For most firms, payroll is the largest operational expense. So making payroll mistakes can have a big impact on business, from cash flow dents to taxation authority investigation to a court case with a disgruntled employee. It is at the heart of any relationship between employer and employee, and mistakes are both embarrassing and costly. You need to work on this at two levels: setting up fair and transparent policies about pay, and setting up a system that minimizes the chance for error. As the business owner, here are payroll policies to keep in mind.
1. Have A Pay Policy And Out It In Writing
Failing to point to the firms policy on why some people get a raise and others did not is a sure way of setting yourself up to have a group of unhappy team members, complaints and even legal action. Come up with a policy that describes the bases for giving bonuses, rises and promotions, and put it in writing. Policies based on objectively assessed performance keep you in the law and out of court.
2. Implement Pay Changes At The Correct Time
It is uncommon to have disconnected between the process of rewarding a pay increase and getting that information into an employee’s payroll record. If that includes does not turn up in the employees bank account at the agreed time, you have send some bad messages about your reliability and what you think of their interests. Another example is the sales executive who knows the customer has paid, but does not get his commission on time because the information has not filtered through the payroll system. This person will eventually be fed up and look for another company that treats its employees better.
3. Deal With Over-payments Immediately
Research has shown that almost half of employees have been overpaid at some time in their work life, but a third did not own up and pocketed the cash. Payroll mistakes like this cut two ways: they can undermine and employers trust in their team, and they can, if not handled correctly when recognized, damage the employee’s feelings about their employer. For instance, demands for immediate and total repayment may be perceived as unfair and imposing a real burden.
4. Assess Termination Pay Accurately
Take time to find out exactly what a terminating employee is entitled to. Mistakes can go in either party’s favor but you probably will not get back and overpayment while you can find yourself in trouble over an underpayment.
If you are preparing your own payroll, you know just how much time it takes to monitor this crucial and recurring task. If you think that it takes up too much of your time, you can outsource the whole thing to an agency. Even small companies can save money by outsourcing their payroll processing. In most cases, a payroll Joplin processor will calculate the payroll every pay period, prepare employee earnings statements, give direct deposit arrangements, and deposit necessary taxes and file tax returns for your business. All these can save you business time and help avoid payroll mistakes.