6 Essential Payroll Best Practices Your Business Should Be Implementing
DECEMBER 19, 2024
6 Essential Payroll Best Practices Your Business Should Be Implementing
Keeping payroll compliant with ever-evolving laws and regulations can be challenging. From tracking employee hours to meeting tax filing deadlines, there’s a lot to manage. To simplify things, we’ve compiled some of the top payroll practices to help ensure your process remains accurate and compliant.
1. Implement Payroll Software: Even in 2024, more than 50% of organizations still use spreadsheets to process payroll. Manually calculating payroll can lead to errors. Many businesses, even those that outsource payroll, rely on software to streamline the process. Payroll software automates calculations, keeps you current with regulation changes, and makes reporting more accessible. Plus, it offers the flexibility to switch payroll processors when needed without major disruptions.
2. Monitor Key Deadlines: Missing important deadlines is a common payroll pitfall. Maintain a central calendar that includes tax filing dates, payroll submission dates, and withholding due dates. This way, your payroll team stays organized, reducing the risk of late filings and potential penalties. The easiest ways to do this are to implement a companywide system – either through standard operating procedures, integrated software systems or utilizing a third party – that help remind employees of these upcoming deadlines.
3. Confirm Employee Classification: Accurate classification of employees vs. independent contractors is crucial, as each group is subject to different tax rules. The recent guidance from the U.S. Department of Labor put this issue at the forefront of HR departments. Misclassifying workers can lead to fines, back taxes, and confusion for both the business and the worker. To avoid these issues, verify that each worker is correctly classified and that appropriate forms are submitted for each type.
4. Use a Robust Time and Attendance System: Inaccurate time tracking often leads to payroll errors. Without reliable time records, you may overpay or underpay employees, resulting in costly adjustments. A good time and attendance system ensures accurate pay and avoids unnecessary reprocessing, especially for overtime, which has different tax implications than regular pay. More than 1/3 of small to medium-sized businesses want to either avoid bookkeeping altogether or delegate their payroll to a third party.
5. Schedule Regular Tax Withholding Submissions: Timely submission of employee tax withholdings is essential. Delaying these payments can disrupt cash flow and create financial complications. By setting a regular schedule for submitting withholdings, you’ll avoid the risk of missing deadlines and ensure that funds are available when tax payments are due. In addition, frequent checks of your internal tax withholding formulas can help alleviate any future discrepancies.
6. Consult a Trusted Payroll Partner: When in doubt, turn to a reliable payroll expert. A trusted payroll partner can help navigate complex payroll regulations, verify compliance, and manage challenging tasks like tax filings, employee classification, and reporting. Having an experienced partner can save time and reduce the risk of costly payroll errors.
Streamline Your Payroll Operations with Payroll Vault
We’re proud to offer you a comprehensive range of expert payroll solutions, including experienced, worry-free payroll management, time and attendance tracking, and record keeping. Our boutique-style payroll service is tailored to your business needs. Visit your nearest Payroll Vault location today or call Payroll Vault at (303) 806-0276 to find out what we can do for your business.
