Part of starting a company on the right foot is keeping your employees satisfied. When it comes to paying your employees on time, here are some tips to follow.
Did you know that one of the challenges startups need to overcome is a lack of structure? Refine your goals, working culture, and train your workers well. Don’t disappoint your employees with late payment.
Are you looking for tips on paying employees on time? Not to worry! In this guide, we’ll go over what you need to know.
Want to learn more? Keep reading to find out.
1. Create a Payroll Schedule
Before you set up your payroll, you want to decide when you’ll pay your employees. Will you pay them once a week, month, or twice a month?
If you’re paying employees once a week, it could get expensive. Most payroll companies will charge the customer each time to process payrolls. If you’re a startup, it might not be worth it to pay your workers each week.
Do you prefer to pay your employees twice a month on the same day of the week? Most people choose the first and third Friday of every month. This pay period is a good option if you have salaried and part-time workers.
What about paying your employees once a month? This option isn’t ideal for startups or small businesses.
Yet, it is a decent option for freelance or contract-based employees. Make sure you check with your state if you can choose this option. There are more regulations with this pay schedule.
2. Collect Employee Information
Gather employees full names, date of births, addresses, and their social security number. You’ll also need the date of employment and your employee’s W-9s, W-4s, and I-9s.
The W-4 provides information on tax withholding. If you have any independent contractors, you’ll get their W-9s. This form will certify their eligibility to work. I-9s will verify employees’ ability to work in the United States.
3. What Are Your Deductions?
Next, you’ll need to classify your employees. For independent contractors, you don’t have to withhold taxes. For your hired employees, make sure you figure out the tax deductions based on their W-4s.
Determine the Medicare, Social Security, and unemployment tax withholding. Depending on the state, you’ll need to withhold taxes. If you don’t know how to figure out the taxes, consult a tax expert.
4. Creating Pay Stubs
Once you have all the information gathered, get ready to run the payroll. You can do this by hand or use an accounting platform. Check out the blank pay stubs template to create the paychecks.
Add employees to the software and calculate their paycheck based on their rate and hours. Factor in if you’re withholding taxes. Once you’ve gotten these things in order, run the payroll.
Make sure you make all the tax payments after you have run payroll. The state and federal agencies could penalize your business if you don’t finish in time.
5. Set up a Direct Deposit
Do you plan to set up a direct deposit for your employees? There will be a waiting period. It will take time for the bank to receive the request and verify that the money is in your account.
Then they have to move the funds to all your employee’s accounts. This has to happen during regular banking hours, not on bank holidays or weekends.
6. Work Out Any Issues
Keep track of your payroll records. Fill out the tax forms, so you know how much you paid your employees.
If you use payroll software, you can access and store these records. This will make it straightforward when you need to access them.
7. Don’t Misclassify Your Employees
Some startups treat an employee as an independent contractor. This is an expensive mistake for a new business to make. Some startups try to avoid insurance and tax obligations and even overtime pay.
Don’t make the mistake of misclassifying your worker. This could result in the wrong pay and your employee’s paycheck getting delayed.
If you have someone working with you as a freelancer and convert them into an employee, you could get in trouble.
The responsibilities of the job need to change. Otherwise, the IRS can fine you for misclassifying a worker.
8. Keep Track of Important Records
Poor bookkeeping or missing information are expensive mistakes for your startup. Breaks and time-schedules will help you keep track of your employee’s hours.
Make sure you have this information, so you don’t mess up your employee’s payroll. This could result in a delayed payment.
If you delay payments, your employees will get a negative impression of the company. This could weaken your relationship with your workers.
9. Don’t Forget to Pay Overtime
Do some of your employees have a fixed salary? You might think then that you don’t have to pay them overtime or track their hours.
Even if you provide them with a large salary, you still have to pay overtime. Exemptions from overtime depend on the employee’s duties and positions.
If an overworked employee speaks with a lawyer, you could get a claim for not paying overtime. You could also face other claims like failing to keep detailed time records.
These will create expenses you don’t need at the beginning. You could face negative press, which would reflect the company culture. Your employees will not like that they have received a late paycheck.
Now You Know More About Paying Employees on Time
We hope you found this guide on payroll helpful. Now that you know more about paying employees on time, set up payroll!
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