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Payroll 101: Tips to Save and Stay Organized

Small business owners and operators need a streamlined system that allows them to maximize every resource and ensure part-time employees are paid on time.  
Photo credit: NIKCOA - stock.adobe.com

When small businesses don’t consistently track employee hours and manage payroll, it can lead to a downshift in profits. That’s why owners and operators need a streamlined system that allows them to maximize every resource and ensure part-time employees are paid on time.

Use these guidelines as a checklist to determine where you can make improvements:  

Start with the Basics 

Consistency is key when it comes to an efficient payment system. “Set a payroll cycle and stick to it,” said Charlette Beasley, a careers and workplace analyst at FitSmallBusiness.com. If you decide every Friday will be payday, or if you establish that checks will be sent every two weeks, staff members will know when to expect their wages. “If you’re working with a payroll provider, take note of the direct deposit processing time so no one receives their money late,” Beasley added. “Some providers require a four-day lead time, which means you have to process payroll at least four days before you want your employees to receive the funds.” 

If your business employs tip-earning workers, make sure it’s easy for them to report their tips for every shift. You might print copies of the IRS Daily Tip Reporting Form and ask staff members to fill one out every day. If your system makes it possible to enter tips electronically, set reminders for workers to report tips when their shift ends. 

Keep Track of Time  

Without a time clock in place for hourly workers, 10% of wages on average are wasted, according to Charles Read, President and CEO of GetPayroll. This means if you ask staff members to simply write down on a card the time they come in and when they leave, you’ll likely spend 110% of what you should be paying for their hourly wages. 

To correctly align wages with the number of hours worked, consider technology that helps record time. “A biometric clock prevents buddy punching,” Read said. This type of clock scans an employee to check for unique physical characteristics, such as their fingerprint, to verify the worker’s identity. 

If your payroll system allows employees to swipe a card to check in and out electronically, you’ll still want to manually review their working times. You might find, for instance, that a worker forgot to swipe their card at the end of the shift, making it appear they worked for an extraordinarily long shift. 

Ensure Legal Compliance 

If you manually calculate employee paychecks and the amount of taxes due, check that you’re using the most up-to-date tax tables since IRS tax rates can change on an annual bases.  

For businesses with more than a handful of employees, a payroll system or service can sort out the different federal, state and local tax requirements. “They provide payroll tax support by automating deductions and tax withholdings from employee wages, and remitting the correct amount to the various tax agencies based on the latest payroll tax regulations,” said Mark Dockham, President of Intrepid Payroll, Inc. 

 Payroll services can also manage annual tax forms. “When tax season rolls around, they create, distribute and file W-2s for employees or 1099s for independent contractors,” Dockham explained. “Tax management services might also include 940 and 941 filings, W-2 and W-3 processing, state withholding and unemployment.” 

Clearly Communicate Policies 

Once you have your payroll system in place, write out the guidelines for employees in a policy manual or handbook. “Every aspect of how you pay your employees should be covered in detail,” Read said. Include information about pay rates, tax requirements, tip policies, overtime, time keeping, pay periods and pay dates, and payment on termination. In addition, be sure to list how employees are paid, such as through checks or a direct deposit. 

When you hire staff, ask them to read and sign the manual or handbook. “Having policies for your employees that they have read and acknowledged at the beginning of employment reduces turnover, disagreements, misunderstandings and other unpleasant aspects of dealing with upset workers,” Read said. If you make changes to your policies, update the manual and ask employees to sign it again. This will allow state and federal labor offices to see you have written contracts with employees that outline your current policies. 

Rachel Hartman is a freelance writer who covers small business, finance and lifestyle topics. A previous version of this article appeared in Pizza Today and was edited for publishing to our audience. 

Payroll 101: Tips to Save and Stay Organized

by | Aug 24, 2023

Small business owners and operators need a streamlined system that allows them to maximize every resource and ensure part-time employees are paid on time.  

When small businesses don’t consistently track employee hours and manage payroll, it can lead to a downshift in profits. That’s why owners and operators need a streamlined system that allows them to maximize every resource and ensure part-time employees are paid on time.

Use these guidelines as a checklist to determine where you can make improvements:  

Start with the Basics 

Consistency is key when it comes to an efficient payment system. “Set a payroll cycle and stick to it,” said Charlette Beasley, a careers and workplace analyst at FitSmallBusiness.com. If you decide every Friday will be payday, or if you establish that checks will be sent every two weeks, staff members will know when to expect their wages. “If you’re working with a payroll provider, take note of the direct deposit processing time so no one receives their money late,” Beasley added. “Some providers require a four-day lead time, which means you have to process payroll at least four days before you want your employees to receive the funds.” 

If your business employs tip-earning workers, make sure it’s easy for them to report their tips for every shift. You might print copies of the IRS Daily Tip Reporting Form and ask staff members to fill one out every day. If your system makes it possible to enter tips electronically, set reminders for workers to report tips when their shift ends. 

Keep Track of Time  

Without a time clock in place for hourly workers, 10% of wages on average are wasted, according to Charles Read, President and CEO of GetPayroll. This means if you ask staff members to simply write down on a card the time they come in and when they leave, you’ll likely spend 110% of what you should be paying for their hourly wages. 

To correctly align wages with the number of hours worked, consider technology that helps record time. “A biometric clock prevents buddy punching,” Read said. This type of clock scans an employee to check for unique physical characteristics, such as their fingerprint, to verify the worker’s identity. 

If your payroll system allows employees to swipe a card to check in and out electronically, you’ll still want to manually review their working times. You might find, for instance, that a worker forgot to swipe their card at the end of the shift, making it appear they worked for an extraordinarily long shift. 

Ensure Legal Compliance 

If you manually calculate employee paychecks and the amount of taxes due, check that you’re using the most up-to-date tax tables since IRS tax rates can change on an annual bases.  

For businesses with more than a handful of employees, a payroll system or service can sort out the different federal, state and local tax requirements. “They provide payroll tax support by automating deductions and tax withholdings from employee wages, and remitting the correct amount to the various tax agencies based on the latest payroll tax regulations,” said Mark Dockham, President of Intrepid Payroll, Inc. 

 Payroll services can also manage annual tax forms. “When tax season rolls around, they create, distribute and file W-2s for employees or 1099s for independent contractors,” Dockham explained. “Tax management services might also include 940 and 941 filings, W-2 and W-3 processing, state withholding and unemployment.” 

Clearly Communicate Policies 

Once you have your payroll system in place, write out the guidelines for employees in a policy manual or handbook. “Every aspect of how you pay your employees should be covered in detail,” Read said. Include information about pay rates, tax requirements, tip policies, overtime, time keeping, pay periods and pay dates, and payment on termination. In addition, be sure to list how employees are paid, such as through checks or a direct deposit. 

When you hire staff, ask them to read and sign the manual or handbook. “Having policies for your employees that they have read and acknowledged at the beginning of employment reduces turnover, disagreements, misunderstandings and other unpleasant aspects of dealing with upset workers,” Read said. If you make changes to your policies, update the manual and ask employees to sign it again. This will allow state and federal labor offices to see you have written contracts with employees that outline your current policies. 

Rachel Hartman is a freelance writer who covers small business, finance and lifestyle topics. A previous version of this article appeared in Pizza Today and was edited for publishing to our audience.