Accurate and timely payroll processing means your employees get the correct pay every week and your company stays in compliance with employment and tax regulations. Good pay practices depend on the quality of your payroll processing. These five tips can help keep payroll on track, reduce time and cost of processing, and save the environment.
1. Understand Employee Classification
Many companies struggle with the rules for employee classification, but improper classification can mean hefty fines and the need to reorganize how works gets done in your company. It’s particularly important for employers to pay attention to how they are categorizing temporary and seasonal staff, who are often incorrectly categorized as independent contractors, even when the type of work they do and how they do it doesn’t qualify for independent contractor status. Specific criteria for independent contractors can be challenging to understand but it’s very important to get it right, especially for payroll. A trusted payroll vendor or online payroll processing service can take the guesswork out of employee classification and keep your company up-to-date on current payroll and employment law.
2. Follow a Good Hiring Process
A good hiring process is very important to a good payroll process, especially for online payroll processing where accurate input depends on having the right information in front of users. Create a written procedure to follow for getting all the necessary information from new employees when they start, and use a checklist so all the required identification and payroll information is collected and nothing is missed. The checklist should include things like getting proof of identification, verifying social security numbers, gathering completed tax forms, reporting new hires to the state within the required deadline, and explaining payroll.
3. Keep a Verifiable Paper Trail
Payroll taxes are a serious responsibility for employers that can have expensive and complicated consequences if not tracked and submitted according to legal requirements. Keeping separate financial accounts for paycheck withholding funds for federal, state, FICA (Social Security and Medicare taxes), and FUTA (unemployment taxes) creates an easy-to-access and well-documented paper trail for legally required reporting and payment deadlines. Most online payroll services can do this for employers, minimizing the need for separate accounts and providing detailed records upon request.
4. Automate Your Payroll Process
Manual payroll may make the owner feel more in control, but can actually be the very opposite. The more manual processes are involved, the more chance for error. Automated payroll processes that include features like mobile time clocks and payroll calculators dramatically reduce errors, save time and money, and make your payroll process more reliable.
5. Take Your Payroll Paperless
It takes time and costs money to produce and distribute paper checks. That time and money could be used for other things when going paperless for payroll. Electronic, paperless payroll systems mean your employees receive their funds at the same time each cycle, and can view their stub, as well as other items, electronically without the employer needing to deliver anything. It’s good for the environment, too.