Does your business take care of payroll in-house? If so, you know that this can be a stressful and time-consuming process.
First things first: what is payroll management? In simple terms, this is a system for processing employee wages while complying with labor laws. Depending on the type and size of your business, payroll can play a key role in its financial health.
Keep in mind that the IRS is very interested in your payroll management abilities. If you don’t know how to do payroll the right way, you may be subject to civil penalties. In 2017, the IRS assessed close to $7 billion in non-compliance penalties.
The good news: managing your payroll isn’t as scary as it may seem. Here are 10 tips that should help you make the process more efficient.
1. Set Up a Payroll Calendar
A payroll calendar helps your staff with planning relevant payroll tasks. It also lets your employees know when time cards are due and when they’ll get paid. The easiest way to create a calendar is to use a payroll app or an Office Suite program.
While setting up your payroll calendar, you should stick to certain guidelines. For instance, use a regular calendar to identify dates that may slow down processing. Also, use colored fonts to note early time card deadlines and other key information.
2. Focus on Transparency
When it comes to payroll, many issues are a result of employee misunderstanding. To avoid that, put your payroll policy in writing and ensure that each employee has a copy. While you’re at it, update the employee handbook as well.
As for what information to include in the policy, start by describing the payroll process. This includes methods for classifying employees and determining salaries. Procedures for handling payroll mistakes are also a must.
3. Train Your HR Staff on Payroll
Yes, payroll processing is already part of any HR professional’s training. That said, their expertise likely lies elsewhere. Though HR doesn’t deal with payroll directly, they can still make use of payroll training sessions.
The main goal is to improve collaboration between the HR and payroll departments. This prevents conflicts and creates a more cohesive team. It also cuts down on manual work, since combining reports reduces the amount of paperwork.
4. Document the Process
While setting up payroll, do your best to document the entire process. This will help you identify weak points and find the process that works best for your business. For best results, share the documentation with your payroll team.
The documentation should include all the processing steps and the check handling process. Make note of each step for filing tax reports and payroll registers. Make sure to have instructions on how to process payroll manually in case of an emergency.
5. Keep up With Regulations
Do you know how to do payroll taxes? Most business owners would say yes, but keeping up with state and federal regulations is no easy task. Procedure changes occur for many reasons, from business relocation to hiring remote employees.
The best way to stay on top of things is to submit a W-2 form by mid-April of each year. That way, the payroll team can keep up with changes affecting state and federal deadlines. This also helps with calculating wages, hours, and benefits.
6. Hire Qualified Staff
As we established, your payroll staff will have a lot of ground to cover. If they don’t have relevant skills, they may make errors or incur compliance penalties. You should only hire candidates who can handle the tasks your business needs.
Now, this doesn’t always refer to people with great qualifications. Often, it’s just as important to find a person who is a good fit for your work culture. Look for qualities such as math skills, experience, integrity, and adaptability.
7. Don’t Dip Into Payroll Tax Funds
If your business is running low on cash, borrowing from payroll tax funds can seem tempting. More often than not, this would be a serious mistake. If you can’t replace the borrowed funds, you risk being unable to pay the IRS.
To avoid these mistakes, open a separate payroll account for your contributed taxes. While you’re at it, consider creating a cash reserve for your business. That way, you’ll be able to rely on your emergency funds instead of payroll tax funds.
8. Automate When Possible
Processing payroll manually takes a lot of time and money. Plus, mistakes happen all the time, especially in businesses that have an increasing number of employees. One way to stay up to date is to automate as much of the process as you can.
These days, payroll software can help you with all kinds of tasks. Most software can create paychecks, send direct deposits, and calculate payroll taxes. Some products can even prepare and file federal and state payroll taxes.
9. Request Feedback From Employees
Don’t assume that all your employees understand your payroll procedures. From time to time, invite suggestions on potential improvements. If there are issues with the use of time cards or timesheet submissions, you’ll want to know about them.
One way to do that is to hold an all-staff meeting about payroll issues. Since everyone’s affected by the process, most employees will want to take part. You can also issue a company-wide survey to gauge the level of employee satisfaction.
10. Consider Outsourcing
For a growing business, paying employees on time can become overwhelming. If you find yourself in this situation, you may want to outsource your payroll tasks. This will mitigate the risks and help you avoid any staffing-related problems.
If you go down this route, opt for a service that suits your business. Many services offer full-service, industry-tailored solutions that benefit companies of all sizes. Getting a free quote is another useful feature.
More on How to Do Payroll
As you can see, payroll management is no walk in the park. Still, following these 10 tips should keep you updated.
Remember, delivering employee paychecks on time goes beyond payroll issues. This is something that represents your brand and helps you with employee retention. By developing the right payroll strategy, you’re supporting your culture.
Want to know more about how to do payroll? Looking for help with tax preparation and other IRS issues? We can help you out — contact us right here!
