Manage Your Employee Hours And Pay: Three Things To Monitor For Payroll
As a small business owner you probably do not have a dedicated human resources department, and more than likely you use some kind of outside bookkeeper or accountant to handle the processing of your payroll.
Unfortunately these professionals are only able to make a correct payroll if they have all of the right information from you, but because of the difficulties in calculating payroll, it can be easy for you to make mistakes. Small mistakes become magnified over time, and you need to protect yourself from potential lawsuits and IRS actions by giving your payroll processor the most accurate information you can. For payroll there are three things that you really need to pay attention to.
Actual Time Worked
The most obvious item that you have to know is how much time each employee logged as workable hours. This might seem like it is easy to do, especially if you have set hours and a regular schedule that your employees are supposed to follow, but things can get more complicated with little effort. One of the biggest areas of concern comes from employees that clock in and out for lunch. If they are given an hour break, are you sure that they came back at the end of the hour, or are they routinely late coming back? If the employee is fifteen minutes late four days a week, then you are paying that employee for an extra hour of work each week, if you do not have an accurate way to track time. At Sugaroutfitters Timesheets is a module that gives the most comprehensive and accurate view of employees coming in and off the clock, so that you only pay for hours employees worked.
Another area where you can run into trouble in a hurry is with overtime, particularly if you schedule your employees at a full forty hours each week. Very often employees will begin their work day a few minutes early, or your might have to ask them to stay a few minutes late each day to finish the final details of a project. The time seems insignificant in the moment, but the accumulated minutes add up over the course of the week, and you could soon find that you owe employees overtime pay that you have not been paying. If you have many hourly employees, then you need to have a strong way to monitor every minute that they work, and be sure to pay them based on all of the hours that they work in the week, even if that means paying overtime. Remember that you can always compensate by sending an employee home early so that they do not hit the overtime mark, but never try to hide overtime hours from employees or your accountant.
Finally you need a good way to keep track of all of the non-hourly pay that you have to deal with on an annual basis. Most of the time you will have some kind of sick pay or personal time that employees can use if they are not able to make it in to work, and you must make sure that all of those hours are accounted for in your payroll calculations. You should also be able to track remaining sick time and personal time so that you can make certain that employees are not abusing the system and getting paid for sick time they did not have.
A payroll system is really the only way to protect yourself from allegations of fraud and payroll tampering, and a payroll system will be able to automatically keep track of all of the important numbers that you need on a regular basis. Your employees and your accountant will appreciate the effort that you make to keep their payroll as accurate as possible.
I am Aubrey Maple and I have been a bookkeeper for thirty years. Two years ago I had a client get hit with a multi-million dollar lawsuit because of unpaid overtime for his small business. This happened in large part because he tried to do all of the calculations by hand and only paid employees for hours he had them scheduled, not the actual hours they worked.