Payroll management is one of the essential tasks that a small business owner has to do. It’s a complex process requiring you to track all your employees’ salaries, taxes, and other deductions. Payroll management also involves filing tax forms and making payments on time. If you’re not careful about managing payroll, you might face penalties or fines from the internal revenue service (IRS).
Here are six of the best practices for payroll management for your startup organization:
1. Outsource A Payroll Officer
You should outsource your payroll to an expert. This person can take care of all the calculations and ensure that all taxes, insurance payments, and other deductions are made correctly. They also make sure the process is completed on time, so there’s no delay in paying salaries.
When looking for a payroll officer, check if they have all the necessary certifications and experience to handle this job. A good option is to hire someone who has worked in this field for some time and can understand your needs perfectly. They should be able to provide practical solutions to any issues that may arise during the process.
2. Make Timely Payments
Paying salaries on time is an integral part of any payroll management system. Paying a salary late could cause problems for your employees and affect their performance at work. You should ensure that wages are delivered on time so employees don’t have to worry about money issues while working for your company.
You may use reliable payroll management software to ensure you’re making timely payments. This tool makes it easier to manage all the different aspects of the payroll management process. It also helps keep track of the amounts paid to each employee and the number of hours worked by them. This way, you can avoid paying extra money to some employees while shortchanging others.
3. Calculate Taxes Accurately
Taxes are one of the essential things needed to be focused on when it comes to payroll management practices. If you calculate them correctly, it could be a manageable headache for you and your employees.
When it comes to taxes, there are two major types: federal income tax and state income tax. Federal income tax is calculated using Form W-2 and state income tax is calculated using a state form like Form 1099-MISC. If you use online payroll software, they’ll calculate these forms for you automatically. This way, all you have to worry about is ensuring your employees fill them out appropriately.
4. Know What Your Employees Are Paid
It’s crucial for employers to keep track of all employee wages and hours worked so they know how much they should be paying in payroll taxes each week or month. This ensures that they don’t underpay or overpay their staff during the year by accident or by not knowing exactly how much each employee earns per hour or week.
You may use a payroll software program to notify what your workers are paid. You can also use an Excel spreadsheet or Microsoft Access database that helps manage your company’s finances. These programs allow you to enter each employee’s salary, bonuses, and overtime pay manually or automatically from your accounting system.
5. Provide Employee With Itemized Pay Statements
This is one of the most important things you must do when managing your employees’ paychecks. You need to provide each employee with an itemized pay stub that shows all the deductions from their paycheck. This is important because it helps employees understand how much money they earn before taxes are taken out. It also helps them see where their money is going so that they can make a better budget for their expenses and savings goals.
You may provide your staff with itemized pay statements by providing them with a copy of their W-2s at the end of the year. If you want to be extra helpful, you can also create an online portal where your employees can log in and see their records whenever they like. This way, you can manage your payroll while helping your workers manage their finances better.
6. Keep Up-To-Date Records
You’ll need to keep records of various aspects of payroll management such as employee information, contact details, salary amounts, and deductions, among others. Keeping these records up-to-date will save you time when making changes or adjustments down the road. You should also ensure adequate storage space for all these documents, so they’re readily available when needed.
When keeping up-to-date records, ensure they’re organized in a manner that makes sense to you and your employees. Suppose you’re using an online system for payroll management. In that case, you should store the information of each employee in one place, including their names under one section and their contact details in another. This way, you can access all their information quickly when needed without searching through multiple documents or folders that might not even pertain to them.
Key Takeaway
One of the consequences of operating a small business is that there’s often a lot to do and only enough time to do it. One area where this tends to happen frequently is with payroll. Business owners might need help to apply the same level of attention and work to payroll as other areas such as marketing and client relations. You can follow a few practices to make your payroll management more effortless.