Managing payroll for a small team has its challenges. The paperwork and time commitment alone can overwhelm any savvy business owner with hundreds of other responsibilities. Proper payroll requires careful planning and proper tools to get the job done so your employees can expect their pay cheques to arrive on time, without any errors.
Small teams don’t always have a dedicated payroll manager so it ends up being the business owner’s responsibility. If that person is you, it helps immensely to have a set of best practices in mind for tackling payroll for your small business.
For those who operate a small business, here is a list of payroll best practices for small teams.
1. Keep track of important payroll dates and deadlines
Write down and track important payroll dates for the fiscal year. Being prepared for deadlines and submission dates are crucial to effective payroll management because missing deadlines can result in unnecessary fees, penalties or interest payments—crushing for any small business owner. That’s why our first and most important tip is to be prepared.
The best place to find this information is on the Government of Canada payroll website. There, you’ll find everything you need to know on managing employee payroll for your small business.
2. Have a payroll communication plan in place
A payroll communication plan is simply a clear understanding of pay structure between you and your employees. The purpose is to avoid any miscommunication, errors or unclear agreements and to help employees understand their net pay. It may be included in the onboarding package you give to your employees on their first day with information on their pay schedule or how vacation accrual is handled.
The Canadian Payroll Association recommends the following measures:
- Publish a template that will identify all elements of the pay statement including details of the earnings and deductions
- Explain how different exemption amounts and tax credits can impact net pay, be unique to each individual, and change over time
- Involve payroll in the orientation of new employees and include a sample lexicon in the commencement package
- Consider the organization’s broader communication strategies utilizing their intranet, the Internet, and print publications
- Prepare an annual statement of compensation and benefits
3. Use electronic pay statements
If you’ve settled into a nice payroll groove and have been paying your employees on time without a hitch, it might be time to automate. Electronic payroll systems/software have been around for ages and have the benefit of letting the software take care of the more repetitive parts of the payroll process. Employees love the hassle free digital experience and employers love the efficiency.
There’s also the added benefit of freeing up more time, cloud data storage, payroll reporting, end-of-year filing, and much more. On payday employees will receive their pay stubs via email — a much more modern approach than receiving a piece of paper in the mail.
No budget for software? Many payroll software providers offer free small business payroll as long as you have a limited number of employees. Rise small business payroll for example is free for any business with 20 employees or less.
Payroll software is a massive time-saving tool and is definitely worth adding to your team for the convenience alone.
4. Classify employees the correct way
To file your tax forms the correct way your employees must be classified the right way. You would be surprised at how many companies classify their employees incorrectly. Full time employee or independent contractor? Part-time or volunteer? Seasonal or intern? Knowing the distinction between these types of employee classifications is crucial to proper tax filing at the end of the year.
5. Keep your payroll records tidy
Having tidy and well-kept payroll records pays off in the long run. This means all historical records for employees are easily accessible whenever the need arises.
We’re past the days of filing cabinets — powerful payroll and HR software systems are now the norm. A human resource information system (or HRIS) easily collects and stores historical data inside each employee profile so that payroll information can be found right when you need it.
6. Audit your payroll system regularly
Lastly, schedule regular audits of your payroll system to make sure it’s doing the best job possible for your business. Take note of where your payroll process can be improved or automated. These are the areas eating up the most time for your administrators. Is the system producing results? Are mistakes or errors common? Are repetitive tasks optimized for efficiency? Identify what is working and what isn’t and explore proper solutions that suit your needs.
Effectively managing payroll for a small team requires a solid grasp of these best practices. If we had to summarize it, organization and preparation are imperative for smooth payroll processing and simple filings at the end of the year.
If you are one of the many business owners being overwhelmed by payroll, tools such as modern payroll software are a lifesaver. Experiment with one of the many online payroll solutions that automate and process payroll for thousands of businesses across the country.
At Rise, we believe payroll should be simple. We want to empower small businesses to do their best work and that means outsourcing payroll so you can focus on your customers. That’s why Rise small business payroll is always free for teams with 20 employees or less! Sign up today for free.