Instituting Paperless Payroll

In today’s “fast-food” world, convenience is mandatory. It’s no different when it comes to paying your employees. As a result, payroll cards are a fast-growing option to more traditional forms of payroll payment, such as paper checks and bank direct deposit. Plus, failing to offer payroll alternatives can result in your company running the risk of missing out on talent and retaining experienced employees. With paycards, employees’ payments are directly deposited onto a debit card without the need for a bank or cash checking service as the middleman. Payroll debit cards are reloadable pre-paid cards that employers can use to deposit their employees’ net wages. In turn, workers can conveniently use them to make purchases, withdraw cash, and pay bills.

Payroll debit cards are a win/win for you, the employer, and your employees. A top reason to use them includes boosting employee satisfaction, because, in addition to helping to retain employees, they simplify your payroll process.

When using payroll debit cards, your employees:

  • Gain immediate access to funds, once they’re deposited. They no longer have to cash a check, take time during lunch to make a deposit, or incur check cashing fees.
  • If an employee doesn’t have a bank account, they can still access their money by using a paycard, provided paycards are permitted in your state and all rules and regulations are met.
  • With a paycard, there are no monthly fees, minimum balances, or bank charges incurred, and more often than not, only a small fee is charged for handling certain transactions.
  • Paycards are ideal for certain industries, including hospitality and food service. In some instances, paycards have programs that give employees the option to have their tips sent directly to their paycards, along with their wages.
  • Employees can access their money through ATMs; however, they should note that some financial institutions limit the number of monthly transactions or charge a fee for withdrawals.
  • Just like a debit card, merchants who accept them will also accept paycards when handling transactions.
  • With a paycard, there’s no concern over fraudulent or stolen checks.
  • Depending on the vendor, an employee can access financial information, such as viewing their transaction history, making transfers to other accounts, and sometimes accessing account information via a mobile app.
  • Most paycard programs are FDIC insured and/or include fraud protection in case the card is lost or stolen.
  • Similar to debit cards, employees can only spend what they have in their account. There’s no chance of running into debt. As a result, this can help employees enhance their credit rating.

On the employer’s side:

  • Paycards function similarly to direct deposit: you can run payroll remotely, after hours, or during an emergency. You can also make corrections to paychecks and issue employee reimbursements through a paycard, just like with any other form of traditional wage payment.
  • Paying employees via a paycard eliminates the need for paper checks—the labor costs and environmental waste associated with them and running the risk of lost or stolen checks.
  • Issuing paycards saves the time and cost of delivering checks to those employees who opt out of direct deposit. They can receive wages at institutions of their choice by electronic transfer to a payroll card account.
  • Paycards can also be insured by the Federal Deposit Insurance Corporation (FDIC). Many paycard programs include fraud protection, dispute resolution procedures, and purchase protection plans.
  • Paycards are flexible. If an employee has a bank account, an employer can allocate a portion into a paycard and the balance into a bank account.

As an employer, if you run your payroll 100% paperless, you need to establish a strategy. For example:

  • Determine whether your business will mandate paperless payroll enrollment or make it voluntary.
  • Use different communication tools to ensure that your employees are on board with paperless payroll.
  • Obtain input/feedback from your managers so they can reiterate the benefits of paperless payroll and answer employee questions.

If you successfully switch to paperless payroll, you’ll reduce payroll costs, eliminate check-cashing fees, and increase efficiency. Is paperless payroll right for you?

Move Into the 21st Century with Electronic Timekeeping

Today, paper timesheets or punch clocks are old school. Employees have discovered work arounds to punching in, such as using co-workers to clock in for them at specific times or providing employers with inaccurate work times that pay employees for overtime they never really worked.

Electronic timekeeping, also referred to as digital time and attendance or biometric systems, automates the time-tracking process and keeps detailed real-time data of when employees arrive and leave work. A digital system automates the entire time-tracking process, keeping detailed actual data of when employees come and go; it’s then automatically transferred into a payroll solution.

These systems offer increased security and accuracy, but they can be costly. Read on to determine if such an investment ideally meets your needs.

Biometric timekeeping systems
These systems use unique physical identifiers to ensure that the employee is the same as the name indicates. This technology tracks the time workers clock in and out with greater security and accuracy.

Different types of biometric scanning devices include:

  • Face recognition. May be less than 100% reliable. When introduced as a smartphone feature, it failed to be foolproof, as close relatives could be taken for the phone’s owner. Not ideal for an employer/employee situation.
  • Iris recognition. Identifies the user by taking a photo of the patterns in the colored ring on the front of the eye, known as the iris.
  • Retina recognition. Looks deep into the eye, closely scanning and noting vein patterns in the back of the eye.
  • Fingerprint recognition. Each individual’s fingerprints are unique and, although they can become more difficult to decipher over time, they’re still valid for biometric identification.
  • “Hand geometry” recognition. Looks to match structures, such as the width of one’s hands and the length of the fingers.

Is biometric timekeeping worth the investment?

Employers primarily invest in biometric timekeeping to lessen the chance of time theft and other types of payroll fraud. Businesses that have struggled with this issue may find the initial investment a way to reduce buddy punching—meaning a friend checking in in lieu of the actual employee.

To increase your overall security and consider biometric screenings for building or data access, you can add a timekeeping component. Biometric scans require no additional input besides the employees themselves. You’ll never hear the excuse that your employee forgot to bring their fingerprints to work or the dog ate them.

How the Fingerprint System Works

Fingerprint time clocks are referred to as thumbprint time clocks and use a fingerprint scanner to match an employee’s fingerprint to a stored image of that fingerprint, enabling the employee to securely clock in or out of a work shift.

Everyone’s fingerprints are unique. The fingerprint reader recognizes and associates a fingerprint with an employee. It stores a numerical series of key points taken from the employee’s finger, referred to as “minutiae.” These fingerprint minutiae serve as landmarks; they’re encoded as a series of numbers and can be used to verify whether the fingerprint is that of a particular employee. An original finger-print image can’t be recreated from the minutiae.

As a result, fingerprint time clocks help to ensure each employee is clocking in or out for themselves. The downside is they’re not legal in some states. The Society for Human Resource Management indicates that Illinois is a state that doesn’t allow employers to use biometric data, such as fingerprints for time clocks. Data stored by these systems is frequently viewed as intrusive and not compliant with privacy-minded data collection rules.

What’s legal nationwide is a time clock app. These apps prevent an employee from buddy punching for another.

Which kinds of companies use biometric clocks?

Theoretically, any company that can afford them can use biometric time clocks. They’re popular among industries, such as restaurants and hospitality.

While biometric timekeeping systems may seem ideal, they’re costly. Small businesses can expect to outlay $1,000-$1,500, while larger corporations may invest five or six figures. You get what you pay for. You can obtain a less secure system at significantly less cost; however, you need to consider whether time fraud is an issue, because you may not be able to quickly recoup the cost in payroll savings, if at all.

Can you assure the protection of your employees’ personal data? Biometric data can be used in identity theft, so it needs to be kept highly secure. There have been class action lawsuits instituted against employers who failed to properly protect this very confidential information.

Something else to consider is that, today, in many instances, your employees may not all be housed under one roof. If you have employees who work remotely or travel a great deal for their jobs, this can pose challenges to conducting consistent biometric timekeeping. Biometric systems are less efficient the more decentralized your employees are.

What are the advantages of using biometric time clocks?

If your business hires hourly employees, you need a time clock to stay compliant with federal and state labor laws. An employee time clock keeps track of every hour an employee works, right down to the minute. You also have the option of rounding up or down that employee’s time worked, pursuant to federal labor laws. Such time clocks also track employee attendance.

Time clocks also protect employees in the sense that they can be assured they’re accurately paid for every hour they work.

Biometric time and attendance tools also address the employer’s concerns regarding time theft, such as when employees clock in and out for one another. However, check your legal jurisdiction, as biometric time clocks may not be legal in your area. You can also consult with a local employment attorney.

If your business has off-site employees, they can clock in and out from their mobile phone. To verify it’s a particular employee, their mobile phone also provides a screenshot of their location on a map.

Which biometric time clock will best suit my business needs?

Before selecting a biometric time clock, consult with a local employment attorney to make sure they’re legal in your state. Ideally, it’s best to use a time clock app that includes integrated scheduling, easy payroll export, hiring tools, etc. Then make sure it integrates with your employee scheduling software, your payroll provider, and your other team management processes. In addition, it should include a mobile app feature that lets you track which employee has clocked in, who’s late, and who’s on break. And, it lets you access this information quickly, irrespective of your location.

ASAP Payroll Service makes hardware clocks, such as card readers, fingerprint readers, and face clocks available to its customers.

An alternative to biometric time clocks

Often, your employees will want to protect their biometric data and would prefer that you not use a biometric time clock, even if it’s legal in your state. As an alternative, you could use cloud-based software to meet your time and attendance needs. With this free mobile app, your employees can view their schedule and timecard data on a mobile device. It also helps them to better budget their finances, because they’ll be able to estimate their pay each week.
A free mobile app can also empower your employees, because it can help them trade shifts, update their work availability, and check-in with the rest of the team…in real time from their mobile device. In turn, these self-service tools will save your supervisors time and establish a paper trail that human resources can use.

ASAP Payroll Service uses TimeWorks Mobile. It allows employees to track their hours on-the-go, punch in and out, view available time-off hours, and more. It’s available on either the iTunes™ App Store (IOS devices) or at the GooglePlay™ App Store (Android devices) and can be downloaded for free.

Other options include using a physical timecard, punch cards, a proximity card, or swipe cards; however, each has its own downfall. Regardless of which you use, these kinds of cards don’t protect from time theft. And, they might not be able to export to your payroll software, in addition to giving you very limited access to data.

Another option is using your tablet’s built-in camera. You’ll get a photo of each clock-in and clock-out on the employee timecard, so you can be sure the right person is clocking in for their shifts. Paired with the included shift scheduling app, which you can access from any web browser, you’ll get a better handle on overtime hours, total payroll and labor costs, and robust attendance tracking data that includes a ranking of who on your workforce is most often on-time for their shifts. You’ll also get other reports that’ll help you and other business owners more efficiently manage your workforce, so you can focus on growing your business and empowering your employees.

In turn, your supervisors will be in charge of running payroll and better coordinate with human resources. The most time will be saved when your workforce management systems all integrate with one another.

What Is Pay-as-You-Go Workers’ Comp?

Workers’ compensation insurance basics

Irrespective of the type of business you run, there’s a chance that your employees could get injured or sick. They might slip on a wet floor, fall off a ladder, cut themselves with a sharp instrument, or get in a car accident while running a business errand. Because of the numerous ways your employees can get hurt or sick, your business must have workers’ compensation insurance to cover them.

It’s state-mandated insurance that protects your business. The sick or injured employee receives workers’ compensation benefits to cover expenses, such as medical bills, job retraining, and pay while off from work. While the majority of states require businesses have workers’ comp insurance, in some states, businesses with a certain number of employees may elect to opt out of coverage.

When an employee accepts workers’ comp benefits, they typically waive their right to sue for the injury or illness. Workers’ compensation insurance covers employees regardless of who is at fault. The illness or injury could be caused by you, the employee, a co-worker, a customer, or someone else.

However, there are some restrictions to receiving workers’ compensation insurance. An employee cannot receive benefits if the incident was purposefully self-inflicted, not job-related, or was incurred while committing a crime or violating a company policy. If you suspect workers’ compensation fraud, you’ll want to take the necessary steps to counter it. And, while many states offer workers’ compensation insurance through a state-operated fund, there are also many private providers who offer the coverage.

If your employee has incurred a job-related illness or injury, you should not retaliate or threaten that employee to prevent them from filing a claim. If you attempt to take recourse against the employee, they can report you to your state or insurance agency.

Did you know that an employee doesn’t have to incur an accident or injury at work to receive these benefits? The illness/injury just needs to be work-related. An employee can get hurt while running a business errand or traveling for business. Or it can happen over a long period of time, such as carpal tunnel syndrome, chronic back problems, lung disease, hearing loss, and/or stress-related injuries.

Generally, employers can purchase workers’ compensation insurance from any provider they want (state or private). However, employers in North Dakota, Ohio, Washington, and Wyoming are required to purchase their insurance directly from the state. These four states are referred to as monopolistic states.

What is pay-as-you-go workers’ comp?
The pay-as-you-go method allows you to pay your workers’ compensation premiums based on your actual payroll and exposure risk, instead of the budgeted payroll you believe will be accurate for the year. This helps eliminate surprises during your workers’ comp audit.

You’ve probably received a few emails, phone calls, or letters offering pay-as-you-go as an alternative to traditional workers’ comp insurance. It lets you pay your workers’ comp coverage by bundling or combining it with your regular payroll. If you work with a payroll or HR service, they’ll make sure your employees and your workers’ comp premiums are paid every pay period. You’re then presented with a single bill to cover all the costs for that time period.

Traditional workers’ comp plans, compared to pay-as-you-go, require large lump sum payments to cover the estimated cost of your liability. With pay-as-you-go plans, your workers’ comp insurance liability is based on each payroll run. If you add or lose employees, your premium liability adjusts accordingly. Pay-as-you-go provides all the coverage and compliance of workers’ comp with none of the stress.

Unless you live in a monopolistic state (mentioned above), you can take advantage of pay-as-you-go workers’ comp.

What Are the Benefits of Pay-As-You-Go Workers’ Compensation Insurance?

Deciding which type of workers’ compensation insurance to select comes down to what works best for your company. For many business owners, pay-as-you-go workers’ comp is a good alternative to traditional lump sum payments. Here’s why:

  • Making hefty annual payments can put a strain on your business budget and harm your business cash flow management. Depending on factors, such as where your business is located, the industry, and how many employees you have, workers’ compensation insurance can quickly add up.
  • Knowing exactly how much your workers’ comp should be is difficult to predict. Pay-as-you-go calculates up-to-date workers’ comp rates with each payroll cycle. Traditional workers’ compensation insurance premiums are based on estimates. You might decide to hire or let go of some employees, which can affect your rate. Traditional workers’ compensation insurance requires that you project what your payroll will be for the year and pay it upfront. Then, at the end of the year, your insurance provider either refunds the difference or requests further payment.
  • With pay-as-you-go workers’ comp insurance, the money you owe is based on your actual payroll. This lets you pay accurate premium amounts and avoid over- or under-estimating. And, as a result, you’ll incur a simplified audit process.
  • Paying your premium can slip your mind. But with pay-as-you-go workers’ compensation, your policy provider automatically collects your premiums with each payroll and debits your bank account.
  • Makes the auditing process is easier, which can save you time and money.
  • What you pay to a payroll service is only your premium payment. You still need to work with a state-approved insurance provider for your coverage.
  • Your premium is based on the payroll generated during a pay cycle and is based on a rate per 100 of payroll per job classification.
  • Pay-as-you-go coverage often requires a down payment, so that a notice of cancellation can be covered if your provider cancels your coverage.
  • This method is still auditable, because all workers’ comp insurance is auditable.

 

There’s also a down-side to consider

  • You can’t budget each pay cycle for workers comp.
  • You might not always see the true cost of your workers’ comp, as it is bundled with the rest of your payroll.
  • Not all insurance companies allow a pay-as-you-go method, so your options may be limited and you may not get the best rates.

Reporting actual payroll wages and only paying premiums based off those actual wages make pay-as-you-go a great alternative to the traditional estimated billing process. However, ultimately, the choice has to be what works for your business. Today, insurance providers offer a wide variety of solutions and flexibility for their programs, so you may simply need to contact your provider to find out what they offer.

If you’re not sure what to do about your workers’ comp coverage, contact us at ASAP Payroll Service. We’ll discuss your options with you to help you make the best decision for your business.

The Nuances of Restaurant Payroll

There’s more than meets the eye when it comes to managing restaurant payroll. It’s crucial that you pay your employees accurately. Plus, you need to track industry one-of-a-kind tax and wage/hourly laws.

Another challenge is high staff turnover. Prior to COVID-19, The National Restaurant Association estimated that the average restaurant lost $150,000 annually due to staff turnover. According to the Center for Hospitality Research at Cornell University, losing a front-line employee costs a restaurant employer an average $5,864. This kind of sky-high rate can take its toll on your payroll process.

Many restaurants conduct most of their new hire paperwork using pencil and paper—a time-consuming endeavor. Switching to a digital onboarding process, such as ASAP Payroll Service’s Evolution software, can save you significant time each year. When a new employee completes an electronic W-4 as part of the onboarding process, the information will automatically flow to the payroll system to establish the proper federal income tax withholding.

Offboarding employees who leave your business create extra work, too. This means understanding final paycheck laws and abiding by them. For example, in California, a terminated employee must be given their final paycheck on their last day. In this instance, ASAP Payroll Service’s clients can go into the system or call to figure out the exact amount. However, not every state has this level of final pay standards, but most have rules regarding when a terminated employee must receive their last paycheck. Check your state’s department of labor for regulations.

Besides servers, you need to track cooks, bartenders, and assistant managers, because each may have a different pay rate. While tracking different wages isn’t unique to businesses, the process is more complicated for restaurants.

There’s more to consider than accurately processing payroll and paying your employees on time.

  • Classifying your employees/tips—while most employees will be classified non-exempt, meaning they will be paid a minimum wage (federal minimum wage—$7.25 per hour) and any accrued overtime, their tips also need to be tracked. According to the U.S. Department of Labor, an employee who classifies as receiving tips engages in an occupation where he or she customarily and regularly receives more than $30 per month in tips. In this instance, the employer of a tipped employee is only required to pay $2.13 per hour in direct wages, if that amount, combined with the tips received, at the very least equal the federal minimum wage. If the employee’s tips and the employer’s direct wages of at least $2.13 per hour do not equal the federal minimum hourly wage, then the employer must make up the difference. Many states, however, require higher direct wages for tipped employees. Please note that certain states and cities have higher minimum wage rates than the federal minimum requirements. It’s important to keep up-to-date on these changes, which generally occur on January 1 or July 1. In addition, states may have different tip credits, so be sure to check your state’s department of labor. It’s important that employers and managers follow federal and state rules.
  • Exempt employees—there are strict rules regarding when to classify an employee as exempt. While most restaurant workers won’t meet the job duties or salary requirements that qualify them to be considered exempt from overtime, be sure to check the Department of Labor’s website for more details. However, when overtime is warranted, it must be paid at a rate of at least 1.5 times the nonexempt employee’s weekly regular rate for each hour worked over 40 hours. States like Alaska and Nevada calculate the time based on hours worked per day, not 40 hours per week. Again, check the Department of Labor’s guidelines (dol.gov).
  • Cash/check tips vs. credit card tips—when a diner leaves a cash or check tip, that money is 100% the property of the server. However, credit card tips are handled differently. Depending on the state you’re in, the employee either receives 100% of the tip or the credit card processing fee is deducted from that tip. Then, too, service charges that you add to a customer’s bill, then pay your service staff, are considered wages, not tips. But tips issued via tip-splitting or tip-pooling (see below) are considered tips, regardless of which employee actually received that tip.
  • Tip pooling— means that, instead of employees keeping all the tips they earn, the tips must to be put into a pool and divided equally among the waitstaff, bussers, bartenders, and possibly the back-of-house employees during a work shift. In this instance, the employer needs to communicate to tipped employees that they must participate in a tip pool, and, a tip credit can only be issued for the number of tips that employee ultimately receives. For further clarification refer to the U.S. Department of Labor’s website (dol.gov) and look for Tip Regulations Under the Fair Labor Standards Act.
  • To take advantage of this benefit, make sure your payroll tax calculations, filing, and payments are all accurate. This is a general business credit equal to the amount of employer Social Security and Medicare taxes that you paid on wages over and above the minimum wage for each employee (see IRS Form 8846).
  • Tip credit—make sure your employees report all tips, because, at the end of the year, if they were paid total wages that exceeded the applicable minimum wage for your business location, you can file for the Fair Labor Standards Act (FLSA) tip tax credit. Related to the restaurant industry, the FLSA allows a business owner to apply a credit up to $5.12 for the employee’s pay. The reasoning is that tips should make up this amount, which leaves the employer paying the difference in a wage, which is to be no less than $2.13. If the employee does not make up the difference in tips between the minimum wage and $2.13 an hour, the employer must meet the hourly minimum wage standard, which, in most cases, is the minimum wage of $7.25 an hour.
  • More than 10 employees— if more than 10 employees worked for you during the previous year, based on using the average number of employee hours worked on a typical business day, you need to complete IRS Form 8027, which tracks total tips, service charges, and gross receipts from food and beverages. If the total tips reported amount to less than 8% of your gross receipts, you must allocate the difference to your tipped employees. If you can prove that a lower rate should apply to your business, then you may request a rate lower than 8% from the IRS. And, if you are granted a lower rate, you should use it in the allocated tip calculation on IRS Form 8027.
  • Benefits and deductions—restaurants customarily provide a free or discounted meal during an employee’s shift. The IRS classifies this as a fringe benefit and it should be treated as taxable income. Because it’s considered a fringe benefit, it needs to be added to an employee’s pay when running payroll.
  • Within a single job, such as a cook, there can be different pay rates, depending on the shift worked, and employees may cover more than one shift during a pay period.
  • There may be employees who work more than one type of job within the same pay period. And, if you have multiple restaurant locations, it’s common for employees to work in more than one location. In this instance, labor expenses will need to be allocated based on the location.
  • As the restaurant owner—what deductions can you make from an employee’s paycheck? The FLSA allows employers to deduct certain costs of doing business from employees’ wages, only if the deductions do not result in the employee earning less than the minimum wage standards after the deduction. Such costs include uniforms, customers who fail to pay, or broken objects. Technically, deducting these costs is allowable, but restaurant owners need to make sure they’re not violating FLSA rules and regulations if this results in an employee’s wage falling below minimum wage.
  • Hiring restaurant employees can be a revolving door. Some may be receiving some form of government assistance, while others may have recently been released from the military, or perhaps jail. In these instances, if your restaurant hires such individuals, you can get up to $2,300 in tax credits after that employee has accrued 300 hours of work.

Managing the Details

If you’re new to the restaurant business, managing your staff can seem daunting. This is where a good online time and attendance system, such as ASAP Payroll Service, can help you track all your employees’ movement between shifts, job types, and locations. It will save you time and reduce payroll errors. We understand how the restaurant industry works and we can help you track:

  • Minimum Wage Alerts. We help keep you compliant with your state’s minimum wage laws and make sure your employees receive their accurate pay.
  • FICA Tip Credit Report. We run this report to help you configure and track what you can claim on your annual tax return.
  • Tip sign-off report. This report provides you with written proof of your employees’ tips received and declared. This helps to keep you compliant.

And, if the IRS or another agency contacts a restauranteur regarding filing their taxes, based on how ASAP Payroll Service filed the paperwork, we’ll work with that government agency, representing the restaurant owner to resolve the issue. If ASAP Payroll made an error, we’ll talk to the government agency on your behalf and pay any fines.

A Hassle-free Payroll Process

Every employee looks forward to receiving an accurate paycheck, whether weekly, bi-weekly, or monthly. However, no one thinks about what’s involved behind-the-scenes to make it possible, except those doing the work. The truth is there’s far more than meets the eye. And, if the responsibility is on your shoulders, you’re not alone if you feel stressed trying to juggle all the moving parts.

Because of the intricate detail involved, you need to be hypervigilant and have an in-depth knowledge of wage laws and payroll taxes at the local, state, and federal level, be up-to-date on employee deductions, and know your company’s internal processes. Below are tips to help you navigate through this complex maze.

To make it easier on yourself, make sure that new employees complete the proper paperwork for their status as soon as they come onboard. For example:

  • Federal W-4 assures the correct federal income tax is deducted. Also consider having a new Form W-4 completed annually and when your employees’ personal or financial situation changes.
  • State withholding forms (these are based on where your employee lives and works).
  • Form I-9 verifies the identity and employment authorization of individuals hired in the U.S.

In addition to completing these forms, there’s a list of additional forms that need to be completed, based on the employee’s status:

  • Employee or independent contractor? For employees, income tax, Social Security, and Medicare are withheld from paychecks. Independent contractors have no employee or employer taxes withheld.
  • Exempt and nonexempt? The difference is how that employee is paid. According to the Fair Labor Standards Act, an exempt employee does not receive overtime pay, nor do they qualify for the minimum wage. However, a non-exempt employee is typically paid based on the number of hours worked. And, if they exceed the standard number of working hours, they will receive overtime pay.
  • Calculating your employees’ overtime pay is more complex than basing it on exceeding the 40-hour work week and paying them accordingly. While employers must pay 1.5 times an employee’s regular pay rate to nonexempt employees for all hours over 40 in a work week, there are some exceptions for nonexempt employees who work for emergency services and hospitals.

Also, if your employee works different jobs requiring different pay rates within the same week, this makes the overtime calculation a bit more complicated. Check with the FLSA and your state’s overtime rules to assure that you’re calculating your employees’ overtime correctly.

  • Set your pay schedule and note federal banking holidays so you know in advance when to prepare your payroll or move up your processing day to work around those holidays. At the end of each year, it’s also a good idea to set the pay processing day schedule for the following year.
  • Keep track of the total number of hours and expense for each payroll period. This process is easier if you only have exempt employees. Nonexempt employees are different in that they can earn overtime, causing their wages to fluctuate. Monitor your nonexempt employees’ overtime closely. This will help you control labor costs and manage cash flow. And, if your nonexempt employees are consistently working longer than 40 hours, you’ll want to review your businesses processes.
  • Payroll withholding can fluctuate based on changes in your employees’ lives. This can affect your payroll processing throughout the year. For example, if an employee marries or divorces or changes their number of allowances, this will affect what’s withheld from their paychecks.

Securely Store Documents

Once you’ve collected all the necessary documents on each employee in your business, you’ll need to store those documents in a safe place—whether this means storing digital versions or filing them in cabinets. According to the U.S. Equal Employment Opportunity Commission, all personnel records should be maintained for one year and all payroll records for three. In addition, you should keep Forms I-9 in a separate secure location different from where your employees’ other records are stored so that you can access them if the Department of Homeland Security, Department of Justice, or Department of Labor requests to see them.

Establish an Employment Tax Deposit Schedule

It’s critical to report and deposit your employees’ income, Social Security, and Medicare taxes to the IRS regularly throughout the year. These filings are based on the size of your payroll.

For example, deposit large payroll taxes semiweekly. With smaller payrolls, deposit your taxes on the 15th of the month. However, if the 15th falls on a weekend, you’ll need to pay the taxes on the first working day of the next week. To file these taxes, use IRS Form 941, Employer’s Quarterly Federal Tax Return (https://www.irs.gov/pub/irs-pdf/f941.pdf).

In addition, you’re required to pay federal unemployment taxes, along with state and local tax filings and payments. To help you remember when taxes are due, keep a calendar that features all critical dates pertinent to your business or bookmark the Employment Tax Due Dates page on the IRS website (https://www.irs.gov/businesses/small-businesses-self-employed/employment-tax-due-dates).

Keep Track of Tax Laws/Changes
As a business, you need to keep apprised of tax laws/changes. No one wants to be penalized for failing to keep up with changes and not withholding their employees’ taxes properly.

  • Indiana’s state minimum wage is $7.25/hr. Select states nationwide have increased their minimum wage in 2020. To determine the minimum wage for your state, go to: https://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx
  • Be aware that state and federal payroll tax and withholding rates generally change at the beginning of a year. However, in the instance when changes are made mid-year, they are retroactive to the beginning of that year. This means that you will need to recalculate taxes and make up the difference to the point in the year that this tax change was instituted.
  • As mentioned earlier, if the Fair Labor and Standards Act (FLSA) surpasses the state minimum wage, you’ll have to pay your non-exempt hourly employees based on the federal rate. And, note that the FLSA determines which employees are considered non-exempt.

Assess Your Company’s Internal Processes
While it’s vital to know federal, state, and local laws and practices, you must also be familiar with your internal policies that affect payroll. This includes paid time off, sick pay, benefits, 401(k), and commissions.

Your business has its own unique benefits plan. For example, some companies pay their employees’ health insurance, while others withhold funds from employees’ paychecks. Then, depending on the years of service or career level, your employees may be compensated accordingly. Plus, if you have a commission or bonus plan, that needs to be taken into account. If you offer a 401(k), do you match it? What determines who is eligible for the match? These types of factors affect payroll and need to be documented and monitored.

Enlist your department managers to help keep you abreast of changes within their departments. They can also report changes in employees’ status as they come up and pass on policy revisions and other payroll-related actions, accordingly.

Should You Automate?

Are you overwhelmed with all the responsibilities involved with managing payroll and taxes? You might want to consider incorporating automated payroll services or outsourcing your payroll needs.

Whether you outsource your payroll needs or incorporate automated payroll services, here are some benefits to consider.

  • Direct deposit and electronic paystubs save you time and paper.
  • Track tax changes. You know your withholdings are always accurate.
  • Simplifies reporting new hires and onboarding, making adding new staff flawless.
  • New employee data goes directly to payroll, while the related documents are stored digitally.
  • Eliminates the need for timesheets, thanks to online and mobile time clocks.
  • Employees can now make address changes and update their W-4 forms without involving payroll personnel.

Processing payroll can be stressful. It involves lots of detail and must be done right. However, creating a schedule, managing and securing your documents, and keeping up-to-date on withholding rates and tax laws, as well as monitoring your business practices, can help to reduce that stress. For the latest in payroll news, regularly monitor organizations like the American Payroll Association or the Society for Human Resource Management. Consider creating a team of network professionals whom you trust, such as your CPA and other payroll practitioners, and share best practices. Finally, don’t hesitate to ask for help when you’re overwhelmed with the most essential parts of your payroll process. Consider hiring professionals who solely handle all the responsibilities related to managing your payroll. And, remember, handling payroll responsibilities throughout the year will leave you less frazzled at the end of the year.

Should You Outsource Your Payroll?

Whether you hire new employees or retain existing ones, it’s critical that you make sure they’re paid accurately and on time. If there are errors in their automatic payroll deposits or other remuneration, this effects their morale and, ultimately, how they perform for your company. Therefore, it’s critical to handle these calculations precisely.

Plus, employees are clueless as to how you handle the numerous, ever-changing tax codes and payroll regulations involved in running your business. They aren’t concerned with the headaches and pressure you’re under to make sure the information is accurate; they just want to be paid on time and error free. However, these kinds of mistakes can be costly to you and your business.

When you think about growing your company, juggling employee and contractor classifications, W2s, 1099s, and tax deposits and filing deadlines, the task seems overwhelming. Plus, there’s the overtime payments, state unemployment taxes, garnishments and levies, and taxable items that need to be addressed. The level of accuracy and time involved in tracking these is daunting.

What’s the Solution?

Consider employing a payroll service. Because, if you prefer focusing on running/growing your business without distractions related to this very detailed but essential responsibility, here are some advantages to using a reputable payroll service.

Outsourcing your payroll is a time saver. Would you rather focus on growing your business or being bogged down with tracking data that differs with each employee? Ultimately, you need to manage both, but wouldn’t you rather spend time strategizing on new marketing plans or improving workflow efficiencies?

If You’re Not a Payroll Expert…

…then, there’s the difference between hiring experts who do this day-in and day-out and you. The experts can handle your payroll in a fraction of the time it would take you or your employees to configure hours, deductions, sick leave, paid time off, and so much more. It’s like selling your own house versus hiring a realtor. A payroll expert does this routinely and is far more efficient, because that’s what he or she does all day long. It’s their expertise. And, they can do it in less time than you, ultimately saving you money.

How about worrying whether your network is secure enough to handle all this confidential, sensitive information. Would you have to add extra security to assure that your system isn’t hacked?

And, just like when you have an accountant file your taxes at the end of the year, if you’re audited, that accountant stands by you. It’s the same with hiring a payroll professional. It’s their responsibility to keep up-to-date on the latest government tax regulations or accurately filing with your state and the federal government. Then, too, tax regulations are fluid. They’re not set in stone. They change throughout the year. Who in your business has the time to keep up with these ever-changing laws? A payroll firm will guarantee accuracy and compliance. If mistakes occur, they’ll make corrections, while handling the liability for any errors they make.

An added bonus is that some payroll firms offer additional services, such as contract generation, contractor services, labor law compliance, access to health benefits, workers’ compensation payments, and bookkeeping services.

To find the right payroll service, do a little homework. First determine your needs, then match a professional payroll provider to them. And, make sure that payroll provider is flexible enough to customize their services to meet your company’s individual requirements.