What’s your biggest headache as a small business owner?
If you said making payroll, you’re not alone. For many business owners, the very word “payroll” is enough to make them want to change the subject quickly.
And while it’s frustrating, confusing, and often the last thing we want to discuss, its importance can’t be overstated—every small business owner needs to take the time to understand payroll.
These commonly-asked questions can give you a good start.
7 Payroll Questions You Need To Ask
1. Am I choosing the right payroll frequency?
Many small business owners are not—and these errors can be very costly for a small business owner. Employers may pay their employees on a weekly, biweekly, semimonthly, or monthly basis. The state in which the employer conducts business will usually establish the pay frequency for the employees, based on an employee’s classification: exempt or nonexempt.
2. What’s the difference between an independent contractor and a W-2 employee?
Classifying employees correctly is a critical issue, because it affects how much a business pays in taxes, the amount of withholdings from paychecks, and which tax documents need to be filed. Incorrect classification can lead to penalties.
3. How do I tell the difference between exempt and nonexempt employees?
Business owners get this one wrong fairly often. Sometimes it’s an innocent mistake, but other times it’s a deliberate decision made to avoid the potential costs of nonexempt employees; namely overtime wages. Exempt vs. nonexempt is governed by the Fair Labor Standards Act (FLSA) and the U.S. Department of Labor.
There’s a lot you need to know about classifying your employees the right way based on the FLSA. Check out our guide here to get all the details.
4. I have remote workers. How do I handle their payroll taxes?
More and more frequently, employers are allowing their employees to work from home a few days a week. But what if an employee lives in a different state than the employer’s usual place of business? Employers may have to deal with the complex challenges of allocating wages among these several states without even realizing it.
5. How can I manage my per diem employees the right way?
Per diem employees’ flexibility often benefits both them and the employer—per diem arrangements typically work out fine. However, when a per diem employee becomes unresponsive and/or is unreliable, what do you do? What can you do?
6. What can I do to avoid being a victim of payroll fraud?
Payroll fraud is a serious issue, and business owners should have a system for detecting and preventing it. The most common form of payroll fraud is when an employee gains access to funds they are not entitled to. For salary employees, this could mean adding fake employees to the payroll and collecting their wages. Hourly employees may also commit payroll fraud by altering the hours they work or by clocking in or out of work at inappropriate times. Luckily, payroll fraud is fairly uncommon, but it is still important for businesses to understand the best methods of detecting it.
7: What do I need to know to understand how wage garnishments may affect my company?
A wage garnishment or wage attachment is an order issued by a court or a government agency that directs an employer to deduct a certain amount of money from an employee’s paycheck and send it to a government agency or creditor. You need to know what’s legally required of your business in response to wage garnishments.
Looking For Answers?
Maybe you’re not sure about the answers to some of these questions or you’re looking for a resource to help you clarify what you’ve learned.
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