People are your greatest asset—and your people need to get paid. You have some decisions to make to make the payroll process go smoothly. First, how will you keep track of employees’ time so hourly workers are compensated fairly (and accurately)? How often will you pay employees? And, will you use a payroll service or assign the duty to in-house office staff?
Let’s walk through some of these payroll decisions so you can weigh them carefully and set up a payroll process that works for you.
Payroll Process: Tracking Time
Time capture is a critical element of the payroll process. Outsourced payroll companies might provide time-entry sheets for you to process or an electronic program to record this data. If you decide to track time yourself, you’ll need some time card system. Some companies use time clocks, but these do not track time worked on specific jobs. Today’s GPS systems are great for tracking time on jobs—which helps manage efficiency and holds employees accountable for their time on the job. Whatever you choose, be consistent and communicate the process with your people. Make sure they understand their time is being tracked, and while “on the clock” they are getting compensated to fulfill their job duties.
The Department of Labor requires that you keep certain records, and requirements vary by state. Here is a list of basics for non-exempt workers.
- Employee full name and social security number
- Employee address
- Birth date, if younger than 19
- Time and day of week when employee’s workweek begins
- Hours worked each day
- Total hours worked each week
- Basis on which wages are paid (ex: $10/hour or $400/week)
- Hourly pay rate
- Total daily or weekly straight time earnings
- Total overtime earnings for each week
- Additions to accounts receivables deductions from employee wages
- Total wages paid each pay period
- Date of payment and pay period covered by payment
Payroll Process: Processing Payroll
An outside payroll service can alleviate the burden of handling the process in-house. Providers such as ADP, QuickBooks Payroll and PayChex can complete payroll tax compliance forms, as well. Another option is employee leasing, which is when employees of the “leasing company” provide workers’ compensation insurance and other benefits for your employees. You still manage your people—but with less exposure. Payroll companies and leasing companies also can provide other human resources support functions to help smaller contractors.
Payroll Process: Pay Frequency
How often will you pay your employees? For most landscaping companies, pay schedules are bi-weekly or weekly—and an every-other-week pay cycle can be easier on your cash flow. Plus, if you’re doing payroll in-house, that means you only have to write checks 26 weeks instead of 52. However, consider what motivates your people to show up on time and work hard. Some companies pay weekly because this is an incentive and can even attract employees to work at your business.
The next decision: pay hourly or salary? Talk to your attorney about the pros and cons—and keep in mind, as you grow, you’ll likely have salaried and hourly employees, depending on the position. Foe the most part, field workers are paid hourly. But there are a range of compensation structures for salespeople.
Payroll Process: Payroll Taxes
Timely payroll tax payment is critical. You must stay in compliance, and payroll services can help. With the evolving tax laws, many business owners prefer to have a payroll company manage their process because then they can rest assured that tax requirements are being met. A payroll firm can submit payroll tax payments to tax agencies. If you fall behind in payroll taxes, this can really hurt your business. Taxing authorities can charge penalties or attach liens to your accounts.
>>The bottom line: Payroll can be a complicated and time-consuming process. Seriously consider delegating this process to a third party that can manage payroll, maintain required data, and assist with payroll tax filing and payments.
EDITOR’S NOTE: This story was an excerpt from one of NALP’s member resources, provided by well-known industry consultant Bruce Wilson. Want to learn more about bettering your business? Become a member to enjoy these resources and more.