Payroll management is one of the daunting tasks that businesses, especially small-scale firms, find challenging. However, it is a primary and inevitable activity for every business. Sometimes, payroll issues can lead to low employee morale, tie up firm resources, and in extreme cases, crumble down well-established companies.
To help, we’ve comprised a list of nine crucial payroll guidelines that can ease the burden on companies, facilitating accurate and less tiring payroll activities.
Register Employer Identification Number
Businesses should consider registering for an Employee Identification Number as the first step. The EIN is a number that helps employers or firms identify themselves for tax purposes. The EIN number is a typical requirement, just like individuals register for Social Security Number. In most cases, entrepreneurs must first register for EIN before getting licenses, filing payroll taxes, and even opening business bank accounts. Thus, EIN is crucial for any startup business. Notably, entrepreneurs must be mindful of legal provisions regarding EIN for they change with business location. In some instances, a business would still have to apply for state-level EIN, notwithstanding the federal EIN.
Develop a Payment Schedule and Wage Status
In payroll development, employers must prioritize the frequency of the salary payment and salary status. These are always two critical components not to ignore.
- Pay frequency involves determining when to remunerate workers and how many times in a given period. These decisions must align with the federal and state laws that dictate minimum payday for employees or hourly rates. Pay schedules can be weekly, monthly, or bi-weekly in a business. Advisably, the payment schedules must be consistent, making sure that employees get their pay as expected without delays.
- Salary status represents how employers arrive at wages the employees will be receiving. In this case, an employer can settle for an hourly rate for non-exempt workers or a salary for exempt employees. Notably, employees’ and business’s interests significantly shape the salary status.
Comprehend and Follow the Wage Laws
Any business or firm must comply with all federal and state laws. However, the process starts by first understanding these laws and setting up structures to ensure compliance. In most cases, companies resolve to use attorney services to help on legal matters.
In this endeavor, business owners must ensure they comply with all tax laws, for example, employment tax, local and state tax, and income tax. Employers must check the payroll constantly to address issues that may hamper wage payment or lead to contravention of legal provisions on payment matters. It helps avoid tax liability cases, thus minimizing commotions with authorities.
Establishing a Payroll System
The apex of good payroll management is to have a payroll system. A payroll system is an infrastructure that assists in calculating and managing workers’ paychecks. Business owners have several options to explore:
- Manual approach: Involves doing payroll by hand. However, it is the most time-consuming and tiring way of maintaining a payroll. More so, it is susceptible to errors.
- Outsourced method: In this case, the business owner hires an external expert to set up the payroll system. These experts manage all activities involved with payroll, including all the taxes involved.
- Software system: It is the best for any business, allowing a firm to enjoy cost-effectiveness, time-saving, and accurate processes. Importantly, today’s payroll software offers additional features that help in tax calculations. Small business owners should consider investing in payroll software for better results.
If you found this article helpful, stay tuned on our blog. We will be publishing ‘Part 2’ of this guide soon!