During the early days of a business, owners concern themselves in finding ways to generate more revenue. Investing in services and systems for employee salary is the very last thing that occupies their minds. But paying your employees the right way is a critical responsibility that can affect your business in the long run.
According to surveys, 20% of small business owners spend more than 6 hours a month dealing with payroll. Some even take 10 hours a month to come up with an accurate and organized payroll for their employees. Payroll is a tedious job to handle, especially for neophyte entrepreneurs. It takes a lot of time that could have been used to focus on the income-generating operations of the business.
However, every venture needs to run a payroll system. Whether to have one or not isn’t an option, and for good reasons. Here are some essential points of building a system for employee salary.
What Is Payroll?
Payroll pertains to the series of processes related to calculating and distributing employee wages and taxes. It includes other employee financial records such as deductions, withholding, bonuses, time-offs, salaries, and other items in a paycheck. It also records all workers’ total earnings in a fiscal year.
You can either do it by hand, by employing an accountant, or by using a software for an inexpensive but automated system. To set up your payroll, here are a few points you need to cover:
- Determine the value of your employees’ wages. You can arrange a fixed payment or a by the hour basis.
- Determine how often you want to pay them. You can opt to do it bi-weekly, semi-monthly, or monthly.
- Determine your mode of payment. You can pay them through payslips, paper checks, or direct bank deposit.
- Determine the tax deductions and other benefit plans you want to include.
After covering all the critical pieces of information, you can now run the payroll system. Pay your workforce the appropriate salary they deserve together with a pay stub. The pay stub will serve as an invoice, showing their net and gross pay, taxes, and deductions.
Distributing paychecks is not the endpoint of “doing payroll”. It also includes keeping a record of all employee information to be used for the end-of-the-year report. You need to keep the earnings record and payroll register updated for any changes in the employee salary and wages.
Why Should Your Company Do It?
- Calculated Compensation
One of the primary reasons why labourers want an established system is to determine their actual net and gross pay. Since it covers their total compensation, they can also assess their net worth within the company. Having everything on a system or written in a payslip informs them of their bonuses, increments, or deductions.
- Boost Employee Trust and Morale
Payrolls reflect the company’s financial integrity and security. Having a payroll system and getting paid on time assures employees that they are on the right hands. It guarantees that the company is still at the right capacity to compensate their working hours, thus giving them no reason to slack and underperform.
It also provides security; it shows that the firm is complying with government-mandated worker benefits such as health insurance and workplace pension.
- Government Obligation
Apart from financial obligations, companies are bound to comply with employment legislation and tax obligations levied by the government. It ensures that all business activities are accounted for, and no labour code has been breached. Upholding the laws signifies a stable and reputable company; a company that protects their human capital and gives high importance to their workforce.
Running payroll in your business can be time-consuming work so you have to make sure you have the right people to do it. This effortful task can be made feasible with the help of competent workers. If you need more advice on how you can efficiently run payroll in your company, maybe we can give you an insight or two – free of charge! Just drop us a DM today!