[fusion_text]Your employees are one of the most valuable assets when it comes to growing your business. They’re the ones who interact with your customers, execute daily tasks and help bring in new business. With your employees doing so much for you and your business, it’s important that they get compensated for their time and effort. It’s easy to believe that payroll is simply cutting a few checks and making sure your employees get paid on time. Once you take on the responsibility of processing payroll, you’ll quickly realize that payroll is much more complicated than it seems.
This is one of the biggest reasons that so many small businesses choose to outsource their payroll to a third-party provider. Payroll service providers generally provide their services from afar, giving you the freedom to focus on your business while someone else handles your payroll. So, what does payroll really entail? Here are the top 5 things you need to know about payroll:
New hire procedures
When you hire a new employee, you’re required to perform new hire reporting with a designated state agency shortly after they’re hired. The agency will verify that your employees are legally allowed to work in the country and give them the necessary tax forms to complete, such as a W-4 for federal income tax withholding. Without this form, you won’t be able to accurately withhold your employees’ taxes.
Wage payments
Understanding federal and state minimum wage laws is an important part of payroll processing. Some states have a higher minimum wage than federal law requires. If this is the case, the higher rate will apply. It’s important to remember that minimum wage laws also apply to tipped and exempt workers. Additionally, some states require paid rest breaks and have laws that require you to pay employees by a certain time.
Payroll taxes
Employment takes are broken up into two categories: employer and employee liabilities. As an employer, you’re responsible for withholding and paying federal, state and local employee taxes along with your own portion. You must also report your taxes with the respective agency. If you fail to comply with tax regulations, civil and criminal penalties may apply.
Record keeping
The Fair Labor Standards Act (FLSA) requires that you maintain certain records for both exempt and nonexempt employees. The FLSA also mandates how long records must be kept and where they need to be maintained. The documents you’re required to keep include: employment contracts, time cards and records that show deductions from and additions to wages. You also need to check with your state to see if they have record-keeping requirements as well.
Proper classification of employees
The FLSA sets federal requirements for exempt employees, meaning they’re excluded from the act’s overtime pay provisions. Employee’s who are not excluded are labeled as nonexempt, and they qualify for overtime pay if they work more than 40 hours per week. If you improperly classify exempt and nonexempt employees, you may accidentally cause a misclassified employee to not receive the overtime pay he or she is entitled to. Typically, salaried employees are exempt while hourly employees are nonexempt.
It’s also important that you understand the differences between an employee and independent contractor. According to the IRS, an independent contractor is a self-employed person. An employee is paid through payroll, while an independent contractor is not. Incorrectly classifying an employee as an independent contractor can cause the employee to not receive certain benefits that they’re entitled to such as overtime, family/medical leave and unemployment insurance.
Payroll is much more complicated and detail-oriented than it may seem, and many small businesses find it more cost-efficient to outsource their payroll services to a third-party provider. Windfall has partnered with ADP to bring your business exclusive savings on payroll services. Not a Windfall member? Learn more and sign up!
Your employees are one of the most valuable assets when it comes to growing your business. They’re the ones who interact with your customers, execute daily tasks and help bring in new business. With your employees doing so much for you and your business, it’s important that they get compensated for their time and effort. It’s easy to believe that payroll is simply cutting a few checks and making sure your employees get paid on time. Once you take on the responsibility of processing payroll, you’ll quickly realize that payroll is much more complicated than it seems.
This is one of the biggest reasons that so many small businesses choose to outsource their payroll to a third-party provider. Payroll service providers generally provide their services from afar, giving you the freedom to focus on your business while someone else handles your payroll. So, what does payroll really entail? Here are the top 5 things you need to know about payroll:
New hire procedures
When you hire a new employee, you’re required to perform new hire reporting with a designated state agency shortly after they’re hired. The agency will verify that your employees are legally allowed to work in the country and give them the necessary tax forms to complete, such as a W-4 for federal income tax withholding. Without this form, you won’t be able to accurately withhold your employees’ taxes.
Wage payments
Understanding federal and state minimum wage laws is an important part of payroll processing. Some states have a higher minimum wage than federal law requires. If this is the case, the higher rate will apply. It’s important to remember that minimum wage laws also apply to tipped and exempt workers. Additionally, some states require paid rest breaks and have laws that require you to pay employees by a certain time.
Payroll taxes
Employment takes are broken up into two categories: employer and employee liabilities. As an employer, you’re responsible for withholding and paying federal, state and local employee taxes along with your own portion. You must also report your taxes with the respective agency. If you fail to comply with tax regulations, civil and criminal penalties may apply.
Record keeping
The Fair Labor Standards Act (FLSA) requires that you maintain certain records for both exempt and nonexempt employees. The FLSA also mandates how long records must be kept and where they need to be maintained. The documents you’re required to keep include: employment contracts, time cards and records that show deductions from and additions to wages. You also need to check with your state to see if they have record-keeping requirements as well.
Proper classification of employees
The FLSA sets federal requirements for exempt employees, meaning they’re excluded from the act’s overtime pay provisions. Employee’s who are not excluded are labeled as nonexempt, and they qualify for overtime pay if they work more than 40 hours per week. If you improperly classify exempt and nonexempt employees, you may accidentally cause a misclassified employee to not receive the overtime pay he or she is entitled to. Typically, salaried employees are exempt while hourly employees are nonexempt.
It’s also important that you understand the differences between an employee and independent contractor. According to the IRS, an independent contractor is a self-employed person. An employee is paid through payroll, while an independent contractor is not. Incorrectly classifying an employee as an independent contractor can cause the employee to not receive certain benefits that they’re entitled to such as overtime, family/medical leave and unemployment insurance.
Payroll is much more complicated and detail-oriented than it may seem, and many small businesses find it more cost-efficient to outsource their payroll services to a third-party provider.
