Paying employees on time and accurately will increase employee retention significantly. You should determine how and when to pay your employees and stick to your schedule.
Outsourcing your payroll responsibilities to a third party such as an accountant, bookkeeping firm or payroll processor is a smart decision for those that are not accountants by trade. Outsourcing payroll allows you, as the business owner, more time to focus on your business operations, while leaving the important task of complying with the tax deposits or reporting and the liability associated with taxes, to a professional (keep in mind, that even with a third party processor, owners are ultimately responsible for their tax obligations).
The Department of Labor requires that hours worked be tracked for non-exempt employees (this would be for all hourly employees). There are several options for tracking employee hours worked:
- Manual (hand-written) time card
- Badge swiping
- Point of Sale Systems
- Time Clock
- Web-based time-keeping system
When is payday? Choices for payroll frequency are:
- Weekly - 52 times per year (paid every week)
- Semi-Monthly - 24 times per year (paid 2 times per month)
- Bi-weekly - 26 times per year (paid every 2 weeks with 1 week lag - Most common)
- Monthly - 12 times per year (paid 1 time per month)
In Iowa, employers may require new employees to participate in direct deposit, but may not require employees who are currently receiving paychecks to sign up for direct deposit. An alternative pay option is a pay card. This is a reloadable debit card, issued through a national or regional bank which would replace a paycheck. There are various laws and regulatory guidelines that may be different by state so research to determine if payroll cards are right for your company. Iowa regulators have approved legislation requiring employees to agree voluntarily in writing to receive payroll debit cards.
Exempt vs Non-Exempt
Classifying employees as exempt from overtime or non-exempt (those who must be paid time-and-a-half pay for hours worked over 40 in a work week) is another critical decision when paying employees. Misclassification can lead to fines, penalties and the payment of back wages to employees that may be owed overtime. The Department of Labor provides direction on how to classify employees. The biggest thing to remember is that you must evaluate each position by the actual duties worked, not based on job title, in order to determine eligibility for exempt or non-exempt. Remember, when in doubt, you can't go wrong paying someone hourly.