There are many key aspects to running an effective and growing small business. For example, if you have employees, ensuring that they are paid properly and on time is a crucial part of a well-run business. Unpaid employees are unhappy employees. Here are some small business payroll tips to help you efficiently manage payroll for your business.
Small Business Payroll Tips
Register for an Employer Identification Number
To properly execute payroll, you will need an Employer Identification Number (EIN). As your Social Security Number (SSN) is to you as an individual, the EIN is the identification number for your business. This will likely be something that will need to be done before applying for a small business license.
Determine Pay Schedule and Salary Status
The pay schedule that you establish for your business will dictate when you pay your employees and how often. Some employers pay their employees every Friday, some do every other Friday, and some do the 1st and 15th of every month. This decision is primarily up to your preferences, however, be sure to check federal and state laws to ensure that you are abiding by the minimum payday laws for your area.
Salary Status is broken down into two primary categories; nonexempt and exempt employees. Nonexempt employees will be paid an hourly rate based on the time that they put in, where exempt employees are paid a set annual salary. There are overtime considerations to think about, as well. This decision is mainly based on what type of roles you need for your business and how much work they require.
Research Wage Laws
As with everything in business, there are federal and state laws that you and your business must abide by. From paying the right employment taxes to ensuring that your employees are being paid accurately and on time, there are many laws that you need to understand as an employer.
Organize a Payroll System
There are a few different ways that you can manage your payroll system for your business. Some businesses choose to manage their payroll manually. This may be the most inexpensive way to manage payroll, however, it is also the most time-consuming and tends to have errors. If you are looking to save yourself the time and headache and have some money to spare, you can outsource your payroll management to an external person or company. With this being their primary focus, it tends to be handle in a more timely manner with less to no errors. Then there is the hybrid option of using a payroll software. Using a payroll software will not be as costly as outsourcing your payroll system, but it will still be organized and save you time. What it comes down to is: how much money are you willing to spend, how much time do you have to give, and what is your experience or knowledge of the payroll system.
Choose a Time-Tracking System
For the employees that are non-exempt and working for an hourly rate, it is important to have a proper time-tracking system in place to keep track of how much your employees are working. When looking for a time-tracking system, there are a few things to keep in mind. You want a system that is easy to use so that your employees and whoever is managing your books has an easy time understanding the sheet and properly paying your employees for their hours worked. However, you do not want the system to be easily manipulated. Non-exempt employees are getting paid hourly, therefore, if they enter more time than what they actually worked on their time sheet, they would be able to get paid more than what they should. Having open communication, trust, and a solid time-tracking system is the best way to manage your cash flow and expectations.
Clarify Your Payroll Policy and Process
Before you begin running your first payroll process, it is important to clarify your payroll policy and process to everyone involved. This way, all of your employees and staff will be on the same page about payroll expectations. While HR is there to answer payroll questions, you do not want them flooded with easily answered payroll questions.
Decide if You Should Outsource
With all of these tips in mind, now is the time to decide if outsourcing payroll is for you and your business. Do all of these steps and tips sound like too much to keep track off, time-consuming, and confusing? Then it may be time to start looking for a payroll business. Abacus Payroll makes payroll easy so you can focus on what matters most, your business. Want more information the benefits of outsourcing and whether or not you should for your business’s payroll? Contact an Abacus Payroll advisor today!
Maintain and Organize Employee and Payroll Records
There are many benefits to maintaining an organized system of employee and payroll records. From being prepared for a question that requires past records to abiding by the federal and state retaining laws, being aware of what you need to hold onto is important for maintaining adequate records. For example, employers cannot dispose of the time cards for active employers for two years and any payroll information regarding paid wages for at least three years. Be sure to look up the laws for your area.
While these are just a few important small business payroll tips, there are many things to keep track of when managing payroll for your small business. If you have any questions or are considering outsourcing payroll for your small business, contact an Abacus Payroll advisor today!