Payroll isn’t just about cutting checks. It’s about staying compliant, keeping employees happy, and saving your business time and money. Whether you’re a small start-up or a growing company, these payroll best practices will help you stay organized and avoid costly mistakes.
1. Stay on Top of Deadlines
Late payroll tax deposits can lead to penalties. Set calendar reminders or work with a provider who ensures you never miss an IRS or state deadline.
2. Classify Employees Correctly
Independent contractor or employee? Exempt or non-exempt? Misclassification can trigger audits and fines. Review worker classifications regularly.
3. Automate Where Possible
Manual payroll calculations are prone to errors. Using a reliable payroll service or software can streamline the process and reduce mistakes.
4. Track Overtime Accurately
Overtime rules vary by state. Make sure you’re calculating hours correctly and paying fairly to stay compliant with wage and hour laws.
5. Keep Payroll Records Organized
The IRS requires you to keep certain records for at least four years. Having organized, digital payroll records makes audits and employee requests easier.
6. Review Benefits Deductions Regularly
Health insurance, retirement plans, and other benefits often change. Double-check deductions to make sure employee contributions and employer matches are accurate.
7. Stay Informed on Tax Law Updates
Payroll tax laws change frequently at both federal and state levels. Stay informed—or partner with a payroll provider who keeps you compliant.
8. Provide Direct Deposit Options
Employees appreciate the speed and convenience of direct deposit. It’s also more secure and cost-effective than issuing paper checks.
9. Plan for Seasonal or Part-Time Workers
Industries like agriculture, hospitality, and retail rely on seasonal help. Make sure you understand the payroll rules around temporary or part-time staff.
10. Reevaluate Your Payroll Provider Annually
As your business grows, your payroll needs may change. Take time each year to review your provider’s performance and make sure you’re getting the best service.
Payroll is one of the most important functions of running a business. By following these tips, or partnering with a provider like Abacus Payroll, you can keep your employees happy, stay compliant, and free up more time to focus on growth.