A well-thought-out payroll policy outlines the payroll process, determines salaries and wages, sets procedures for resolving mistakes, and calculates levels of earnable vacation time. It’s critical that you balance payroll expenses against general business expenses to ensure you have the funds to compensate employees.
Here are some pointers to aid you in dealing with payroll:
- Compute and gather payroll and tax data accurately. Employers are legally responsible for employment taxes — Social Security and Medicare — and for matching these deductions. Payroll taxes can vary by state.
- Calculate overall payroll costs as a proportion of revenue, keeping track of hours, wages, tax holdings and benefits.
- Properly assess employee classifications — are they employees? Then categorize further by determining whether they’re hourly or salaried and in keeping with the Fair Labor Standards Act. Make sure you’re keeping track of when overtime kicks in for employees entitled to it.
- Properly monitor employee attendance. Employee scheduling and time tracking ensure the accuracy of your payroll reports.
- Develop a payroll calendar for smooth workflow and handling errors. It will help define the many steps to the process. It also helps employees understand when they’ll be paid and when timecards are due, and it helps your payroll staff plan and execute payroll tasks.
- Abide by federal, state and local laws that regulate payroll. Ensuring compliance is about not just avoiding legal trouble but also contributing to a fair and transparent workplace. This can get complicated with employees residing in different states with different laws.
- Make payroll policy and related documents easily accessible.
- Ensure employees get their direct deposit or paychecks accurately and on time, which, in turn, motivates them to be more productive at work.
- Plan for year-end tax reporting: W-2 forms for employees and 1099s for contractors. They need to be sent out by Jan. 31 — start planning early. If there are any discrepancies, resolve them before the year ends. Remember that accurate year-end tax reporting is crucial to maintaining good relationships with your employees and contractors who need these forms to file their own tax returns.
- Standardize turnover processes. Small details can take significant time for new hires to learn. Minimize negative efforts when losing team members by moving payroll staffers to different roles and temporarily filling positions when employees go on leave. Promote internally and implement a buddy system for coverage. Update payroll templates and save them to a drive accessible to everyone on your team.
Keep an eye on operations
Keep operations as simple as possible; this saves resources and keeps inefficiencies at bay. Make reporting easy by reining in extra administration. Consider automating the process to streamline time-consuming tasks. Conduct regular audits of your process to limit exposure to discrepancies.
This is just the beginning! Every company has its own special needs. To ensure you’re doing what’s best for your company, work closely with lawyers, accountants and any third-party providers.