Payroll is essential to running a successful business, but it can be complicated and time-consuming to set up. This can make payroll one of the most challenging parts of your job as an entrepreneur. Fortunately, there are several ways you can make payroll easier on yourself and your employees, from automating tasks like taxes and deductions to helping out with the administrative side of things. This article will detail payroll basics and common pitfalls that small business owners must avoid.
Getting Started: Payroll 101
Payroll is generally defined as “all those things that employers do for employees,” including allocating wages and benefits, withholding taxes from paychecks, making tax payments, and filing paperwork with state agencies (like unemployment insurance). The federal government oversees certain aspects of payroll—the IRS collects income tax every year—but states oversee employers’ responsibilities when it comes to paying overtime wages or providing workers compensation insurance coverage for injuries incurred on the job.
Small Business Payroll Challenges
Lacking A System To Track Payroll Information
A lack of a system to track payroll information can cause many problems. It’s essential to keep track of all this information so you can make sure everything is accurate, and if there are any issues in the future, you’ll be able to go back and figure out what happened.
Tracking payroll information is also critical for keeping your company compliant with federal and state laws. You need to keep track of employee hours worked to know how much they should be paid each week or month. You also have to keep up with all the relevant tax information so that it can be reported accurately on Form 941 or other required forms.
Paying Employees Late
Paying employees late can hurt your business. If you’re paying employees later than scheduled, it can cause stress for both managers and employees. It also risks companies being late on other bills, like utilities and rent. To avoid pay issues in the future, take the following steps: Make sure you have enough funds in your account to cover payroll. This can be difficult if you don’t have a consistent revenue stream or are waiting for invoices to come through from clients or vendors. Reviewing your finances regularly will help keep this from happening again!
Misclassifying Hourly Employees As Salaried Exempt Employees
To ensure you’re covering the right amount of payroll taxes for your employees, it’s important to classify them correctly. In general, an employee is classified as either hourly or salaried exempt. An hourly employee is paid by the hour and does not receive any benefits like insurance or vacation time; a salaried exempt employee receives a fixed paycheck each pay period regardless of hours worked and thus is not eligible for overtime pay.
Why do we care how employees are classified? To help ensure that all workers are being treated fairly under state and federal law, various regulations require that employers withhold income tax from employee paychecks regularly—and some states also require employers to withhold sales tax on their behalf as well. There are exceptions for certain types of jobs (for example, some states do not require employers to withhold income taxes from commission-based wages). Still, generally speaking, most companies will need to withhold at least some portion of an employee’s salary to comply with these laws.
Failing To Update Employee Records
If you fail to keep employee records up to date, it can cause several problems. For example: You may have difficulty paying employees on time if they haven’t given you updated contact information.
Employees could be concerned that you’re not properly administering their taxes and other benefits, leading them to leave the company and go somewhere else where they feel more secure.
Relying On The Wrong Software
It’s essential to look for the right payroll software. Payroll software that is easy to use will save you time and money. Examine your needs carefully before choosing a payroll vendor, especially if you have many employees or need additional features like retirement plans and healthcare benefits.
If you’ve been struggling with employee payroll for your small business, it’s time to make a change. Payroll software can help you take control of the process and save you time and money. You may be surprised by how much better your employees feel about getting paid on time and their increased productivity. In short, this investment will pay off in spades! Running a small business is hard, so don’t make things more difficult by adding payroll challenges to your plate. At Kurv Business, we make it possible for you to automate payroll at a price you feel good about. Learn more about us here.