Your employees are your most valuable assets. While they bring their own skills and expertise to the table, you’re responsible for compensating them fairly, offering proper insurance and benefits, and making sure your business abides by federal, state, and local regulations regarding employment practices. If you run a small business—with up to 100 employees or fewer—you may handle some or all of these tasks yourself rather than relying on an outside HR department or consultant, but that doesn’t mean you can ignore them altogether. Here are five ways to improve payroll and HR as a small business owner.
1) Understand Taxes
Start by figuring out what kind of taxes your business will need to pay. That means knowing whether you’ll be hiring full-time employees (if so, they’re subject to payroll taxes) or freelancers (who are responsible for their own taxes). It also means knowing if you’ll be collecting sales tax—and if so, how much—from your customers. You should also make sure you understand how different taxes impact financial reporting; after all, money talks. If possible, stay on top of taxes by having someone who can competently handle accounting duties at your company from day one. Your CPA may charge more for an initial set-up fee but it could save you long-term headaches—not to mention some cash.
2) Organize Personnel Files
Organizing employee files is a simple administrative task that can save you hours of time. Keep copies of important documents, such as insurance cards, employment agreements, hiring forms, and company policies. Any paperwork relevant to each employee should be kept in one place so it’s readily available for reference or audits from government agencies or other third parties. Sort papers into separate folders for each person, including an updated folder where paperwork can be thrown once it has been signed or filed away. It also helps to create index files so you don’t have to hunt through a giant pile of documents just to find one piece of information quickly.
3) Keep Up with Employee Status
One of your top priorities is keeping track of your employee’s employment status. Each state will have different laws regarding which employees require you to send them W-2s or 1099s; if you don’t know what these are, ask your accountant! Be aware that not having forms on hand for an employee might put you in a vulnerable position in case they leave for another job—even after they’ve received payment. It also means you could be held liable for taxes owed, so take extra care when dealing with special statuses. If there are any changes to an employee’s employment status, let them know immediately so that nothing falls through the cracks.
4) Prepare W2 Forms
Once you have a few employees, it’s time to get all of your paperwork in order. Your W2s need to be filled out by each employee for their tax returns, so if you do them yourself or ask someone else to fill them out, just be sure that you have every form completely correct. The last thing you want is for your staff members—or worse, their employers—to have incorrect information for their taxes because of something stupid on your end. The IRS doesn’t look kindly on payroll errors either.
5) Create Labor Agreements
If you have employees, it’s important that everyone involved in an employee-employer relationship knows exactly what they’re supposed to be doing. Have every worker sign an employment agreement that spells out their obligations, responsibilities, compensation, benefits, advancement opportunities—you name it. You can use labor agreements for full-time employees, part-time workers, temporary workers, and contractors. These agreements will give you some added peace of mind while making sure your employees understand what they need to do—and vice versa. Additionally, if your business ever ends up facing any legal action or dispute resolution proceedings related to labor issues or employee relations disputes (think lawsuits about wrongful termination), having these documents in place will help defend against any future accusations of unfair treatment or illegal behavior on your part.
6) Automate your HR and Payroll department
In order to manage everything on your plate, you have to use technology wisely. Set up some sort of time management system so that you can stay on top of things while freeing yourself from mundane tasks. For example, try using software for human resources management or payroll software so that you don’t have to deal with it on a day-to-day basis. If you use a paper timekeeping system, there’s also software out there that can help increase productivity by helping employees track their time more easily. Integrate invoicing into your accounting system for payroll processing in order to get paid sooner rather than later—and get cash flowing back into your bank account sooner too!