Angry employees surrounding your desk after receiving a less-than-satisfactory paycheck is not an ideal situation. Honestly, there are many opportunities to make mistakes in small business accounting. While the advent of more computerized systems reduced typos and errors relative to paper records, numeric or miscalculated equations can vastly still impact employees’ paychecks.
At Padgett Payroll Services®, there is no payroll mistake that we have not seen. Our payroll administrators are spread across 400 offices throughout the U.S. and Canada, so your small business has an expert nearby to advise you on payroll improvements. Here are some small details to improve in your small business payroll procedures to reduce the chances of making a mistake.
Determine Your Payroll Schedule
Traditional employees often fall under weekly, semi-monthly or bi-weekly pay schedules. Contracted employees typically receive paychecks for services on the day of services provided unless otherwise specified in company contract and business statements. Understanding how each of these pay schedules work is absolutely important in ensuring that there are no dire mistakes. Meet with your executive team to decide whether all employees should be subject to the same pay schedules or keep salaried, contracted and hourly employees separate.
Classify Your Workers (in-house employees, subcontractors, contractors or vendors)
Speaking of salary versus hourly, it is very important that your small business accountant is able to classify each of your employees appropriately. This becomes a prerequisite to payroll taxes.
Understand Payroll Taxes and Pay Them Respectively
The United States’ Government has a governing power over taxes through the Internal Revenue Service (IRS) that determines federal, state and other taxes specific to every employee. Upon hire, all employees are required to fill out the correct form dependent on the nature of their employment with the business.
Non-contracted employees are to fill out W-4 and W-9 forms, allowing them to select which percentage they want withheld for federal and state taxes. Contracted employees, however, have two separate forms – the 1099-MISC and the W-2. If any of the figures within these documents are added incorrectly into the IRS and your business’ payroll system, there could be major discrepancies come tax filing time.
Maintain Accurate Employee Records Including Required and Optional Benefits
1. Keep a close eye to each employee’s start and leave dates. This becomes especially important regarding tenure, tax season preparation and benefits or PTO eligibility.
2. Don’t forget holiday pay! Many employees look forward to these days with their friends and family with the assurance that if it is a paid holiday, that it will be reflected within their next paycheck. This is also true for any overtime. Your company may have certain overtime policies, so make sure warnings are in place for employees breaching their time cap if they are not eligible for overtime pay.
3. If an employee decides to take personal time or vacation time, be sure to record this and account for it on a pay schedule basis. TIP: Your company may want to instate a policy that all vacation time be requested two to four weeks ahead of time to accurately account for this time allotment.
4. Your company is required to educate employees about their eligibility for benefits and deadlines to apply, and ensure their paycheck deductions of these benefits are accounted for.
Padgett Payroll Services® is your one-stop shop for all your small business payroll needs. We can manage the headache of tax preparation and maintaining employee records for you with our outsourcing services. Learn more from our payroll experts today!