Managing payroll as a small business owner can become highly stressful if time and resources are in short supply. However, many common challenges small businesses face when developing and implementing a payroll management system can often be lessened with a bit of focus, direction, and support from industry experts.
Putting forth the effort towards improving your payroll department is well worth the effort. The benefits of creating an efficient and effective payroll system as early as possible will help to prevent future accounting problems and inefficiencies. Whether you’re a business owner starting with payroll management, or are a seasoned proprietor looking to improve your current employee payment plans, the following six payroll management tips are sure to be of help.
Small Business Payroll Management Tip #1: Establish a Payroll Schedule
Your business’ pay schedule is the defined timeline of when and how you plan to pay your employees. This may seem like a no-brainer when creating a payroll plan for your business; however, many small business owners overlook this minor yet crucial detail. In BC, there are labour laws that outline when employers must pay employees for their work. Businesses that don’t adhere to these laws can face penalties.
British Columbia requires that a business owner adhere to the following rules surrounding pay periods and pay schedule.
- Employees must be paid twice a month.
- Pay periods cannot be longer than 16 days.
- All wages must be paid within eight days after the end of a pay period. This includes incurred overtime hours and statutory holiday pay.
Small Business Payroll Management Tip #2: Define Salary Status
A company’s salary status explains how that business will calculate wages for their employees. Typically, this is divided into one of two categories: hourly wage and salary. Companies can offer both forms of compensation depending on the size of the business and the individual positions.
What are Salaried Positions in British Columbia?
Salary pay is a defined amount of money the employer agrees to pay the employee within a defined pay period regardless of the number of hours worked.
Salary and Overtime
In British Columbia, salaried pay does not exclude an employee from earning overtime hours. If an employee works more hours than agreed upon in the employment agreement, they must be compensated for their overtime.
Small Business Payroll Management Tip #3: Know Provincial Wage Laws
Every province in Canada has wage laws that employers within each province must adhere to. These rules vary from province to province and typically include the following basic laws:
- Minimum Wage
- Minimum Daily Pay
- Vacation Pay
- Statutory Holiday Pay
- Final Wages Pay
Small Business Payroll Management Tip #4: Understand Your Tax Obligations
The tax obligations of a payroll management system are financial deductions an employer is legally required to make on behalf of the federal and provincial governments. This money comes from the employee’s gross pay within each pay period.
Legally required tax deductions from an employee’s pay include:
- Federal Income Tax
- Employment Insurance Earnings (EI)
- Canada Pension Plan (CPP)
- Court Mandated Wage Garnishes
To determine the amount of deductions to withhold from an employee’s earnings, the Canadian Revenue Agency has an online tax calculator any business owner can access and use. Or, for those not as confident in their bookkeeping skills, seek outside help from Source Online’s bookkeeping professionals.
Small Business Payroll Management Tip #5: Establish a Time Tracking System
How a business tracks and records its employee’s hours is essential to operating a reliable payroll system. Business and work culture saw a dramatic shift in 2020 due to the global pandemic that drove thousands of employees to work from home. This has resulted in innovations for businesses to track employee hours, regardless of location.
Multiple software solutions exist to track employee hours accurately; the payroll software program needs to be user-friendly and easily accessible. Time tracking software that works well for small businesses include:
- QuickBooks Time
Small Business Payroll Management Tip #6: Keep Accurate Payroll Records
The number one way to keep your small business’ payroll records accurate is to follow the adage: consistency is key. When business owners keep payroll services and employee records as a top priority, managing a payroll system becomes more manageable.
Additionally, be sure to keep payroll records for the required time determined by your provincial government. In BC, employers must keep records for a minimum of four years.
If maintaining an efficient and effective payroll system becomes overly time-consuming – such as when your business grows, or employee roles change, don’t hesitate to outsource those essential duties to a reliable payroll professional. Perhaps not too surprisingly, when small companies outsource skilled services, they can often save money.
Contact Source Online Bookkeeping for Payroll Management Expertise
At Source Online Bookkeeping, we help small businesses adapt to the challenges of running a payroll system. Our family-oriented Vancouver Island business has helped several business owners with payroll management and other essential bookkeeping services. For more information or to answer further payroll management questions you may have, reach out to our team.