3 Key Things to Understand About Payroll Management
As a small business owner, every cent counts. That’s why it’s imperative to pay attention to payroll management.
One seemingly small payroll error can wind up costing your business hundreds or thousands of dollars if not caught in time. Don’t believe us?
Consider the following example.
In 2017, one Texas company—Precision Demolition—failed to pay one of its employees $608.05 in overtime pay. After going to court, Precision Demolition had to pay that same employee $1,216 in damages, including penalties. Then, the business got slapped with a $41,333 bill for the employee’s legal fees.
And none of that price tag included their own legal fees. In short, that business paid seventy times more than what they would’ve had they filed payroll correctly.
So, with that example in mind, keep reading to learn more about payroll management.
- Know Federal and State Wage Laws
As a business owner, it’s your duty to familiarize yourself with the Fair Labor Standards Act (FLSA).
This act explains everything from minimum wage and overtime pay to sick leave, holidays, vacation, severance, and more. The law works to teach business owners about all the laws concerning wages, ensuring you’re paying employees correctly. It also covers less common wage laws, such as the Service Contract Act and the Walsh-Healey Public Contracts Act.
If you’ve ever had a question about back pay, hazard pay, or tips, for example, the FLSA provides resources and information to ensure you stay compliant.
- Understand Payroll Taxes
Are you familiar with all the components of payroll taxes?
There are several inclusions you need to be aware of—here’s a recap:
- Social security
- Unemployment tax
- Federal income tax withholding
These are a few of your many more significant considerations.
In addition to these, employers are expected to know the steps of the payroll tax process, have intimate knowledge of their state’s payroll taxes—and that’s only the surface. To do things correctly, you’ll need to have a more substantive understanding of these processes and inclusions.
Tax laws can and do change, too, so you’ll need to consult with either the IRS or a tax professional to ensure your knowledge is up-to-date.
- Consider the Fact That Payroll Is Easy to Outsource
Is all this information stressing you out? Are you scared you’ll miss one small detail, like Precision Demolition, and end up putting yourself out of business?
If so, you can easily consider outsourcing payroll services. Do your research to discover who to hire, considering factors like reputation, customer support, features, and cost. There are several companies out there, so be sure to get several quotes.
Get Your Payroll Management in Check Today . . .
. . . Or you’ll pay the cost—literally.
As this guide shows you, there’s a lot to learn about payroll management. This list only touches the tip of the iceberg. The more you learn about managing your money, the better shape your financial situation will be in.
What else can your business stand to learn about finances?
Keep scrolling our blog to find out!