For any new business that goes beyond starting as a sole trader or partnership, there is one key component for success: employees. When a company possesses a workforce which is productive and committed, they have a greater chance of maximizing profits.
Sadly, there is one significant disadvantage when it comes to employees: they’re a pain to manage. From keeping all staff members happy to ensure the hierarchy is in sync, there are many different points to consider.
This also includes employee payroll.
Employee payroll can be tricky to understand for new businesses. It’s even a challenge for established organizations to manage effectively. This article, however, supplies four steps for newcomers to the business world, attempting to get their employee payroll in the best shape possible.
Use specialist payroll software
Above all else, the first thing you need for dealing with payroll is specialist software. One example of this would be Xero. By utilizing payroll software, you will save many hours, boost productivity, and improve accuracy.
Why? Well, first, Xero can automate the payroll process. That means you don’t have to manually track employee hours, work out all the figures, and send out payments. If you want even more features, Xero integration adds the expertise of Paynomix to the mix. By syncing up both platforms, this opens the door to blending Xero’s SaaS model with the improved workflow of Paynomix.
Set a budget
When organizing your payroll expenses, you must budget accordingly. You don’t want to underestimate the cost of employee benefits, for instance, as it could leave your business in the red.
Furthermore, it’s not only about fixed payroll costs. You also have to take into account variable costs. Commissions are an example of variable costs, as you cannot predict at the start of the month how many products an employee will sell.
Map out employee benefits
Linking to the previous point about budget, you also have to factor in what employee benefits you will provide. A happy employee is a more effective one, and the foundation for this can be due to a fruitful benefits package.
As for what benefits will be appreciated, consider the following:
- Health insurance
- Dental insurance
- Vacation time
- Paid time off (such as maternity and family medical leave)
- 401 (k) retirement savings plan
- Flexible spending accounts
Classify your workers
You want to avoid any mistakes when classifying your employees. If you end up misclassifying any workers – either on purpose or unintentionally – this could lead to serious ramifications with the IRS, such as tax penalties and further fines.
To stop this from being an issue, ensure each staff member is classified from the start. Thankfully, this is simply the case of defining if they fall under one of two categories: employee or contractor.
Alongside their salary, an employee has other expenses your business needs to cover – such as overtime fees, tax, and benefits. A contractor, however, only receives the money you agreed upon for their services. They pay their own taxes and have no additional benefits.