- September 18, 2023
- Posted by: Mohammed Abiola
- Category: Finance & accounting
Taking care of payroll as a small business owner can be a tedious task, especially when you have no idea what payroll management is all about. Although Payroll processing takes time and requires one to be careful and precise, it’s a vital aspect of every business. And every business owner must integrate a robust payroll system to run their businesses smoothly.
A business that has grown from a one-man operation to employing one or more people needs to compute payroll. It involves overtime, payroll taxes, minimum wage, salary, etc. Improper management of payroll can lead to consequences such as fines, charges, and even court cases, which can be avoided with appropriate knowledge and careful application of the knowledge.
In this article, we will explore tips to make payroll management for small business owners more efficient and effective.
Payroll management tips every small business owner must know
Train your HR on payroll
Some businesses can afford to hire both an HR team and a payroll team concurrently. In this case, there’s a separation of duties pertaining to the handling of payroll for the success of the business.
However, in the event of non-disposal of your payroll team or having just an HR team, they can manage the processing of payroll to reduce workload or take over the payroll process in addition to their core duties.
To ensure the capability of HR, you need to train your HR team on the current payroll processing practices by organizing payroll training programs handled by seasoned payroll managers. In addition, training your HR staff on payroll policies will help boost effective communication between them and employees concerning payroll. And in the process, create a healthy work environment.
Set up a payroll budget
A successful payroll strategy can’t exist without a payroll budget. You need to have a budget laid aside to take care of employees’ wages, salaries, compensations, benefits, taxes, payroll taxes, and insurance. Creating a plan for this will help you avoid difficulties that you may encounter.
Before you start your monthly, biweekly, or weekly payroll processing journey based on your payroll structure, ensure the funds are available. Don’t borrow for your payroll so as not to put your company into debt. You have to take into consideration overtime, bonuses, and commissions, which should be reflected in your budget. You don’t want to be in a situation where you are deficient in paying your employees for services rendered.
Set up a payroll calendar
Payroll calendars are vital for a successful payroll structure. It will help employees know when to expect their wages and salaries and keep track of payments. Also, it helps the payroll processing time to process tasks efficiently within the specified period.
There are various ways to set up a payroll calendar. You may consider using payroll software, as it automates the entire process and creates a schedule of when the payroll will be due. Also, you may consider using a manual calendar by creating a spreadsheet that integrates all the information you need.
Creating a payroll calendar will ensure all your employees have a uniform pay schedule. This can be done weekly, biweekly, or monthly, but before putting this into effect, ensure your employees are aware before resuming duties to avoid misunderstandings. A calendar also helps you file your taxes within the specified time to avoid unnecessary fines and charges that come with late tax filing.
Properly classify employees
Employee misclassification is a big offense, and if found wanting, it can attract penalties and charges. To prevent such a situation from occurring, you have to classify your employees appropriately, either as full employees or independent contractors. To identify the classes to place your worker in, you have to take into consideration some factors, which are broken down in the table
|Tax||According to the law, employers are required to pay employees taxes on their behalf.||A contractor is liable for their employment tax|
|Tools||Employees depend on the tools provided by the employer||Contractors provide their own working tools|
|Service||Employees provide services that are available within the company or business.||Contractors provide services not rendered by the company or business.|
|Work time||An employee works full-time and has a fixed time slot||A contractor works part-time, and work time varies.|
|Bonuses||In accordance with the law, full-time employees are eligible for bonuses and other forms of entitlement.||Independent contractors are not eligible for bonuses, per the law.|
|Pay structure||Employees are paid based on the minimum wage structure of the country.||Independent contractors are paid based on several factors, including length of service, experience, and negotiation.|
Stay updated with government policies
The government tends to change payroll policies from time to time. For instance, to improve the standard of living, the government may implement a minimum wage increase or changes in the income tax. Not only should you be aware of this, but you should also integrate it into your practices. Ensure you keep abreast of the latest changes, policies, and regulations, both at the state and federal levels, and follow them to the letter to prevent consequences in the long run.
Automate your process with payroll software
Going paperless to manage your payroll comes with a lot of benefits, such as the fact that you get to save time and money and reduce the stress that comes along with it. Choosing the right software is vital, as it helps in organizing and simplifying your workflow that comes with calculating tax deductions, wages, and salaries, as well as benefits, bonuses, overtime, and compensations.
There are lots of payroll software options out there to choose from. Weigh the pros and cons of each software, ensure the software has a rapid customer service response system, and choose the best fit for your business. Diligently study the software to make effective use of it, and if you come across a problem, you can ask for help from the customer care service.
Though payroll software costs money, the benefits over pen and paper are enormous. With an automated system, you get quality assurance as you can easily spot errors and effect corrections, while with a paper payroll, you may omit a mistake, which can cost you money and reputation. Some of the payroll software options you can choose from include QuickBooks Payroll, Onpay, Gusto, Workful, and ADP.
Maintain an accurate timestamp
You don’t want to go wrong with this. An accurate timestamp is synonymous with an accurate payroll. Monitor your employee’s attendance to produce an accurate payroll; you won’t want to overpay or underpay an employee as a result of not tracking their attendance.
You can use both manual and automated time tracking systems, like a biometric machine, to track your employees’ work presence and productivity. Most time tracking apps will allow you to download the attendance data or link it to a payroll system. Choose what works best for your business. Also, make sure your employee takes manual attendance to improve accuracy and prevent missing input if a malfunctioning machine occurs.
Maintain payroll records
Proper documentation of employees and payroll records is essential in payroll processing. You need to keep information regarding your employees, the class of worker they belong to, their tax identification number, the number of hours worked per day, the number of days worked per week, and the number of hours for overtime. Ensure you keep accurate records, and ideally, it’s best to always check your records to spot mistakes and correct them without delay.
You should maintain your payroll records of paid salaries, wages, and taxes for a minimum of four years for reference. And a minimum of 3 years for the timestamps of every employee.
Embrace digital payroll
Going digital will help you save time going to banks, filling out paperwork, issuing checks, or carrying physical cash. You can simply transfer funds to your employee’s bank account or use a payment system to automate that. This process also saves employees the stress and time of going to the bank to deposit their cash or withdraw their checks.
Outsourcing payroll can be the best way to save time and focus on managing your core business activities. Though it can be quite expensive, especially for small businesses with fewer employees, the benefits it provides outweigh the cost. Payroll management is complicated, especially for those with little knowledge about it, and time-consuming. Any mistake, such as a delay in tax payment or paying your employee, can attract fines or upset your employees, and you won’t want that.
Outsourcing to a payroll consultant gives your HR team more leverage to execute vital HR duties applicable to the success of the company, such as recruitment and hiring, onboarding, training and development, counseling, etc.
Why consider PoweredUp Consulting to take care of your payroll?
Payroll processing can be cumbersome for lots of small businesses to handle. At PoweredUp Consulting, we have experts who will manage your payroll processing accurately and on time. We will take away the workload and stress associated with payroll management while you focus on running your business with ease. Our experts are up-to-date with the regulatory conditions in Nigeria and will meet your compliance needs.
To learn more about our payroll services, book a consultation with us today.