Every time the business expands, payroll management becomes challenging. It is important to note that, while it might have been relatively easy to manage a few employees and cover all their needs years ago, issues have become increasingly complicated, including various regulations, classifications, and technical aspects.
These difficulties can cost a lot of time and money for the business person. Nevertheless, realizing possible barriers and using an effective approach to their solution can help to optimize the work of the company, save time, and minimize the number of mistakes. Here we look at 5 major payroll issues that growing businesses experience and how to manage them.
- Ensuring Compliance with Complex Regulations
It is always a challenge for new businesses to deal with the frequent changes in tax laws and labor regulations that accompany hiring. Employment laws are changed by the governments often; those rules include minimum wages, taxes, overtime wages, and benefits to the employees. Hence, failure to work in compliance with the regulations can lead to severe fines or even prosecution.
For example, the tax laws in the state and the country as well as determining deductions for social security, medicare or unemployment insurance are key. Also, cross-state and cross-country enterprises require different regional legal requirements for employees, thus creating more complications.
- Managing Employee Classification
Employee classification is important in payroll and compliance with state and federal labor laws. Classifying full-time employees as contractors is a legal and financial no-no. Traditional employees are paid better and get compensated for overtime work, medical expenses, and even paid vacations, holidays, and sick days while contractors are given their work with all the expenses on taxes, both directly and indirectly, on their own.
Many entrepreneurs rely on payroll software with a user-friendly interface to handle employee pay, tax filing, and benefits management efficiently. Most small business owners always turn to their payroll software with an easy-to-use graphical user interface for the generation of employees’ checks, preparation of monthly and yearly tax statements, and administration of employees’ benefits. These tools can assist businesses in classifying workers properly and preventing common mistakes regarding necessary classifications.
To meet this challenge, employers should review employment contracts and IRs periodically. The division of duties and responsibilities during the onboarding process can also be used to differentiate between contractors, freelancers, and staff. Moreover, consulting legal is important for growing businesses to hire consultants who meet the classification standards to avoid making some mistakes.
- Handling Payroll for Remote and International Teams
Due to the increase in telecommuting, organizations are now grappling with issues relating to how to pay remote workers. Employing overseas workers, remotely located employees, or even expatriates can be complicated by multiple tax laws, exchange rates, and contradictory labor laws.
For example, the salary of an employee working in a foreign country may require knowledge of taxes, contributions, and foreign exchange. Moreover, the timely payments of all the suppliers, employees, and all related legal requirements for both home and host country have always been an important consideration in European construction projects to sustain trust and confidence.
- Maintaining Data Security and Accuracy
Some of the most crucial and confidential details are usually processed in payroll, including employees’ bank details, Social Security numbers, and salaries, and as such an attack on payroll can be disastrous. Ensuring that this data is secure and accurate as it must be for most contemporary businesses collecting and processing payroll data digitally is challenging.
Employee data contains highly personal information about the worker, and its loss can cost a company money and harm its reputation after a single data breach. Furthermore, mistakes like wrong salaries paid, and wrong taxes sustained during data entry, can cause dissatisfaction among the employee and several compliance problems.
To overcome these issues, there is a need for good payrolling systems that are supported by strong security measures of encryption and multi-factor authentication. It is also essential to conduct periodic audits on EDP systems, to train employees on cybersecurity measures, and to implement password security measures. To reduce errors, it can deduct the correct taxes, and/or other deductions, so that employees can receive the right amount when they are due.
- Scaling Payroll Processes Efficiently
The problem becomes more complex with the growing numbers of employees, distribution of various branches, and different structures of payments. In large organizations and big groups, traditional methods suitable for small teams result in slow progress and increased error rates.
The scaling of the payroll processes needs the application of technologies and systems. Companies with locations and time zones in different parts of the world can manage payroll using cloud-based payroll solutions. The process includes, but is not limited to, calculating taxes, making direct payments to employees, and tracking their benefits.
