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Improving the Payroll Process

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The idea of payroll seems straightforward. A company sells a product or service. The revenue from those sales is distributed between operational costs and payroll. Employees who log hours during the payroll period get paid for their work.

Small and medium-sized companies often feel that this process is better managed if it is done manually. However, the multiple tasks associated with “payroll” can be rather confusing and result in a variety of problems. Especially as the business grows, the once easily managed manual methods may become overwhelming as additional employees are added to the mix.

In addition to simply paying employees, the employer is also required to track time worked, attendance, and have a good handle on reports for annual or quarterly audits. Other issues can arise from properly setting up employees in a payroll application or platform, calculating deductions, direct deposit, and managing the reporting of hourly employees who clock-in or out.

Employees rely on effective and accurate payroll processing from their employers. If the payroll process is delayed or inaccurate, the employee is likely to incur issues in their personal life as it relates to finances. This can cause undue hardship between the employee and the employer.

Whether you are processing payroll manually or using a human capital management (HCM) platform that includes payroll processing, we recommend using these tips to improve your existing payroll process.

Use a Payroll Calendar.

Create a payroll calendar that includes payroll cycle start and end dates and pay dates. The calendar will need to take into account Federal and/or holidays observed by the organization that falls during the regular workweek. Marking these holidays on the calendar will help to reinforce the cycle start and end dates. Post the calendar in a conspicuous place, in addition to making it available on the company intranet. This is also a great piece to include in the new hire packet.

Self-Check with Regular Audits.

Gross wages, benefits, social security and Medicare, and tax withholdings are all factors of your payroll process that need to be evaluated on a regular basis. Develop a regular audit schedule if you are processing payroll manually. This audit should include a verification of all active employees, confirm pay rates match employee records, hours worked match hours paid, time is labeled correctly (i.e. PTO, bereavement, holiday, regular, etc.), compare your general ledger to your bank statement, and check to ensure withholdings and remittance are correct based on each employee’s tax amount.

If you are enlisting the assistance of an HCM, you should still double-check many of these same elements. As the employer, it is your responsibility to know where your business stands in terms of your payroll process. This includes understanding active vs. terminated or inactive employees, hours worked vs hours paid, etc.

Know Your State and Federal Tax Policies.

It is fair to say that most business owners find taxes and bookkeeping to be one of the most difficult or less favored parts of owning a business. This does not minimize, however, the importance of these tasks, especially as they relate to compliance. While using an HCM with a payroll feature can help minimize your compliance concerns, this does not remove your responsibility of also manually maintaining payroll compliance. It is important to keep a close eye on legislative updates on a federal and local level to ensure your business is compliant and policies are current.

Here are some additional resources:

Include a Strong Payroll Policy in Your Handbook.

Employees aren’t required to fully understand the payroll system, but they should be able to access information quickly and easily to help answer any questions they may have. For example, unpaid taxes or employee misclassifications is an item that should be covered in the employee handbook.

Overall, it is better to be as transparent and forthcoming as you can regarding any organizational policies. This will leave little room for interpretation and misunderstanding on the employee’s part. At the very least, your employee handbook should detail employee classification, how salaries are calculated, employee reporting, how promotions are calculated, and how the business handles any payroll mistakes.

Processing payroll can be one of the most time consuming and costly aspects of your business. Harbor America payroll solutions offer businesses peace of mind when it comes to wage garnishments and deduction, direct deposit, reporting, and time and attendance. In addition, we will actually file and distribute your W-2s and manage your State and Federal filings. Contact us to learn how we can eliminate these and other tedious payroll-related tasks.

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Is Your Payroll System a Total Disaster?

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Do you run a small or mid-sized business? If you do, then how is your payroll system? Is it in order or is your payroll a total disaster? If it isn’t as streamlined, accurate or organized as it should be, you could face huge problems. Here are some of the most common payroll mistakes and the potential consequences of not keeping a tidy payroll system:

Errors in Employee Classification on W-2 Forms

Not classifying employees properly is one of the most common payroll mistakes. When this occurs, it can result in major employment tax penalties. In other words, sometimes business contractors classify workers as independent contractors to avoid having to pay the extra costs for Workers’ Compensation, Social Security and State Unemployment.

Poor Record Keeping

Failing to keep accurate records is another sign of a messy payroll system as well as failing to gather the right data. Although it takes time, it’s critical you keep a chronological history of everything pertaining to your business and employees since not doing so can result in having to pay hefty fines and penalties (including interest).

Confidentiality Breaches

Breaches in confidentiality in your payroll can lead to problems. Your payroll system should be set up so that your employees cannot find out the salaries of their coworkers or even your salary.

Being Unaware of Tax Laws

Probably, the most dangerous payroll error is ignorance. If you’re not up to date on all the tax laws, you’ll suffer. You need to familiarize yourself with all the mandatory regulations and keep up-to-date as these change. This can be a very daunting task, which is one reason why it makes sense to outsource payroll to a PEO.

Rushing Through Payroll

Not taking the time needed for doing your payroll can lead to either underpaying or overpaying employees, resulting in employees questioning your abilities. What’s more, when your payroll is inaccurate, your business could experience severe financial consequences during audit checks when the numbers fail totally.

Potential Consequences of an Untidy Payroll System 

  • Payroll mistakes can lead to considerable financial loss for your company.
  • Legal problems—Often, businesses are faced with audits and other types of legal actions because of payroll errors and messy record keeping.
  • Productivity can suffer when you’re forced to spend hours or even days searching for lost records, instead of working. As time is money, this can also cost you financially.
  • When you spend valuable office time trying to correct payroll mistakes, it’s easy for your employees to not be paid on time. Falling behind on a payroll schedule can affect company morale and lead to employees quitting.
  • Data loss is another significant consequence. That’s why you should have a backup plan in case records are lost. In the worst cases, companies can go bankrupt or even go out of business because of lost records, lack of compliance, or financial errors.

Other Warnings and Considerations

  • Taxes are one of the most complex features of payroll. Consider how it’s easy to make errors in the withholding process because deductions can be either mandatory, or they can be voluntary.
  • One way to determine if an employee is an independent contractor or an employee is by asking how much control your company has over a worker. The more control there is over a worker, the more likely he or she is an employee and not an independent contractor.
  • If you have misclassified any of your employees as independent contractors, it’s imperative that you immediately contact the IRS.
  • Consider that part of a payroll system may entail paying money that an employee owes to someone else or a third party, such as garnished wages for child support. When this is overlooked or mishandled, your business can be affected.
  • Stress to your employees the importance of informing the HR (Human Resources) department when there are changes in their employment histories.
  • It’s a good idea to have mandatory employee data checks on a quarterly basis to make sure that your payroll system is updated and accurate, regarding the information you have on them.

Get Help With Your Payroll System From Harbor America

You don’t have to be a slave to your payroll. More and more business owners are discovering the benefits of outsourcing their payroll system to a PEO (Professional Employer Organization). This is just one of the many services we offer at Harbor America. Please contact us for a free quote and learn more about how you can find more hours in your workday.

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Compliance Tips for Construction Companies in the Middle of a Hiring Spree

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Construction companies around the country are in the middle of hiring booms for a variety of reasons. In some areas, it’s a simple case of increased demand for homes due to population increases. In others, it’s the need to rebuild following natural disasters. Whatever the case, you want to be sure that your construction hiring and payroll practices are up to standards during that hiring boom. Taking a few extra steps to ensure compliance at this stage of the process will help protect you down the road.

Make Sure Your Hiring Process is Compliant

As a construction company, you may be unlikely to hire many individuals with disabilities. That doesn’t mean, however, that you can afford to discriminate. If you’re hiring a new secretary or receptionist, for example, it’s critically important to recognize that you must make reasonable accommodations for employees with disabilities under the ADA (Americans with Disabilities Act). You’ll also need to be willing to make accommodations for deaf employees or employees with certain disabilities that do not prevent them from taking on tasks on a construction site–and ensuring that you maintain those standards will keep you compliant.

Check Your Interview Standards

During an interview, you must present your company as an equal opportunity employer. You want to be sure that you’re offering the same opportunity to anyone who comes into your interview, regardless of their race, religion, family size, or any other factors that aren’t directly related to their ability to do the job. For this reason, it’s important to pay attention to the questions that you ask throughout the interview process and how they shape your hiring choices. While it’s nice to get to know more about your candidates, you can’t base an employment offer on factors outside their ability to successfully do the job.

Write Clear Job Offers

Long past are the days when a job offer could be a simple handshake between a member of your company and your new employee. Instead, make sure you’re producing a clear employment contract that lays out everything that your new employee can expect in their job, including:

  • Whether this is an at-will position, which means that the employee can be fired for any reason at any time
  • Whether or not this is a contract position–for example, an individual who has been brought onto the team to help complete a specific project
  • What the new employee’s salary looks like
  • What benefits go along with the new position
  • Any policies and procedures that are integral to your company

Get Employees on Payroll Immediately

It’s easy to decide that you don’t want to mess with payroll when you’re in the middle of a hiring boom. There are too many other things that you need to take care of! Any money that you give to an employee–bonuses, overtime, and other funds–must go through the official payroll process in order to maintain compliance. Without these standards, you–and potentially your employee–could end up in hot water with the IRS, creating even more problems that you don’t want to deal with.

Pay Close Attention to Overtime

Business is booming and your customers are eager to see their construction projects finished. Some days, it feels like you have more work than you know what to do with, and you’re tapping all of your employees to work extra hours to help meet the demand. If your employees are working overtime, however, it’s important that you keep up with compliance regulations regarding overtime. Make sure that your employees are being compensated appropriately for the time that they’re spending on the job.

Work with a PEO

If you’re struggling to maintain payroll compliance and obligations or to keep up with HR responsibilities in the middle of increased demand for your services, you’re not alone! By hiring a PEO, you’ll put yourself in a better position to keep up with those responsibilities and protect your employees and your business.

Maintaining compliance might not be your first thought when you’re in the middle of a hiring boom, but it’s important that it remains on your priority list. By making sure that you’re keeping up with compliance standards, you’ll be able to better protect your construction company from later damages. If you need help, working with an experienced PEO like Harbor America is the best way to keep your time free from administrative tasks and focused on the parts of your business you’re uniquely qualified to handle.

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5 Top Payroll Mistakes and How to Avoid Them

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Your business may be equipped with the latest and best technology, but it can still suffer a financial loss when there are payroll mistakes. About 40% of small businesses pay an average of $845 annually in IRS penalties because or payroll errors-yikes!  To make sure your business isn’t contributing to that statistic, here are five top payroll mistakes and the best ways to avoid them:

Poor Record Keeping

Just a tiny error in your bookkeeping records can mean having to pay a considerable amount of money. When you have mistakes in your payroll records, it can affect the pay-cycle. What’s more, it can result in having to pay penalties. That’s why it’s critical you keep precise and detailed payroll records. To prevent errors in bookkeeping, consider outsourcing to a virtual bookkeeper or an all-purpose PEO.

Failing to Keep Old Payroll Records

Even if your payroll records are meticulous, they won’t do you any good if you destroy them too soon. The United States Department of Labor requires that payroll records must be kept for at least three years.

You may live in a state that requires maintaining payroll records even longer.  Although different states have different requirements governing which specific documents to keep, these documents usually include W-4s, timesheets, pay stubs, and tax forms. Switching to an automated payroll software system or outsourcing to a payroll expert will mean you can access old records easily without taking up precious office storage space.

Being Late on Paying Taxes

Another common payroll error is being delinquent on paying your payroll taxes. In addition to having to pay penalties, late payments also mean accrued interest. To avoid this problem, be sure to check the requirements of your city or state, regarding when income taxes are due. Working closely with an accountant or outsourcing your taxes are excellent ways to avoid late penalties and save time as well.

Misclassified Employees                                                                     

A huge payroll error is misclassifying employees. Misclassifying employees as contractors can mean having to pay enormous IRS penalties as well as back taxes.

To prevent this from happening, you need to determine if someone working for you is an employee or an independent contractor. If someone is classified as an employee, you have to pay a certain portion of Social Security taxes and Medicare on their wages. However, this is only a requirement for your employees as it doesn’t apply to independent contractors.

Not Including Bonuses and Gifts

It’s important you don’t forget to reward your employees with Christmas bonuses and other gifts. Just be sure to record them just as you would any other type of wages.

Make sure to include the correct value of any gifts, awards and other prizes on your employees’ annual W-2 forms. This should be done under the wages section. If you don’t do this, then it’s likely the bonuses and gifts would be considered “under-the-table” wages, which can get you in trouble with the IRS, as well as your state government.

Considerations and Warnings

  • Before you’ll able to invest money in your employees and your business, you need to know the amount of available money your business has at all times.
  • If you’re still using the old-fashioned paper method for payroll, consider switching to digital payroll management because it is much more accurate, not to mention more streamlined and efficient.
  • Be sure to have your business registered long before taxes are due. Also, obtain the correct local, state and federal payroll tax ID numbers because you’ll need to submit filings and pay the government on time.
  • Don’t miscalculate overtime wages. Keep in mind how overtime wages are not the same as regular wages. Failing to pay the right overtime rate can result in having to pay penalties, along with interest and back wages.
  • Be sure your workers are paid on time by running payrolls at least four days in advance.

If you have to process payroll for a business, you probably already know this job can consume most of your time. Why not hand over your payroll management to a PEO, so you can spend more time running your business? Payroll administration is one of the many services provided by a PEO (Professional Employer Organization). Please contact us at Harbor America for a free consultation and to learn more about how we can help you save time and give you peace of mind. We provide services to small and mid-sized businesses.

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7 Reasons to Outsource Payroll to a PEO

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Small and medium-sized businesses are increasingly turning to professional employee organizations (PEOs) to handle their payroll administration. It’s not difficult to see why. Payroll administration is a time-consuming, complex and often tedious task that can pull your talented team away from your core business. Six of the most burdensome payroll-related tasks include IRS-compliance, direct deposit, check printing, payroll software upgrades, time-and-attendance bookkeeping, payroll adjustments, and special reporting requirements. Below we take a closer look at how a PEO can handle each of these six payroll administration tasks for you.

Meeting IRS payroll requirements

Small and medium-sized businesses often complain that payroll-related mistakes are costing them hundreds, even thousands, of dollars annually in IRS penalties. When a PEO performs payroll on your behalf, you have professionals in charge of every aspect of the payroll process to ensure that you will meet all your IRS requirements, penalty-free.

Handling direct deposit

Increasingly, employees are asking their companies to pay them through direct deposit. This saves your employees the task of having to go to the bank and wait for their check to process. It also saves your business the hassle and overhead associated with paycheck-handling. A PEO will handle your direct deposits automatically, making life easier for you and your team.

Performing on-site check printing

Although direct deposit is quickly emerging as the new standard, there are still many times when printing a paycheck on-site is preferable, or even necessary. A PEO worth its salt will offer on-site check printing as part of its suite of services, and you will no longer have to struggle with printing paychecks again.

Purchasing and updating payroll software

In order to properly and efficiently handle payroll in 2017, businesses require robust payroll software capable of handling direct deposits, tax records, timekeeping, complex reporting and so on. This is a significant upfront expense, and the costs increase with each necessary upgrade. To further complicate the matter, you need to worry about keeping all of your payroll data 100% secure and your software 100% up-to-date. With an experienced PEO, however, the expense of payroll software, along with all of the concerns that come with payroll data, is outsourced to professional payroll experts.

Maintaining time and attendance records

Don’t let the maze of time and attendance bookkeeping get you down. You don’t need to master all the ins and outs of this demanding area of payroll administration on your own. Put your trust in a seasoned PEO that will have the experience and the advanced software to handle even the most complex scheduling and time-keeping demands without a hitch.

Performing complex payroll adjustments

Handling deductions and wage garnishments is best left to the payroll professionals. Let an experienced PEO take over these tedious tasks so that you can get back to your business.

Generating special reports: job costing and certified payroll

In the context of payroll, job costing is a method for associating employee work hours and labor costs with specific jobs. Certified payroll, on the other hand, applies to construction projects funded by the government and is a government-required payroll report. Needless to say, job costing and certified payroll reports are special cases that require a great deal of expertise. When shopping around for the perfect PEO, always look for one that doesn’t have hidden fees for these special payroll reporting services.

Outsourcing payroll to a PEO: a smart move

Outsourcing payroll to a PEO is becoming an increasingly preferred solution for small and medium-sized businesses. With the considerations above taken into account, it’s not difficult to see why. We’ve looked at six of the most demanding payroll-related tasks that PEOs can unburden from your business, including meeting IRS requirements, offering direct deposit, handling on-site paycheck printing, performing payroll software upgrades, handling time-and-attendance bookkeeping, automating payroll adjustments, and meeting special reporting requirements.

If you want to get started with a PEO that provides all of the above and more, contact Harbor America for a free consultation.

3 Ways a PEO Saves You Time and Money

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Are you a small business, start-up operation or a mid-sized business owner looking to free up more time? Maybe you should consider the services of a Professional Employer Organization (PEO). A PEO may be one of the best-kept secrets contributing to the success of small to medium-sized businesses. With your administrative and human resources tasks taken care of, you have time to focus on more important aspects of your business such as updating your business plan, keeping your customers happy,  and ultimately – making more money!

A Brief History of PEOs

The earliest beginnings of PEOs in the U.S. were in the 1940s with people beginning to discover co-employment. As time progressed, by the late 1960s and early 1970s, the concept took off, partly due to the success of a popular consultant, Martin Selter, who began a PEO for a doctor’s office in Southern California. Current statistics show there are approximately 780 to 980 PEOs currently operating in the U.S. employing more than 2.7 million people. Industry forecasts show the PEO industry is expected to have better than average growth in the coming years. It is an industry serving more than 150,000 small to mid-sized U.S. businesses.

Now on to some important ways that a PEO saves time and money:

1) Human Resources

By joining forces with a PEO, you can outsource many routine human resource tasks. The PEO has a co-employer relationship with your employees so they can manage tasks while you as a business owner still retain control of employee supervision to the degree you desire. If you choose to do so, however, you can delegate such tasks as regulatory compliance, unemployment claims, employee handbook development, and employee benefits. You can be as hands-on or hands-off as you choose.

2) Payroll/Benefits

With a PEO, you aren’t going to need a full-time staff dedicated to prepare your payroll or administer your benefits packages to employees. With the PEO’s access, it may even be able to secure you a more favorable benefits package than you would have access to on your own. We all know great benefits packages attract top talent for your company. Here is a perk of PEOs that you may not even have considered – lower workers’ compensation insurance rates. How is that possible? The PEO may have agreements with insurers (or have negotiating power) to secure insurance coverage at a lower price.

Another great time-saver a PEO offers is taking care of tracking employee leave requests. Federal and state law regulations dictate that careful records are kept of employee leave time, including time used for family and medical leave. Federal employment laws mandate employee leave time be granted for personal and family-related illnesses and conditions. The Family and Medical Leave Act (FMLA)  has specific regulations for employees governing guaranteed time off (up to 12 weeks of unpaid leave per year) for health conditions or to care for a family member. As an employer, you are required to continue to provide health insurance benefits to these employees and once they return to work, these employees must be restored to their same or equivalent positions.

3) Compliance

The number of organizations that require regulatory reporting is growing by leaps and bounds. A PEO can help you with state and federal compliance reporting requirements including employee-related documentation for ADA, OSHA, payroll, etc. Without regulatory compliance, your business could face fines or even worse, put employees at risk by failing to meet mandatory safety (OSHA) requirements.

As you can see, a PEO saves time and money in clear and noticeable ways. Whether you are a large or small business owner, a PEO has benefits that can make your life a whole lot easier. If you want to find out more about how you can use a PEO to claim back your time, visit our website for more information on how we can help your business operate more efficiently. You should be working smarter – not harder!