4 Essential Payroll Policies and Procedures Every Employer Must Use

Andrew Moran - Writer for TBR
By Andrew Moran
Nevena Radulović - Trusted Brand Reviews Editor
Edited by Nevena Radulović

Published January 19, 2023.

An office desk with files marked "Salaries" and "Employees"

If you're wondering whether a payroll policy is integral for companies, the simple answer is yes. It's a critical component of running a business, managing accounting and human resources departments, and ensuring the organization remains payroll compliant.

To avoid unnecessary fines, unemployment lawsuits, and even interest in unpaid wages, employers must ensure they maintain an efficient payroll process that can facilitate accuracy and support timely employee compensation. To help you out in this process, we've put together a brief guide on payroll laws and procedures you should adhere to as an employer.

» Are you legally obligated to run payroll? See the answer for your business

1. Pay Frequency

Establishing and maintaining a steady stream of pay frequency is essential. While different businesses may use various payroll schedules, be it a weekly schedule or a bimonthly one, nearly every US state today has a minimum pay frequency law to determine the longest possible period between paydays. So, for example, while the longest period in Alaska is semi-monthly, in other states like Idaho the longest span will be a month. On the other hand, Alabama doesn't have any pay frequency laws.

» Need help establishing steady payroll? See our tips for streamlined payroll processing

2. Overtime Pay

Properly calculating overtime pay and monitoring it is crucial for both large and small business payrolls, as it can be costly and needs to be by the book. Today, companies are legally required to pay non-exempt employees overtime if they clock in more than 40 hours per week. According to federal law, employees who work anything over these hours must be paid 1.5 times their regular rate. Because some states may have additional laws, it's imperative to pay attention to the various labor rules and regulations because you may be legally required to repay wages plus late fees and other penalties if you're not in compliance with overtime laws.

3. Payment Methods

Today, there are many different ways to compensate employees, be it through a physical check or direct deposits. For the most part, employers will typically select payment methods, although it would be smart to check state laws to figure out what methods are permitted or restricted.

As an example, some state laws across the country may prohibit paying employees with payment cards or direct deposits based on several factors, such as the following:

  • Employees didn't offer permission
  • The company doesn't cover payment fees
  • Employers failed to notify employees of any related fees they were responsible for
  • The organization refused to provide additional payment options, such as paper checks or cash.

4. Payroll Taxes

Finally, payroll taxes are an essential aspect of maintaining a workforce. Although compliance is paramount, what does it even look like? Well, there are many components to complying with payroll taxes. First, there's calculating payroll taxes correctly, especially when it comes to remote employees. Second, filing and paying taxes on time is vital since you don't want to be slapped with fines and penalties. Finally, businesses must consider both federal and state tax rates when calculating and filing taxes for the year.

Because it can be a complicated ordeal, the best solution to avoid any headaches—financial and otherwise—is to incorporate payroll software with the right features into the firm's infrastructure. By doing so, employers can automate the tax filing process and ensure everything is streamlined.

» Want to reduce payroll taxes? See 5 legitimate ways to do so

Streamline Your Payroll Process

Businesses of every size and in each industry have to comply with payroll laws, whether at the federal or state level—there's no other way around it. However, while this requires a tremendous amount of resources, there are several measures you could employ to avoid stressful paperwork and administrative problems.

Ultimately, you can streamline the payroll process by incorporating automated payroll with the right software that can help you achieve these objectives, be it automating payroll tasks or determining a jurisdiction's payroll laws.

» Need help streamlining your payroll? Read TBR's payroll software reviews to find the best resources available.

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