payroll management tips for small businesses 3
Small Business

6 Payroll Management Tips For Small Businesses

For many businesses, managing payroll can be a hassle and the cause of many headaches.

Small businesses may sometimes feel like paying their employees is a challenging or overwhelming task. However, with the right system and strategy, you can make this organized and doable. It’s imperative to retain a proper flow with payroll for your employees, as this will ensure happy workers. In turn, they will continue to work hard, and remain loyal to your business. Below we will detail several payroll management tips for small businesses.

To become a sustainable small business, it’s recommended that you apply valuable practices to your payroll management. Fortunately, the tips that will be tackled below won’t require you to shell out hefty amounts of investment. 

Keep your employees happy with some of the these payroll management tips for small businesses.

1. Establish a Clear and Concise Payroll Policy

The first one of the payroll management tips for small businesses is to create a payroll policy. Creating an internal payroll policy for everyone to adhere and refer to, makes your organization workflow smoother. A small business needs to tackle this even before releasing the first batch of checks. This will prevent errors, discrepancies, and misunderstandings. 

Everyone must know how payroll works. Other variables like paid leaves, salary ranges, and more details should be included in your policy. Communicate the policy to everyone in the company. Whatever job role and position they have, they must be familiar with the payroll policy.

2. Set Up an Efficient Payroll System

You can either use a manual system, outsource it, or go with an automated payroll system to calculate and manage employee paychecks. As a small business, it’s natural to feel that manually computing payroll is more practical.

Unfortunately, there will be more tendency for errors when manual computation is conducted. You save time and energy by automating payroll since it is the most accurate method. Going for an outsourced company that offers payroll services is an excellent solution for your small business, too. To give you a comparison of the three types of payroll systems, check out the following:

  • Manual System – A hand-filing payroll is an option for some small businesses, mainly because it’s cheaper. By contrast, manually processing payrolls is actually time-consuming, prone to errors, and considered a tedious task by many.
  • Outsourced System – When you have set aside some budget to outsource the payroll system, you can hire a third-party company to do this task. Payroll processing, payroll taxes, unemployment taxes, and other administrative duties are usually handled by them.
  • Software System – With a payroll software, you get the benefits of both manual and automated systems, including time savings, accuracy, and convenience. Today, most software offers comprehensive features, such as storing data, calculating payroll taxes, and more.

3. Categorize all Workers

Depending on the classification of your employees, their pay schedules and tax implications will also vary significantly. Independent contractors and full-time employees have blurred boundaries, so make sure to have a clear difference in their payroll schemes. 

It’s best to decide and ensure that both parties understand the expectations for an independent worker and a full-time employee. Ensure all classifications are incorporated into your payroll system so that nothing is missed, and there won’t be misunderstandings later.

4. Decide Your Pay Schedule

Pay frequency is one factor you need to decide as an employer. It’s referred to as your company’s pay schedule. You will choose when workers will receive their compensation, and how they can receive them. 

Before the decision, make sure you are complying with the laws of the federal and state government. Payroll payments are usually made weekly, bi-weekly, or monthly. Whichever schedule you prefer, try to stay consistent, and never pay your employees late.

5. Decide How Salaries Are Computed

Wages are calculated based on salary status. You can have two ways to pay salaries, and that can be on an hourly or fixed rate. Your small business and the employee’s job role must be considered when determining the right salary level. Before hiring an employee, they have to know how they will be paid, and how their salaries are computed.

6. Stay Transparent About Salaries and Pay

The organization should communicate openly, honestly, and transparently when issues arise, and whether or not the salaries will be credited on time. And, if the payments aren’t credited yet, what the reason is. Although sometimes unavoidable, paying wages in a delayed manner could lead to demotivation if improperly handled. 

As an employer, you must explain the reasons behind the delay, and ensure that your employees understand the situation. New employers should stay on top of employees’ inquiries regarding salary postings, and send an announcement to everyone whenever necessary, to keep employees happy.

Payroll Management Tips for Small Businesses – Summary

The payroll process is always stressful, but following the right advice early on can reduce the pain later. As a small business, it’s pretty challenging to comply with everything required to make your payroll system smooth. But with the tips mentioned above, you can save yourself from the hassles and troubles.

No matter what, you need an effective strategy to ensure all your employees are compensated well, and are content with the process.

For more articles like this one detailing payroll management tips for small businesses, be sure to check out the small business section of the site.

4 comments on “6 Payroll Management Tips For Small Businesses

  1. Usually I never comment on blogs but your article is so convincing that I never stop myself from saying something about it. Keep it up!

  2. Deciding on a pay schedule will certainly help you in the long-run. When I first started using payroll software, it amazed me how much easier it was to adhere to a schedule. It also made my business benefit from filing year-end W-2 and 1099 forms directly to the IRS/SSA.

  3. very very useful, thanks for sharing.
    Karl Rock

  4. Pingback: The Best Payroll Software for Small Businesses in 2022 -

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