Payroll 101: Everything You Need To Know To Pay Your Employees Correctly

Payroll 101: Everything You Need To Know To Pay Your Employees Correctly

In Fashion Business by Melanie Shaw

Payroll isn’t the easiest activity for many business owners. Most are apt to get it wrong at some point, much to the consternation of their employees. It’s fine, detailed work, and requires a talented, experienced, and fresh mind to get it right the first time. (And that’s not most business owners on a Friday evening!)

Fortunately, this post is here to help. We take a look at everything you need to know about paying your employees correctly so you can avoid foul-ups along the way. Here’s what you need to know. 

Don’t Do It Manually

First, give up on the idea that you have to do payroll manually. Using spreadsheets or writing down hours on a tatty piece of paper will cause confusion and make it hard for you to synchronize data across your team. 

Instead, use bespoke, reliable software. Find cloud-based solutions that enable multiple stakeholders to make entries and adjust reported hours worked. Ensure that you have permissions in place for final managerial sign-off. Review your software every quarter to determine whether it’s the optimal solution for your enterprise. 

Calculate Taxes

You’ll also need to calculate your employee’s taxes accurately to avoid any potential issues with the authorities. The deductions you need to make will depend on your jurisdiction. Employers in the U.S. must subtract federal, state, and applicable local taxes from checks, as well as social security and Medicare contributions. 

Again, you’ll want to use software to do this. Regularly updated solutions can automatically work out how much HR should pay a specific employee in net pay to their bank account, and how much they should set aside for tax. 

Remind Your Team To Submit Timesheets

Of course, there’s also a benefit in getting your team to help you when it comes to managing your payroll and paying them the right amount of money. 

Colleagues can sometimes be slow in reporting hours worked in a particular week or month. That’s why it’s worthwhile to remind team to submit timesheets early. Having this information in hand lets you more accurately calculate their pay and ensure they get the relevant managerial sign-off to get their pay packets on time. 

It’s a simple change, but it can result in a wildly more efficient business model. It also takes some of the pressure off your HR team because they don’t need to constantly send reminders to colleagues asking them to provide their rota information. 

Of course, you can pre-allocate hours. However, this approach can result in complex overtime calculations and create new problems for your team as a whole. 

Make Sure You Follow Federal And Local Regulations

Payroll 101: Everything You Need To Know To Pay Your Employees Correctly

Payroll 101: Everything You Need To Know To Pay Your Employees Correctly

Unsplash – CC0 License

You’ll also want to ensure you follow federal and local regulations dictating how much and when you should pay your employees. Rules can vary between sectors, locations, and industries, so always make sure you’re following best practices and being compliant. 

If you’re not sure whether you’re following the law to the letter, speak to an HR consultancy or find a legal team specializing in this area. Check all your contracts with employees and contractors and ensure they meet all applicable standards. 

Reduce Errors

Failing to pay employees the correct amount can lead to a host of unwanted outcomes, including:-

  • High employee dissatisfaction
  • Legal wrangling
  • Audit and lawsuits
  • Fines

The most damaging of these is the poor relationship it generates with your employees. People no longer want to work with you because you become known as a business that doesn’t pay on time, or at all. 

It’s critical, therefore, to reduce errors and find ways to make your payment processing more predictable and reliable. Best practices for compliance include digitizing payments and ensuring that multiple people check wage slips before finally distributing them to workers. 

Communicate Clearly And Transparently With Employees

You should also ensure you communicate clearly and transparently with employees about their pay and benefits. Make sure they understand precisely what they can get while working with you. Explain exactly what you offer, and what their pay packages will look like month to month.

Failing to do this can lead to industrial disputes. Workers may accuse you of not being completely forthright in your interactions with them, which can damage trust. It can also lead to reputational damage that affects your ability to attract talent. 

In short, if you offer benefits, ensure employees can enjoy them. Don’t hide everything behind performance requirements. 

So there you have it: everything you need to know about paying your employees correctly. Which of these actionable tactics will you use? 

Photo by Christina @ on Unsplash

About Melanie Shaw

Melanie Shaw is a fashion and lifestyle writer who has worked in the fashion industry in PR and communications, helping brands launch their latest products and collections.

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