Handling the financial record of employees; salaries, wages, bonuses, net pays and deductions can be complicated for small business owners. The Nigerian business climate makes the process more challenging as most business owners are to obtain several permits, approvals, and licenses in complying with the law on payroll management.
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Payroll management is the administration of employees’ financial records, including salaries, wages, bonuses, deductions, and net pay. It includes the collection of payroll data, computation, disbursement, and reporting of employees’ salaries. Also, it includes other obligations such as contributions by employees as required by the law.
Effective management of payroll is important as it attracts and retains highly competent, valued, and loyal staff.
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In general, some business owners think little of their payroll process as most small businesses are unregistered. Therefore, they are ignorant of the framework applicable to payroll. Furthermore, the small size of the workforce, payment of employees by means off the record, are contributory factors.
However, registered businesses have the responsibility of complying with the business regulatory framework applicable to managing their payroll. Yet, lack of planning, cumbersome business policy, ignorance of applicable laws, etc. make following the framework difficult.
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Proper management of payroll can be challenging for the new entrepreneur or business owner. But, with proper planning, a business can instill a payroll system that is sustainable.
To effectively manage your payroll process, we have highlighted tips that will guide you set up a payroll system.
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Payroll Management Tips
Allocate Resources To Payroll Management
Some small business owners and new entrepreneurs do not pay much attention to the way their payroll is handled. This negligence can accrue penalties for the business.
Thus, small business owners should allocate resources such as staff, money, etc. to payroll management. These resources are important to implementing an effective payroll system. It helps resolve the challenges faced by small business owners and entrepreneurs with their staff.
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Transparent Business Policy On Payroll Management
Transparency in the administration of payroll is important. Transparent and consistent business policies are important for efficient payroll management.
Transparency on the payment of staff, employees’ records containing their biometric information, payroll variance reports, reconciliation reports are important for a sustainable system.
The established laws on the payroll system should be followed when formulating business and company policies. A transparent and consistent policy produces a transparent and compliant administration of the payroll process.
Knowledge Of The Applicable Law
The knowledge of the applicable law on payroll is important. In law, deduction of certain allowances and contributions from the employees’ salaries, are mandated by law for the employees’ benefit. These deductions are contained in the regulatory framework of labor-management and fiscal laws.
In Fiscal laws such as tax administration laws; business owners serve as the agents of the government in the collection and remittance of employees’ taxes after certain deductions such as housing, pension contributions are made.
The failure of small business owners to carry out such mandated obligations can lead to liabilities and penalties sanctioned on the business. Thus, business owners need to have knowledge of applicable laws when managing their payroll.
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Adopt A Payroll Software
Payroll software is a viable tool for managing your payroll. It is a cost-effective and efficient way of helping a business streamline their processes and comply with regulatory laws.
Also, this will save you stress and free up time that can be invested in other areas of the business. Besides, payroll software is known to reduce errors that may occur when you manage your payroll manually.
Select A Payroll Software That Suits The Business Needs
It is not enough for small business owners to adopt a payroll software. Small business owners should adopt a payroll software that is adaptable to their business needs.
When selecting a software, you should consider one hosted on the cloud. A cloud software ensures your payroll data is conveniently available anytime it’s needed. Also, the payroll software should have safety protocols that deny unauthorized third parties’ access to your payroll data.
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Classify Employees Properly
There are different classification of employees an entrepreneur or business owner can employ. Business owners should classify employees as either an employee of the business or an independent contractor.
This classification is important as the deductions on tax required for employees of the business are different from that required of independent workers.
Independent workers tend to pay their tax obligations themselves. Understanding the difference and properly classifying all the people you work with will help in setting up a payroll structure that works.
Set-up A Budget
Payroll management is expensive to administer as the burden of making employee contributions to the appropriate legal framework rest on the profitability of the business.
In managing payroll, small business owners should set up a budget based on the estimation of the cost of payroll. Budget estimation aids in planning, and curtailing unforeseen expenses when establishing your payroll structure and system.
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Review Employee Records And Data
The entrepreneur and small business owner must keep and review employee information periodically. This review is important as it takes note of changes in employees’ wages, bonuses, overtime, allowances, and biometric information. Hence, creating an efficient payroll management system.
Keep Updated Accounting Records
Accounting records such as the income statement, balance sheet, and cash flow statement gives the business owner information on the profitability of the business for an accounting period. It brings to the attention of the small business owner the necessary employees’ taxes and contributions that the business owes or failed to remit.
The accounting books kept by a business also gives the business owner information on the estimated resources available for the business operation. That way, the business owner can decide if it can allocate the required resource for payroll management.
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Integrate Payroll With HR
An integral aspect of payroll management is the record-keeping of employees which is one of the roles of the human resources department. These records include information on employees’ performance, benefits, etc.
The task of regularly updating them can be risky and cause delays in business operation if done manually. Hence, integrating payroll administration with the human resources department can bring about an efficient system in the organisation.
Outsourcing Payroll Management
When managing your payroll process becomes demanding, outsourcing the entire process to a payroll service company becomes a viable option.
The companies that handle these kinds of services understand the applicable laws and will make your work easy. Also, you are left with time to focus on other areas of the business where your strength lies. Besides, payroll companies have the resources to combat and take action on identity fraud.
Running a business is not a walk-in-the-park. There different moving parts that need to align for the smooth operation of a business entity. Payroll management is one of them.
If you don’t manage your payroll well, you will have dissatisfied employees and may also get in trouble for no-compliance with authority. It’s always best to do things right.
How are you managing your payroll? We will like to hear your thoughts in the comments. Also, share this with your business friends.
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