Trusted Blogs & Resources Trusted Brand Reviews brings you expert insights to guide your payroll processes and human resource management. Discover practical strategies to optimize these systems through HRIS and software automation, freeing up time and resources and boosting productivity. Payroll Payroll Summary Report: Types, Benefits, & Templates Payroll summary reports are documents that include comprehensive information about employees, such as their salary or wage rate, employee benefits, overtime data, timesheets, and other factors related to their work compensation.
On the tax front, these documents can highlight employees' deductions, gross and net pay, and tax withholdings. Payroll reports can also offer a snapshot of the company's payroll obligations during a specific time frame. To give you the full idea of their usefulness, we'll look into the different types of payroll reports and their benefits.
» Who should produce payroll summary reports? Learn about HR vs. finance in handling payroll
Common Types of Payroll Reports
There are several types of payroll reports, each serving an important purpose of achieving different aims, whether it's ensuring payroll compliance or determining the number of hours employees are putting in at the office.
That said, here are the five common types of payroll reports:
1. Company Payroll Report
A company payroll report will essentially summarize and break down compensation, taxes, payroll deductions, and how many hours employees worked on any given day, week, month, or year. This can be a helpful document that provides insight into how much the company is spending on employees or business expenses without having to dig through staff members' paychecks.
2. Employee Payroll Report
An employee payroll report will give information on each workforce member's compensation, taxes, deductions, and other related data. Like a company payroll report, this document will help management figure out the investment the company has made in employees and ensure accurate payroll solutions.
3. Payroll Tax Report
A payroll tax report is widely used to garner details regarding employees' gross pay, taxable pay, and the amount of tax for a specific payroll deduction. This is a crucial report for ensuring that the correct deductions and withholdings are taking place. It's an essential document for complying with local tax laws, but also for retaining talent and contributing to a positive workplace culture.
» Want to reduce payroll tax? See 5 legitimate ways employers can do so
4. Certified Payroll Report
A certified payroll report is a special type of payroll report primarily used for independent contractors working on federally funded projects. This is a critical document that must be completed and submitted to government authorities to prevent complications and potentially ensure more work comes the company's way.
» Want to make an independent contractor a full-time employee? Here's what to consider
5. Time-Tracking Report
A time-tracking report is another feature of payroll management reporting that allows employers to easily track the time spent by employees during any determined period. This is superior to having to comb through every worker's timesheet submissions individually. It's a useful tool for calculating overtime and learning how workers are allocating their time, how productive they are, and if the return on investment (ROI) is justified.
Benefits of Payroll Reporting
Ultimately, payroll reporting is an imperative component of owning and operating a business that functions like a well-oiled machine, be it a startup or a corporation. Although these reports might seem redundant, they're useful in providing information to facilitate the advancement and development of the business.
Here are five benefits of payroll reporting:
Costs: provides an in-depth picture of the company's overall labor costsMorale: adds to morale by calculating employee turnover and reducing itExpenses: assesses and monitors payroll expenses to ensure the business can improve its payroll management policiesVisualize: enables fast and simple live payroll data visualizationData: outlines vital information, such as pay rates, hours worked, overtime hours, tax withholdings and deductions, and other relevant data
Easily Produce Payroll Summary Reports to Benefit Your Business
Are payroll reports important? Yes. Do they need to be difficult to produce? Not at all! It's vital to create clear and easy-to-understand payroll summary reports to track companies' dollars and cents, especially when more and more businesses are tightening their belts.
Although these take time and require a bit more resources to produce, companies can greatly benefit from payroll reports, from enhancing compliance rates to efficiently managing staff. Incorporating payroll software is one way to mitigate some of the manual work involved in writing payroll reports, as payroll software features that help with automatic calculations can save time and bolster compliance with local laws.
» Looking for an easy way to produce payroll summary reports? Read TBR's payroll software reviews and find the right solution to achieve this goal. Payroll 5 Global Payroll Challenges Employers Face in 2023 (With Solutions) With more companies embracing work-from-home policies and adopting remote technology, video communication, and the concept of global expansion, global payroll has accelerated. Since businesses are now hiring workers worldwide and maintaining a globally distributed workforce, it's even more imperative to pay employees on time and in the right currency.
While it's a complex task with a plethora of challenges, be it hiring destinations and compliance with local labor and tax laws, you can overcome them with the right payroll solution.
» Are you considering employing remote workers? Here's how to adjust their payroll
1. Ensuring Compliance
Every market possesses its own compliance calendar, which can make it harder for companies with a global workforce to monitor. But just because it's difficult, it doesn't mean organizations can miss deadlines for filing reports or making tax payments. In addition to timely submissions, private firms need to make the necessary Social Security-related contributions, maintain the correct tax rates, possess the right termination policies, and be careful not to misclassify employees.
To ensure compliance, companies can choose between two primary methods. The first is to work with local experts—for example, if you have employees from Germany, you'll need to find human resource experts in this country. The second is to potentially outsource international payroll to guarantee compliance and free up your company's resources.
» Is your business payroll compliant? See our compliance tips to avoid penalties
2. Inefficiency and Errors in Data Handling
For the most part, payroll processes will depend on manual tasks, such as inserting data into Microsoft Excel spreadsheets. This can both be time-consuming and increases the odds of making errors during the data entry process.
Perhaps one of the most reliable and cost-effective solutions to this is incorporating payroll software into the company's fabric. Automated payroll with the right features has benefits that can mitigate a broad array of challenges, save time on payroll processing, and eliminate costly errors.
3. Maintaining Data Security
In today's digital economy, it's more imperative than ever to maintain data security. Employee payroll data requires the necessary data protection mechanisms to protect sensitive employee information, as well as information about the company. Moreover, it's crucial to comply with data protection rules and regulations in each country. While this is a lot of responsibility for companies operating in the international market, not employing these critical tools and measures can result in compliance issues.
However, using a good payroll service provider is a great solution for companies. This way, companies can transfer their payroll data to a single centralized system with top-of-the-line payroll software for an all-in-one solution: this provides high-level security, easy access, and functional payroll management.
4. Keeping Track of Payments
It's estimated that almost half of all businesses—large or small—employ freelancers, in addition to having a full-time staff. While this is a cost-effective strategy, keeping track of all freelancers and personnel can be challenging. Without a dependable payroll infrastructure, various errors can arise, resulting in additional costs, weakened morale, and lower productivity. The other issue is that businesses need to pay attention to different time zones and foreign bank accounts.
When managing a team of full-time staff, international freelancers, and independent contractors across the globe, companies must invest in payroll software to visualize payroll data. The efficacy of using digital payroll solutions for keeping track of payments is immense, providing a smoother experience for all parties involved.
» Want to make an independent contractor a full-time employee? Here's what to consider
5. Lack of Transparency
Sometimes, businesses will turn to multiple payroll vendors to handle their day-to-day payroll needs. The primary drawback to this is a lack of transparency. Unfortunately, payroll data presented by each payroll provider will come in different formats, making data transparency all but non-existent. Simplicity is the key to efficient payroll management, so this can be a tremendous setback for companies.
Therefore, many HR experts typically recommend that businesses standardize their payroll data. A single standard for all your payroll needs can diminish the need for several payroll providers—and once again, payroll software can offer a solution to achieve this.
Overcome Global Payroll Challenges With Payroll Software
In today's highly advanced and globalized economy, installing a global payroll system has never been more pronounced. It's essential to not only accurately run payroll, but also maintain employee trust, which is necessary to retain talent and improve workplace culture.
Paying your employees accurately and on time while also having an unblemished compliance record with local laws is imperative for a successful business. In the end, payroll software can eliminate multiple obstacles put in your way, helping you achieve this goal.
» Want to overcome global payroll challenges? Read TBR's payroll software reviews to find the right solution for global payroll. Payroll 6 Steps to Reconciling Payroll Liabilities in QuickBooks Let's face it: payroll processing can a be stressful, time-consuming, and costly investment. At the same time, it's difficult to avoid it due to its importance, as an effective payroll management strategy will achieve many aims: navigating the tax system, monitoring business expenses, avoiding penalties and fines, and keeping accurate records.
One area that businesses need to pay attention to is payroll reconciliation, which consists of comparing your payroll register with the amount you plan to pay out to your workers to verify matching numbers. This should be a frequent process, but what steps should you take? Read on to learn how to reconcile payroll liabilities in QuickBooks.
» Paying employees using QuickBooks: learn about the same-day deposit feature
1. Make a List of All Your Payroll Liability Accounts
For the first step in this process, it's essential to produce a list of payroll liabilities—these are payroll expenses that companies still owe. These can include several aspects, such as employee compensation and benefits, health insurance, taxes, and withholdings. It's crucial to remember that any funds that aren't regularly removed from your payroll accounts could suggest there might be a problem, be it transactions booked to the wrong accounts or late bill payments.
2. Create Transaction Labels
One reconciling measure to employ is to create transaction labels so that offices can separate employee and employer payroll liability transactions. By incorporating QuickBooks into your payroll infrastructure, you can take advantage of the option to assign transaction labels. This feature can identify employee and employer funds separately, resulting in quick and efficient data organization.
» Want to integrate QuickBooks with Gusto online? See how to do so seamlessly
3. Download a Payroll Liability Reconciliation Spreadsheet
Should you download a payroll liability reconciliation spreadsheet? Simply put—yes. This document monitors your account activities, supports making copies for every payroll liability account, and creates them at the end of every period based on how regularly you complete reconciliations. Payroll experts suggest monthly reconciliation is suitable. In addition, it's highly recommended to insert the liability account name at the top of the spreadsheet, as well as the beginning and ending balance, and leave space for any reconciling items.
4. Print Reports from QuickBooks
To start the Print Reports feature from QuickBooks, you'll need to garner reports from the general ledger and payroll software.
Now, there are a couple of factors you need to be aware of. First, if you're reconciling liabilities every month, you'll need to select a monthly transaction report for every payroll liability that shows beginning and ending balances. The second is that you may need to put together multiple reports from your payroll software, such as a payroll deduction report, payroll register report, and payroll tax report.
5. Review Payroll Liability Transactions
For exceptional payroll management, departments need to review every payroll liability transaction and reconcile outstanding items. This is completed after using Print Reports, as you download transactions from QuickBooks into an Excel spreadsheet.
Here are the five steps for exporting transactions from QuickBooks to Excel:
Click on the "Gear" iconSelect "Export Data" under "Tools"Pick the date range on the "Reports" tabAdd or remove items from the "Reports" and "Lists" tabsHit "Export to Excel"
Lastly, be sure to figure out the transactions that account for the final balance of each payroll liability account.
6. Fix Payroll Liability Reconciling Items
Although remedying payroll liability by reconciling items can be difficult, it's a critical component of payroll management. As a result, you should check transaction amounts that need to be listed on the payroll liability amounts by doing the following:
Examine benefit premiums: Check any relevant invoices to determine who you were charged for and how much.Examine payroll deductions: This consists of reviewing if they match what you were charged and what was paid out.
In the end, you might need to reverse a transaction when particular circumstances arise. This might include errors on an invoice your benefits provider billed you, regular employer-matched retirement or benefits funds for terminated employees, voided checks, or expensed amounts to the business that employees were ultimately responsible for.
» Not sure if payroll deductions are the same for all? See the different payroll deduction types
Easily Reconcile Payroll Liabilities in QuickBooks
Every organization needs to complete payroll reconciliations every month to ensure an effective payroll management strategy. This is essential to ensure no employees are overpaid or underpaid, payroll processing errors are reduced, and other key pieces of tax information are properly stored.
Although it can seem daunting, this doesn't need to be a trying chore since QuickBooks can make the process of reconciling payroll liabilities accurate and easy. Using QuickBooks for this purpose will result in fast identification of reconciling items.
» Want to easily reconcile payroll liabilities? Make sure to read our review on QuickBooks software and see how it can help you along the way. Payroll Are Payroll Deductions the Same for All Employees? [Types + Differences] Everyone has been on the receiving end of a payroll deduction—it's a mandatory and voluntary component of employment and business operations. Payroll deductions are wages withheld from an employee's paycheck for the purpose of paying taxes, employee benefits (health insurance, unemployment insurance, or retirement pension schemes), or garnishments.
A critical aspect of payroll deductions is accuracy since the company might be responsible or held liable for the missing amounts. As a result, it's imperative to understand the different types of payroll deductions—this article will help you learn all about them.
» What type of tax should employees pay? Learn about payroll tax vs. income tax
Different Types of Payroll Deductions
It should be noted that the total amount of payroll deductions can depend on a variety of factors, such as where employees live (whether they're remote employees), workers' gross wages, work status (whether they're independent contractors or full-time employees), and age. As a reminder, here's the federal payroll tax rate for 2022: 15.3% (7.65% by the employee and 7.65% by the employer).
Overall, there are three primary categories of payroll tax deductions.
Pre-tax deductions are funds subtracted from employees' gross pay prior to the taxes withheld from the paycheck to cover the cost of benefits. The idea behind a pre-tax deduction is to minimize employees' taxable income and cause less income tax to be owed. It should be noted this plan can be voluntary.
Now, the withholdings might include:
Health insurance: Although companies may offer health coverage like dental and medical, business experts say it's better for employees and employers to pay insurance premiums on a pre-tax basis.Life insurance: If employees choose to incorporate life insurance into their terms of employment, they can deduct the money from their pay on a pre-tax basis.Retirement plans: Employers will provide a whole host of retirement plans, primarily a 401(k) or individual retirement account (IRA). Job-related expenses: This is money spent on work-related expenses, from parking to vehicle ownership to travel.
On the other hand, there are mandatory payroll deductions that can't be avoided, no matter what your employment status is or how large or small the organization is at any given time. So, what are they?
FICA tax: This is the Federal Insurance Contributions Act (FICA) deducted to fund Medicare and Social Security programs.Federal income tax: The federal income tax is applied to everything that can be viewed as income: salaries, hourly wages, gifts, unemployment benefits, bonuses, tips, and much more.State & local tax: The state and local income tax will depend on the jurisdiction. So, for example, if employees are employed in New York, they'll be subject to a state/local income tax. However, if they're working in Texas, they won't face a state or local income tax.
» How to reduce payroll tax? See 5 legal steps employers can take
Post-tax deductions occur when money is taken from employees' paychecks after the taxes have already been withheld. It should be pointed out that post-tax payroll deductions don't impact your tax liability. However, while this can include charitable contributions and union dues, the most common post-tax deduction is the following:
Wage garnishments: Wage garnishments are withheld on a post-tax basis and are never voluntary since they're typically determined by court order so employees cover an unpaid debt.
» How can employers ensure payroll compliance? Follow these steps to avoid penalties
Confidently Manage Payroll Deductions With Payroll Software
In the end, it's of the utmost importance for all businesses, be it multi-national corporations or startups, to maintain an internal accounting system that will accurately cover payroll deductions and take into account a broad array of factors, from employees' locations to their tax status.
For organizations that don't have the manpower or the technology in place, like small businesses with less than 10 employees, it would be a worthwhile investment to hire a payroll or HR expert, business accountant, or tax advisor, or opt for the right payroll software to ensure peace of mind.
» Want to confidently manage your payroll deductions? Read TBR's payroll software reviews and find the right solution for your needs. Payroll 4 Main Gross Payroll Inclusions for Workers' Compensation Insurance Gross payroll inclusions are wages that include employees' pay before taxes, discretionary deductions, and other mandatory withdrawals that have been removed. Most employees' gross earnings include their base employee compensation, from salary to hourly wages to tips. Of course, there are also supplemental wages, such as bonuses, commissions, prizes, awards, and other modes of income.
However, when it comes to workers' compensation insurance benefits that cover pay for workers who've sustained different injuries or have become disabled due to their work, there are four main payroll inclusions paid by employers.
» Want to effectively manage workers' compensation? See our workers' comp tracking tips
1. Commissions & Draws Against Commissions
Commissions are a method of payment (or top-up) for workers when they complete the task at hand. Businesses typically employ sales commissions to bolster worker productivity, something that's usually reserved for salespeople.
Commissions are a form of regular income paid to employees who either receive a full-time salary plus commission or strictly commission. This form of compensation is meant to encourage and incentivize more effort from staff to boost revenues or reach business goals.
Draws Against Commissions
Some might make the case that draws against commissions aren't salaries. This is true because they're regular payouts instead of periodic payments. This is considered an alternative to straight commission only, something that's challenging for workers nationwide.
» Do commissions play a role in payroll deduction? See the different payroll deduction types
Everyone expects a bonus, be it at the end of the year or upon completing a critical assignment. However, while this is a common form of compensation by employers and governments, it's not guaranteed. That said, bonuses reward high performers, pushing workers to go the extra mile to receive some extra cash.
3. Extra Pay for Overtime Work
Many employers, especially successful ones that need to fulfill client orders or keep up with demand, will decide to pay employees for working more hours than what their contracts state. Calculating overtime can be beneficial for workers since they can garner a higher pay rate for additional work and clocking in more than 40 hours each week.
4. Pay for Holidays, Vacations, or Sick Days
Be it start-ups or corporations, employers need to go above and beyond to attract and retain employees in today's labor market. As a result, a growing number of firms in the private sector will offer holidays off, extra pay for working on a holiday, and even extend paid time off when workers are feeling ill.
It should be noted that these types of payroll inclusions need to be determined based on the rules and regulations regarding the number of paid holidays in the jurisdiction employees are working in.
As a quick summary, here's what employers and employees can expect in different areas:
US: No federal requirements are outlined for paid sick leave.UK: Employees are permitted to take holidays as sick leave if they're sick during this period. They must also provide proof of illness to employers.Europe: Workers will receive a pre-determined percentage of their pay during sick leave.
» Want to successfully manage absence & leave? See our tips for effective absence & leave management
Manage Gross Payroll Inclusions With Payroll Software
Let's be honest: trying to figure out and calculate payroll inclusions for workers' compensation insurance can be tricky. This is why it's imperative to opt for payroll software that can eliminate these types of challenges, erase common mistakes, and ensure your company is adhering to local labor laws.
» Need help managing gross payroll inclusions for workers' comp insurance? Read TBR's payroll software reviews and find a solution to help you along the way. Payroll Changing Payroll Provider Mid-Year: 3 Benefits and Setbacks There's a huge misconception among corporate organizations that the beginning of the year is the ideal time to change payroll providers. This is most likely because people often associate the start of a new year with new beginnings of all kinds, but this article will show how this shouldn't apply to changing payroll.
Many companies struggle with properly managing the aspects of payroll on a regular basis, from tax compliance to employee satisfaction. It can be difficult for companies to find the right payroll provider that meets both their needs and budget, which often leads to changing payroll providers mid-year. Contrary to popular belief, this can actually be a great time to make such a change—below, we'll discuss why that is.
» Is in-house payroll a good choice for your business? Find out here
3 Benefits of Mid-Year Payroll Provider Transition
Changing the payroll provider mid-year payroll provider offers several benefits to an organization. It reduces the workload with a new provider transition at the beginning of a year and helps avoid any potential issues that may arise from not being familiar with a new provider's processes and procedures. In addition, it ensures business owners are taking advantage of the most up-to-date technology and services in the payroll industry.
What's more, choosing the right payroll provider can help you achieve:
The best payroll providers will be at your disposal any time you require their assistance. If they care about customer service, they'll be available for any questions and concerns you may have about the service. Additionally, look for a provider that will offer regular communication updates on their services, process changes, as well as other pertinent information.
You know you're dealing with a great payroll provider when all your employees are getting paid on time and no one is overpaid or underpaid. Good payroll providers issue precise and consistent payments of employee compensation while taking into consideration any changes in your business. Additionally, data maintenance is crucial for organizations that handle sensitive employee information, so the right payroll provider should be able to guarantee all data will remain secure and confidential at all times.
No Future Problems
As a business owner, you should always remember that the main reason you're hiring a payroll provider is to save money and time in the long run. To achieve this, you should look for a provider that can guarantee future success with no additional issues. In short, they should provide quality service and customer support, be up to date on the latest local legislation compliance, and have no hidden fees.
» Eliminate future issues: see the internal controls to avoid payroll fraud
3 Potential Challenges to Keep in Mind
Despite the clear benefits of changing payroll providers mid-year, there are still some potential challenges to be aware of. These can include the following:
Before changing your payroll provider, remember you have to give your new provider a clean slate. This means you'll need to handle all the issues & data errors related to payroll management and payments before changing providers. This will help the new payroll provider hit the ground running and get your employees paid without any issues while keeping you headache-free.
Multiple Pay Frequencies
Flexibility is a crucial quality when it comes to choosing the right payroll provider, so make sure the provider you choose can accommodate multiple pay frequencies. It's recommended you find a service that won't be limited to monthly payments and can handle weekly, bi-weekly, semi-monthly, and monthly frequencies to ensure everyone gets paid on time. While most employees & contractors prefer being paid on a monthly basis, having this flexibility will keep you open to more options and allow you to handle issues like paying overtime more easily.
» Are you properly calculating overtime? See how to do it automatically
Complex Payroll Taxes
In organizations with more complex payroll taxes, it's important to find a payroll provider that can manage this complexity with ease. The right payroll provider should be able to handle issues like complex tax processes while taking care of employee documentation, year-end processing, and other relevant tasks. Nevertheless, hiring a tax expert can be an alternative solution if hiring such high-end payroll providers is out of your budget.
Changing Your Payroll Provider Mid-Year: The Verdict
Although changing your payroll provider mid-year has its benefits, what to keep in mind when choosing a new provider ultimately matters more than when you'll make the transition. As long as you find a provider that will offer good communication, reliable service, and an assurance of no future problems, you're good to go, whether it's mid-year or the start of a new year.
As a final thought, consider using the right payroll software to handle the tedious business processes, as the right solution will help with quick calculations and compliance with relevant laws. Adopting reliable automated payroll software will help you get on track and maintain an efficient payroll process, ensuring satisfaction on both sides.
» Looking to ensure a smooth payroll process? Read TBR's payroll software reviews to find a solution that will help you achieve your goals. Payroll Setting Up Payroll for Non-Profit Organizations: 3 Best Practices Incorporating the payroll process can be difficult for a non-profit organization, especially because these organizations are tax-exempt. However, they're not entirely liability-free when it comes to payroll and taxes, as there are many differences in non-profit structure, operations, and funding that may require special considerations when setting up payroll compared to a traditional organization.
So, how to properly set up payroll for your nonprofit? Read to find out the best practices and what to keep in mind when structuring and managing such an organization.
» Is your non-profit payroll compliant? Here's how to avoid penalties
Although non-profit organizations don't seek commercial or monetary profit in a traditional way, they still have employees and independent contractors working for them. Their salaries are determined by their position in the organization, and they can still enjoy traditional employee benefits like vacation time, health insurance, and overtime compensation. Therefore, it's important to understand the legal considerations that come with setting up payroll:
When the non-profit has employees, it must follow the minimum wage law of the state it operates, just like a traditional business. There may be different laws for different departments within the organization, depending on the type of work they do and their location. However, as the minimum wage law differs from state to state, make sure to check your local jurisdiction and find what applies to you.
Determining the frequency of pay periods can be tricky, but it's important to ensure employees are always paid on time and accurately. The frequency of pay periods will depend on the size of your organization and the number of employees you have. Usually, the most common choices for payment periods are bi-weekly and monthly, but it's important to discuss this with your employees to ensure everyone is on the same page.
Exempt vs. Non-Exempt Employees
Non-profit employers must also consider which employees are exempt from overtime laws. This is important because exempt employees don't receive overtime pay, while non-exempt employees do. The distinction is based on the type of work the employee does, their salary, and other factors, so it's important to check your state’s labor laws and comply with them.
» Does your non-profit have remote employees? See how to set up their payroll
With the basics of setting up payroll covered, it's time to look at some general best practices for properly setting up payroll as a non-profit organization.
1. Understand Your Tax Liability & Withholdings
Like traditional businesses, non-profit organizations must comply with state and federal tax laws and regulations. This means understanding the taxes that you owe and knowing how to withhold them from employees' paychecks.
Regarding federal income tax, it's worth mentioning that non-profits are generally exempt from it. However, this doesn't mean the organization is exempt from all types of tax, so make sure to research your jurisdiction laws and determine which tax liabilities your non-profit organization has.
Some examples where non-profits have to pay taxes include:
A non-profit engaging in activities outside of its basic purpose: Let's say a non-profit organization runs as a social advocacy group seeking to support the rights of those who can't defend themselves. If this organization then decides to also run a daycare center and offer educational services, it will have to pay taxes on the income generated from these activities, as they're outside of its original scope. Property tax liabilities: Another instance in which non-profits have to pay taxes is when they own real estate. Depending on the jurisdiction, they may be liable for property tax and pay it on the property they own.
2. Consider the Classification of Your Workforce
Having a clear understanding of the types of employees in your workforce is key to setting up payroll appropriately. Non-profit organizations often employ both full-time employees and contractors, so it's important to know which type of worker you have and how they should be classified. Let's take a look at the differences between the following non-profit workers:
Employees are individuals hired by the non-profit to do a specific job or role. They may be paid either hourly or through a salary, and they must comply with labor laws regarding overtime pay, minimum wage, and other requirements.
Volunteers aren't usually considered employees, as they generally don't receive any type of payment for their services. Therefore, they're not subject to the same labor laws or withholdings as employees. However, non-profits should be careful not to blur the lines between volunteers and employees—if a volunteer begins to perform tasks similar to those of an employee, it may be necessary to reclassify them as such to comply with labor laws.
Independent contractors are self-employed individuals who provide goods or services to a non-profit in exchange for payment. Unlike employees, independent contractors aren't subject to labor laws and must be paid on a 1099 basis. However, it's important to be careful not to misclassify an employee as an independent contractor to avoid any legal and financial liabilities.
» Are you properly classifying employees? See how to avoid employee misclassification
3. Prepare Tax Returns on Time
Even if you've got all the legal paperwork ready, failing to submit it on time might have negative implications for your non-profit. Using all the different forms and legal documents required to file annual earnings and spending depending on your total revenue. If you're not sure which forms to file, check out the IRS website to get a detailed look at all the paperwork.
Although you can request an automatic 6-month extension if you need more time to file the necessary paperwork, this doesn't mean taxes don’t need to be paid on time—any unpaid obligations must still be fulfilled. Thus, it's important for non-profits to plan ahead and get the taxes filed before the deadline.
» Want to make sure you pay your dues on time? See our time-saving tips for payroll processing
Easily Set Up Your Non-Profit's Payroll
Setting up payroll for a nonprofit organization can be a difficult and tedious task, but going through all the legal and administrative hassles is important to ensure compliance with tax laws and regulations. In some cases, a nonprofit could largely benefit from hiring an accountant or a professional tax service to ensure compliance along all aspects of payroll.
However, one of the easiest ways to set up and manage payroll for your nonprofit is by using the right payroll software. With it, you can stay compliant with local laws while streamlining the payroll process and reducing the burden of manual payroll.
» Need help setting up payroll for a non-profit? Read TBR's payroll software reviews to find the solution that will get the job done. Hr function 4 Ways to Mitigate Co-Employment Risks to Protect Your Business’s Reputation Complex business arrangements sometimes require intricate legal and administrative contracts, which is why co-employment might be needed. This is a business arrangement between an organization and a professional employment organization (PEO), where both entities share the legal responsibilities of an employee, have some degree of an employer-employee relationship with the worker(s), and will have to take on certain obligations. Of course, both employers should have clearly defined roles and responsibilities.
Nevertheless, issues related to co-employment happen more frequently than business owners would like, potentially causing log-term reputational damage and even a PR crisis. Luckily, there are some measures business owners can take to mitigate and manage the potential risks of co-employment. In this article, we'll look at four ways to protect your organization’s reputation in a co-employment arrangement.
» Considering a co-employment agreement with a PEO? See the 3 PEO types
Strategies for Preventing Co-Employment Risks
Before we dive in, it's worth mentioning there are some common misconceptions about co-employment. Business owners often believe co-employment will cause problems related to payroll, replace the HR department, or even cause employee dissatisfaction in their organization. However, having the right co-employment strategies and considerations in place will protect you from such risks.
So, to avoid putting your company's reputation at risk, consider the following suggestions:
1. Ensure Regulatory Compliance With Employment Laws
The potential risks of not complying with labor laws are too big to ignore, as non-compliance can have massive legal, reputational, and financial consequences. That's why it's important for both organizations involved in the co-employment arrangement to be up-to-date with all the latest employment regulations & labor laws and make sure any agreements are compliant with them.
This also means that both companies understand their respective roles and responsibilities in the arrangement, and all parties are aware of their rights & obligations. Remaining compliant with the relevant laws & regulations is the easiest way to keep your business' reputation intact.
» Maintain your reputation by avoiding payroll compliance penalties
2. Verify Proper Classification of Independent Contractors
Although a co-employment arrangement is almost always used for full-time employees, independent contractors can also come into the picture and cause some confusion. It's important to remember that properly classified independent contractors are never a part of a co-employment arrangement, as they act as "independent businesses" themselves. This means they alone are responsible for all the taxes they pay and how the payroll is processed on their side. Your business won't be held liable for any payroll-related issues, as long as the contractor/freelancer is properly classified.
Thus, it's important to avoid the misclassification of employees at all costs, as it can have legal & PR consequences for both parties. By being thorough and verifying all documentation when hiring, you can protect your business's reputation in the long term.
3. Avoid Treating Independent Contractors like Employees
Even if the independent contractor is classified correctly, it can be easy to overlook this and start treating them like a regular employee. This should be avoided, as the distinction should remain clear throughout the entire co-employment arrangement. If independent contractors are treated any differently than their contract requires, it gives them legal grounds to file a complaint or lawsuit.
You can avoid a hefty lawsuit or an unwelcome visit from institutional representatives by simply abiding by federal, state, and local government laws. Make sure to keep independent contractors' rights in mind and make the distinction from full-time employees clearly visible in all aspects, from employee benefits and compensation to workers' compensation to their specific responsibilities.
» Managing workers' compensation: see what injuries aren't covered
4. Partner With an Experienced Agency
Sometimes, business owners have to delegate some of their responsibilities to ensure peace of mind, which is where reputable agencies come in. Outsourcing tasks to the right agency will help you manage and mitigate co-employment risks, as they have all the experience and resources to do so.
However, it's important to avoid agencies that are potentially non-compliant with employment laws and regulations, as they can cause much more harm than good. In some cases, your business might be held liable for the mistakes they've made, causing a permanent stain on your reputation in addition to massive legal consequences. On the other hand, a trustworthy agency will help you manage the entire co-employment process seamlessly.
Avoid Co-Employment Risks to Protect Your Business
Co-employment can be a great way to gain access to a talent pool without the full employer commitment, but if not managed correctly, your business might face severe consequences. That's why it's important to remain mindful of all the co-employment risks and take the necessary steps we've mentioned above to protect your business from all legal, reputational, and financial implications.
It's also worth mentioning that businesses in a co-employment arrangement almost always benefit from using payroll software equipped with the right features, as these solutions help businesses remain compliant and avoid many of the risks we mentioned above while saving a lot of time and resources in the long run.
» Want to remain compliant in co-employment? Read TBR's payroll software reviews and find the right solution to protect your business' reputation. Payroll 5 Legitimate Ways to Reduce Payroll Tax as an Employer As a business owner, you should always be looking for ways to increase revenue and reduce costs, while making sure you maintain payroll compliance with local laws. One of the biggest costs businesses have are payroll taxes, which refer to the employer's tax obligation related to their employees' compensation. Payroll taxes are used to fund federal programs like Social Security and Medicare, which is why they're seen as crucial by the government.
Still, implementing certain tax-saving strategies can help you reduce the total payroll tax you pay while keeping employees satisfied and your business compliant. Read on to learn about multiple legal strategies business owners can use to reduce the amount of payroll tax they pay.
» What type of tax should employers pay? Learn about income tax vs. payroll tax
How to Save Money on Payroll Tax as an Employer
Before deciding where and how to cut down, there are some considerations employers should take. This includes determining whether you’re a small business owner, as different strategies may be available for larger companies. Additionally, it's important to properly classify your employees, as different tax rules apply based on employee status.
Regardless, there are some universal strategies you can implement to reduce your payroll tax burden:
1. Work With Independent Contractors
Hiring independent contractors is one of the easiest legal ways to reduce payroll taxes, as employers don’t need to pay any employment taxes on the income they give out to freelancers and other contractors. Moreover, contractors can be paid on a per-project basis, which gives employers much more control over their payroll costs. However, it's important to avoid employee misclassification when hiring contractors, as this can lead to fines and other legal implications.
» Want to convert independent contractors to employees instead? Here's what to consider
2. Offer Tax-Exempt Fringe Benefits
Fringe benefits are rewards employers give to their employees beyond salaries and wages, such as health insurance, retirement plans, and more. In certain situations, these can be offered on a tax-exempt basis if they meet specific criteria set by the Internal Revenue Service (IRS). By carefully positioning fringe benefits as tax-exempt contributions, you can lower your payroll taxes without affecting employee satisfaction and jeopardizing workplace culture.
3. Use an Accountable Plan for Employee Reimbursements
Under an accountable plan, employers can give their employees a certain amount of money to cover all of their work-related expenses, such as travel and training. This is an excellent way to reduce payroll taxes, as employers don’t need to pay them on these reimbursements. However, it's important to properly document all reimbursements under the plan to avoid any legal issues.
4. Improve Employee Retention
Retaining valuable employees can be one of the most effective ways to reduce payroll taxes, as it decreases overall turnover costs and allows businesses to avoid paying taxes on the income they give out to newly hired employees.
In most cases, it's much cheaper to keep existing talent and reward them than to hire and train new employees through efficient onboarding processes. In addition to cost savings, retaining current employees can lead to better productivity and team morale, which is why businesses should make employee retention a priority.
5. Offer Remote Work
Employers willing to give their employees more flexibility in terms of where and when they work can enjoy significant savings. By allowing employees to work remotely at least some of the time, businesses can avoid payroll taxes on certain benefits related to commuting. Additionally, offering a remote work option can give employers access to a much wider talent pool.
In addition to reducing costs, offering your employees the option to work remotely has a number of benefits, including:
Drastically improved worker satisfaction: Employees that have the option to work remotely usually have a better work-life balance, leading to higher satisfaction and better results down the road.Increased productivity due to less time spent commuting: On average, employees waste around 30–40 minutes a day commuting, amounting to 5–10 days spent commuting on a yearly basis. Instead of wasting this time on commuting, employers can give their workers these 5 days as paid time off, leading to improved productivity and satisfaction.Reduced office overhead: Overhead expenses usually refer to telephone bills, repairs, supplies, and utilities. Having at least some of your employees work remotely can quickly add up, putting substantial amounts of money in your business's pocket. A decrease in unexcused absences: Employees that have to commute usually call in sick when they don't feel 100% healthy, as they'd rather rest than commute. On the other hand, remote employees could just continue working from home when they're feeling better, as all they have to do is sit at their home desks.
» Considering hiring remote employees? Here's how to set up their payroll
Reduce Payroll Tax and Save Money in the Long Term
Although reducing payroll taxes can be a difficult task, it’s far from impossible. By following the methods outlined above and being mindful of different legal regulations, employers can take advantage of several strategies that allow them to save money while providing their employees with fair wages. In some cases, it might be beneficial to even hire a tax professional to oversee the entire process and help you minimize costs.
It's also worth mentioning that using a payroll software solution to handle the cumbersome payroll process could be quite helpful. By implementing automated payroll software, businesses can quickly and accurately calculate all payroll taxes (and other types of spending) while remaining compliant with all relevant tax laws and regulations.
» Want to reduce payroll tax more easily? Read TBR's payroll software reviews and find the right solution to help you along the way.