It’s important for small businesses to follow common payroll best practices in order to save time and money. We’ve compiled a list of ways that growing teams can optimize their payroll processes.
Managing payroll for a small team has its challenges. The paperwork and time commitment alone can overwhelm even the most savvy business owner. Payroll requires careful planning and proper tools to get the job done so your employees can receive their pay cheques on time and error-free.
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 payroll best practices in mind for tackling payroll for your small business.
Write down and track important payroll dates for the fiscal year.
Being prepared for deadlines and submission dates is crucial for effective payroll management. Missing deadlines can result in unnecessary fees, penalties, or interest payments, which can be crushing for any small business. That’s why our first and most important tip is to be prepared.
Related Reading: The official 2021 payroll calendar for Canadian businesses
One of the best resources for payroll information is the Canada Revenue Agency (CRA) website. There, you’ll find everything you need to know on payroll best practices for your small business.
Having a payroll communication plan in place will clearly outline pay structure for you and your employees.
The purpose of a payroll communication plan is to avoid any miscommunication, errors, or unclear agreements and to help employees understand their net pay. The plan may be included in an onboarding package, with information such as an employee’s 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 earnings and deductions
- Explain how different exemption amounts and tax credits can impact net pay, be unique to each individual, and change over time
- Prepare an annual statement of compensation and benefits
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 you automate 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 and having cloud data storage, payroll reporting, end-of-year filing, and much more. On payday, employees will receive their pay stubs automatically 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 up to a certain number of employees. Rise small business payroll for example is free for any business with 20 or fewer employees.
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.
If you’re unsure of employee classifications, Payscale has a breakdown of the different terms to help you better understand.
Having tidy and well-kept payroll records pays off in the long run. This means all historical records for employees should be easily accessible whenever they are needed.
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.
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 you or 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.
Related Reading: How to calculate the ROI of your HR payroll system
Effectively managing payroll for a small team requires a solid grasp of payroll 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.