Payroll can be overwhelming for small business owners— with so many stipulations and requirements to follow, even one simple error can cost a ton of time and money.
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Here are five things small business owners need to take under serious consideration when completing payroll, from Jean Domaingue, area director of sales for CompuPay.
No. 1: Misclassification. Domaingue said small business owners often will hire a freelancer or a temp worker for a period of time, and pay them under the table, which is a very risky move.
"If Harry gets hurt and goes to the hospital, and you don't have workers comp insurance because you don’t have 'employees,' you're in trouble," she said. "Make sure each person is an employee, and has the proper insurance."
No. 2: Hiring family members. In certain business structures, small business owners can save money on taxes by hiring members of their family. Domaingue said this is most common in a sole proprietorship structure, when family members do not need to be covered with unemployment taxes.
"You can realize some fairly significant savings on employment taxes," she said. "It's depending on how the person is related to you."
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No. 3: Follow new hire forms and reporting requirements. This is all the more important with the continued controversy over immigration in the U.S., Domaingue said.
Make sure every person you hire is legally eligible to work in the country. Also, make sure you are withholding the correct amount of taxes from each employee, she said.
No. 4: Understanding overtime laws. Even if your worker may be salaried, you may still have to pay him or her overtime, Domaingue said.
"Workers in this country are very savvy now, and they know the laws," she said. "If they report you to an agency; once that can of worms opens up it can be very costly for a small business owner."
No. 5: Adherence to the Fair Labor Standard Act and Federal Minimum wage. These laws can vary from state-to-state, so small business owners need to be sure they are complying with their state's minimum wage laws, Domaingue said.
"If your employees are not being paid properly, you can be fined and subject to penalties," she said. "You'll also have to pay someone to do your back taxes and amended returns.
The NFIB will cover these tips and five more during its Webinar, "The 10 Things Every Business Owner Should Know About Payroll," tomorrow at 12 p.m. eastern time. Register at www.nfib.com/webinars/payroll.