What is Payroll? This is What Every Business Owner Needs to Understand – LIFESTYLE BY PS icon

What is Payroll? This is What Every Business Owner Needs to Understand

What is Payroll? This is What Every Business Owner Needs to Understand

Can you imagine owing $1.1 million in back wages?

Wyoming Casing Services Inc had their employee’s payroll set up to cover hourly work, along with piece-rate pay. However, they failed to include the piece-rate income when calculating overtime rates. The Fair Labor Standards Act (FSLA), caught wind and demanded the employer immediately pay $1.1 million in back wages.

On top of having to pay the fine, Wyoming Casing Inc, also had to retrain every manager, and HR employees regarding FSLA best practices.

If you want to avoid costly payroll mistakes, we can help. What is payroll, and how can you be sure you’re doing things the right way?

Read on to learn the top payroll facts every business owner should know.

What Is Payroll?

Payroll is something every company with employees has to do. It’s the step by step process towards giving employees their earned income. When you hear someone referring to payroll, they might be talking about the actual checks or a different part of the process.

Here are a few aspects of payroll you should be familiar with:

  • Calculation of Paychecks
  • Financial records for employees paychecks
  • Total earning for all employees

First, when someone says, “I just got done doing payroll”, they’re referring to completing employee’s pay calculations. However, payroll can also refer to the financial records your company will be keeping to determine each employee’s pay. Deductions, paid time off, salaries, and hourly wages, are all part of the financial records your company has to keep track of.

Luckily you can use a pay stub generator free, to make financial record keeping easy and convenient. Finally, payroll can also refer to how much every employee earned working for your business in a total fiscal year.

Hourly Wages Versus Salary

Do you pay your employees an hourly wage? If yes, then you’ll need to track every single hour yourself, to guarantee you’re paying employees the right amount.

For salaried employees, you might still want to keep tabs on the hours their putting in.

This way, you can be certain that employees are being fully compensated for their time.

Time off and Overtime

In addition to tracking employees' hours, you’ll also need to keep records of the time they take off from work. Your records about vacation time, sick time, and holiday time are a crucial part of creating accurate paychecks for each employee.

Next, if you have any nonexempt employees, make sure they’re receiving the proper amount of overtime pay. We suggest you check your states overtime laws to know the exact number of hours that an employee must reach to be eligible for overtime pay.

Payroll Employee Information

No matter what type of business you own, every employee needs to complete a Form W-4. The form will give you the information you need to accurately make deductions from your employee's checks.

If an employee's financial situation, or personal situation, changes they should fill out a new form. Whenever you hire a new employee, they'll need to fill out a fresh form as well.

Make Payday a Success

Now you know the answer to the question, “What is payroll?” and can help your business become a success. After all, when it comes to reaching your goals as an employer, and as a team, knowledge is the ultimate power.

For more ways to empower yourself, check out another one of our articles.