Managing payroll might be a necessity for business owners, but it can be a real burden, too. With so many compliance issues to navigate, and sometimes hundreds of employees to pay fairly, legally, and on time, some understandably turn to third party payroll providers to help them cope.
While this is the ideal solution for a lot of companies, it still pays to have at least a basic understanding of payroll compliance for yourself, and the following tips should help:
- Understand wage and hour laws
Employee compensation is governed by many regulations that are subject to change, and it’s best to familiarize yourself with all of these to make sure your employees are fairly compensated for their work, and to avoid the potential of legal problems.
- Make sure your employees are classified correctly
To comply with payroll regulations, classifying employees correctly is essential. By understanding the criteria that governs each different classification, such as exempt and non-exempt, employees and independent contractors, you can determine the correct status for each worker, and ensure that you accurately calculate their wages, overtime pay, and benefits.
- Keep accurate and up-to-date records
While it is of course your legal responsibility as an employer to maintain payroll records accurately, doing so is also crucial for helping to settle any disputes and audits. Key information such as time and attendance records, employee data, tax-related documents and pay stubs, should all be tracked and retained. Payroll software can help you to streamline all processes associated with recordkeeping, and if you outsource your requirements, you’ll likely find that the third party service provider uses the latest software.
- Keep up with your tax obligations
From federal and state to local taxes, small business owners must successfully navigate a number of payroll tax requirements, some of which include Social Security tax, income tax withholding and Medicare tax. Avoiding IRS penalties (which can cost a company dearly both financially and in terms of its reputation) is only possible if these taxes are calculated accurately and remitted in a timely manner; an outsourced tax professional can help ensure that you achieve this as and when necessary.
- Know your reporting and filing responsibilities
In the majority of instances, small businesses must submit payroll reports and associated filings to the relevant government agencies, which can include 941 and W-2 forms. Make yourself aware of the deadlines for each of these and what the process entails, so that you can submit them accurately and on time, to achieve full tax compliance.
- Keep up-to-date with changes
If you outsource your payroll requirements, you won’t need to concern yourself too much with this, or any of the points mentioned above, but it’s worth remembering that tax laws and regulations surrounding payroll can change at a moment’s notice, making it essential to stay up-to-date with them at all times to remain payroll compliant.
Having a sound grasp of what is needed to run payroll accurately and stay compliant, can be immensely helpful in keeping your workforce happy and productive, and for keeping the IRS from your door. But it isn’t something that you have to worry about too much if you choose to outsource your payroll needs.
With plenty of affordable and reliable outsourced payroll providers based both locally and remotely, there’s no need for payroll compliance to become a headache for small business owners anymore, and if you haven’t already explored this option in detail, perhaps you should?