If you are responsible for wrangling the payroll in a small business, it is important to learn from the mistakes many others in your position have made in the past.
With that in mind, here are the main points to consider so that you can steer clear of the worst consequences of payroll errors.
Prioritize accurate employee classification
More organizations are adopting a mixed approach to hiring employees at the moment, combining full time team members with freelancers and contractors to fulfill their requirements.
From a payroll perspective, it is important to differentiate between these main categories, dealing with permanent workers and part time consultants separately. This will involve filling out W-2 forms for the former and 1099 forms for the latter, and since you can quickly learn how to create a 1099 online it should be straightforward to sidestep this common pitfall.
Take tax seriously
There is no doubt that tackling the taxation aspect of payroll management is the most significant challenge you will face. It is not just a case of calculating how much tax needs to be paid, but also how much has to be withheld from the salary of each employee.
This of course ties into the aforementioned classification issue, as there will be perks, deductions and pension payments to factor into the payroll for full time employees, while freelancers may not receive any of these benefits.
Most importantly, you should aim to be as accurate as possible, as you could fall foul of inland revenue representatives if mistakes are made on a consistent basis.
Hit deadlines consistently
In the world of payroll management, timing is everything, and missing deadlines can lead to all sorts of trouble from a number of sources.
Paying tax to schedule is certainly one of the best ways to avoid any penalties, as if you fail to do so you could be charged over a tenth of the money owed for your transgression.
Errors like this often crop up because of straightforward forgetfulness, so make sure you set plenty of reminders and alerts to prevent this from happening, and aim to automate the payment process as a failsafe should you not keep up to date with your responsibilities manually.
Keep thorough records
The final thing to know about making payroll processing as simple and stress-free as possible is that if you sort out your paperwork and organize it efficiently, you will never need to worry about the problems that can arise if mistakes are made.
From ensuring that all employee and contractor information is accurate and up to date, to keeping tabs on expense claims and other documentation, a keen eye for detail here will pay dividends in the long run.
Making the switch to a digital solution for sourcing, storing and managing payroll data is certainly worthwhile, especially as cloud services are making this more affordable. If you have any further concerns, seek advice from a payroll professional.
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