Most people do not consider payroll management to be the most fascinating aspect of business. However, there is no denying that payroll management provides incredible value for society. One indicator of this is the fact that the industry in the United States alone for payroll and bookkeeping services is worth more than $55 billion every single year!
Many people become experts in payroll management through many years of experience. In the meanwhile, they often suffer through common payroll problems.
Fortunately, you can stand on the shoulders of giants. Learning from the mistakes of others can help you to become a payroll management expert as soon as possible.
So what exactly can you do to take your payroll management skills to the next level? Read on to learn all about the most important payroll management tips every employer should know!
1. Think About the Right Way to Pay Your Employees
When some people first imagine paying their employees, they naturally imagine either paying them a salary or paying them an hourly wage. However, just because an option comes to mind first does not mean that you should actually do it. There are important pros and cons to both salaries and hourly wage alternatives.
Even if you have already started paying your employees, you can always change your systems. It can be a little bit difficult to transition your current employees over to a new system. However, you may calculate that it is worth doing.
Plus, you can at the very least create an ideal system for any new employees who join down the line.
Paying employees a salary is usually simpler. You do not have to keep track of any specific hours. That can make the payroll system easier to manage.
However, it may not be worth it to make payroll easy to manage if you have to pay for that ease in dollars. Using hourly wages will often be much more efficient for a business.
Sit down and think through which option is best for you. If you decide to use an hourly wage system, make sure you are using an efficient system to help you keep track of how many hours each employee works.
2. Choose the Appropriate Schedule for Paying Your Employees
Once you have decided how to pay your employees, you’ll have to decide how often to pay them. In theory, you have infinite options for when you will pay your employees. In practice, almost every business pays every week, every two weeks, or every month.
The most important thing is that you have a consistent system. That way, you can set up payroll practices without having to think them through every time you pay your employees.
3. Make Sure to Classify Your Workers Correctly
There are different requirements for how you pay workers depending on how you classify them. Employees have certain rights that independent contractors do not. If you have interns, they receive very different treatment from either employees or independent contractors.
Make sure that you set up separate payroll practices for each type of worker.
4. Find a Powerful Payroll Software to Help You
These days, almost anybody can manage payroll for a small business as long as they find the right software to help them. There are software tools designed for huge companies. These are probably not the right choice for a small business.
You should also avoid software designed for payroll experts. Unless you are a payroll expert, you are looking for software that will help you manage the basic functions of payroll rather than more complicated procedures.
5. Simplify Your Processes for Managing Payroll
Many people figure out their payroll system on the fly. As a result, it sometimes contains inefficiencies. These inefficiencies can be difficult to detect, especially if the payroll system is not actually written down.
Next time you go through your payroll system, give yourself some extra time. Every time you move on to the next step, write down what the next step is.
Once you are done, look over your steps. Decide if there are any unnecessary steps that you can remove.
6. Carefully Track Everything Connected to Employee Payroll
As you go through your payroll system, you will often need to consult certain documents. Make a list of every document that you ever need to examine during your payroll process. Set up an additional system to make sure that these documents are in a certain spot so that you can always reference them during your payroll process.
If you are not careful, you can set yourself up for a very difficult time come tax season. Make sure to keep all relevant documents in a predictable place to avoid this.
7. Apply Payroll Management Tips to Automate Functions
If possible, find a payroll service that will help you automate as much of the tax filing process as possible. Many payroll software tools allow you to automate both state and federal taxes. This can save you a lot of time and stress.
8. Plan in Advance for Changes in Payroll Costs
Make sure that you account for potential changes to your payroll costs. These can include changes in salary, wages, and benefits.
You should also account for your tax costs. Remember to account for employee unemployment taxes as well as Social Security and Medicare.
Apply the Most Important Tips for Payroll Management
We hope that some of the ideas in this brief article about the most important tips you can apply to payroll management have been helpful for you. Many businesses struggle with common payroll problems for years. Fortunately, the solutions to these problems have mostly already been found.
That makes learning a little bit more about common payroll practices an investment that will more than pay for itself down the line. To learn more about how to effectively manage your payroll or to speak with experts in payroll management, feel free to reach out and get in touch with us here at any time!