Employers tend to prioritize things such as maintaining or boosting productivity, accomplishing strategic objectives, and fulfilling their missions. All too often, managing payroll is taken for granted and not given much oversight once the checks start rolling out.
But this can lead to problems as big as a federal investigation or as small (relatively speaking) as employees grumbling around the watercooler. Here are seven simple truths about payroll to keep in mind:
1. A formal policy keeps everyone on the same page. Every organization should establish and document a formal policy outlining its payroll philosophy, rules and procedures. Doing so creates a single resource for payroll administrators to follow and employees to reference. It also sets forth guidelines for accomplishing payroll tasks efficiently and accurately. Your attorney should review the policy when it’s created and whenever it’s updated.
2. Workers need to be properly classified. Generally, workers classified as employees must be categorized as either hourly or salaried. Under the Fair Labor Standards Act (FLSA), hourly employees must receive overtime pay for any hours worked past 40 per week. (Some exceptions may apply.) Salaried employees are usually exempt from FLSA’s overtime rules. If you engage independent contractors, they need to be clearly treated as such — not managed the same way as employees. Should any questions arise regarding how to classify a worker, contact your employment attorney.
3. Compliance is critical. As you’re no doubt aware, payroll compliance means abiding by federal, state and local laws. At the federal level, there’s the aforementioned FLSA, as well as laws such as the Federal Insurance Contributions Act, Federal Unemployment Tax Act and Equal Pay Act. Agencies such as the IRS and U.S. Department of Labor typically conduct payroll compliance investigations. Be sure your staff and payroll services provider (if you have one) keeps up with the latest regulations and guidance.
4. For most employers, simpler is better. Naturally, the complexity of any organization’s payroll depends on its size and the nature of its operations. To the extent possible, however, try to keep your payroll processes “lean and mean.” You may want to use a centralized portal or a cloud-based “software as a service” application to help facilitate an efficient, affordable approach to payroll management. But it’s imperative to find the optimal solution for your distinctive needs.
5. Employee training is worth the investment. If you’re keeping payroll in-house, ensure every staff member involved receives the appropriate amount and nature of training. This should include ongoing training as procedures or technology change. Even if you outsource payroll, some employees may need training to functionally interact with the provider and maintain your end of the deal.
6. Outsourcing is often a viable option. Turning over major payroll functions to an outside provider is a strategy every employer should keep in mind. Under the right circumstances, outsourcing can increase efficiency, ease compliance, and save time and money. That said, you should perform a cost vs. benefits analysis before investing in a third-party payroll services provider.
7. Ultimately, it’s a people thing. Payroll isn’t about only dollars and cents; mistakes or inefficiencies in this area can be an absolute morale killer. Few employees will stick with an employer that regularly shorts or delays their checks. And even if mishaps are rare, staff members will remember if errors aren’t quickly corrected. Contact us if you’re interested in outsourcing. We can also help you review and improve the cost-effectiveness of your payroll processes.
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