide to take care of payroll themselves, while others outsource to companies like Checkissuing, who offer check printing services for businesses of just about any size. Every organization requires a unique approach to payroll; the question is, which approach would work best for yours? The information below will hopefully help you figure that out.
#1: Automate your payroll process
Many businesses still process payroll manually. This may seem more economical in the short-term (since accounting software isn’t exactly cheap), but it’s actually pretty counter-intuitive. For one thing, you’re paying for hours of labor that could be spent on other projects. Even if you’re doing it yourself as a small business owner, what if you spent that time networking with new clients or increasing sales leads instead? If you want to make your business more cost-effective, this isn’t the best strategy.
Software programs like QuickBooks and Rippling can make your life much easier by automatically calculating tax withholdings, processing Direct Deposit paychecks, and more. There will be fewer errors, and you’ll likely build trust with your employees with more accurate paychecks.
#2: Complete onboarding paperwork promptly
If you’ve ever been hired as an employee, you likely had to complete a whole stack of paperwork before starting the job. These forms are there for a reason: they’re required by federal, state, and sometimes even by county laws. Small- to medium-sized companies are usually the culprits for failing to hand out onboarding paperwork on time, especially if they haven’t automated their payroll processes. However, it’s just as important for a mom-and-pop store to have their employees complete these forms as anyone else. Without them, a business can incur heavy fines, or at least spend extra time making corrections on past payrolls.
Which forms have to be completed for each new hire? Here are the most common ones:
- W-9 forms are issued to contractors and are used to calculate taxes owed to the IRS.
- W-4 forms help employers determine correct tax withholding amounts for their employees.
- I-9 forms verify the identities and employment authorizations for all new hires in the US.
- Direct Deposit Forms allow organizations to deposit employee paychecks directly in their bank accounts, giving them an option that’s more convenient than physical checks.
There are plenty of other forms that could be applicable; these are just the basics. If you aren’t sure which forms you should be using, consulting with someone who has expertise in payroll processing should shed some light on the matter.
#3: Put together a payroll team
Whether or not your business has an accounting department, you should at least have someone (or several people) in charge of processing payroll. Why? Because it’s a very intricate and time-intensive process, and there’s too much risk of error if you don’t have the necessary experience. These errors have very real consequences for a business, such as damaging employee trust, time wasted correcting mistakes, and even penalties from the IRS.
It may seem like a drain on resources to hire people specifically for payroll, but this decision has benefits beyond just reducing errors. In most cases, if unqualified employees are charge of payroll, they’re likely taking time away from tasks that fall within their areas of expertise; this means that they’re periodically spending hours at a time wasting their talents. With experts on board to process payroll, however, the other team members are free to pursue projects that will bring more value to the company.
When you’re looking for new hires to populate your payroll team, you don’t just want the right qualifications; you should also look for people who can adapt to the company culture, and who have plenty of integrity. That being said, technical qualifications are important too. Look for experience in processing payroll, accounting-related education, and general math skills.
You’ve learned about things to do when simplifying payroll; here are some things NOT to do.
Payroll is an intricate process, and there are countless ways to mess up – especially if you aren’t familiar with all the relevant legislation and regulations.
#1: Don’t vary the payment schedule
There are two reasons why you should stick to a rock-solid payroll schedule. First, there are laws about minimum frequencies for payroll; if you just do it whenever you feel like it, you probably won’t be in compliance with those laws. Second, if your employees never know when their next paycheck is coming, they’ll have a hard time trusting you.
#2: Don’t fail to keep accurate records
A failure to maintain payroll records can get you in hot water with the IRS. You’re required to have records of employment forms, when and how much you paid your employees, and more – and you have to hold onto them for at least three years.
#3: Don’t miscalculate overtime wages
Overtime is time-and-a-half if an employee works more than 40 hours a week, right? Not necessarily. Some states have different laws, such as having to pay overtime if an employee is on the job for over eight hours a day.
Processing payroll will never feel like a walk in the park, but it can probably be made easier than it currently is. With the correct tools and strategies, you can get a handle on your company’s payroll for good.