Doing Payroll Differently
The way Americans do payroll differs a fair amount from the rest of the world. I have my own complaints about how I’m paid and I’m sure you do too. But this article is for employers, actually. Specifically, employers who struggle with employee complaints about payroll. Hopefully we can figure out ways to make it work better for all parties involved, but to do so we have to combine empathy with practicality.
Legal Requirements (and Consequences)
Let’s talk about legal restrictions and requirements for payroll in the United States, so it's clear what can and can’t legally be done. Things differ state by state, but in general, whichever is stricter - that is, the federal law or the state law - is the one you are required to follow.
Cloudpay wrote a great article about this, but to summarize a few of their main points: unpaid leave is required for those with certain medical positions, there is no federal rule on how companies should pay their employees or how frequently (meaning the responsibility lies on the states), federal income taxes are required and in most states a state income tax is required, and as one’s wage increases, so do taxes - including Social Security and Medicare.
It's true that payroll must be done with the utmost caution, because lying or mistakes on your taxes can cause incredible legal damage and may potentially ruin a company. The amount of trouble one gets into lies in the results of the “responsible person” test, which weighs the motives behind a tax “mistake” by analyzing the power those submitting information have. You can learn more about payroll accounting by reading this guide.
If you don’t pay your employees on time or refuse to pay them for work when there is a contract that says you are supposed to, State Labor Agencies and Small Claims can come after you, which you do not want.
There’s also something to be said about offering proper benefits. Is the insurance you’ve chosen for your employees something they can rely on? Can they rest at night knowing that accidents and mistakes won’t be dropped or poorly handled by the insurance company? In my experience, sometimes companies offer benefits out of obligation but the benefit providers aren’t very trustworthy or efficient. There’s a reason insurance companies of all kinds brand themselves with taglines of efficiency and “safe hands” - because some benefit providers drop the ball. Make sure that whatever you’re supplying to your employees is something that you personally can stand behind before you ask them to.
Euro-socialist countries have some great protections in place for workers and ethical payroll. Their benefits seem to be more encompassing of different scenarios.
While it’s not the most amazing example of a socialist healthcare, I am thoroughly impressed with Great Britain’s employee protections when it comes to payroll. In the UK, for instance, employers have to come to an agreement with the employee before any change occurs in their policy or contract - no I’m not joking.
In France, employees are guaranteed five weeks off, as well as other leisure-centered rules, including more holidays and 35 hour work weeks instead of 40. While this might sounds like a bad idea (to me, even), their workers’ productivity is actually higher.
These are only two examples of how Europe seems to pay and treat employees better, but maybe what we should be asking is if it’s possible for us as American employers to treat our employees similarly.
Consult Your Accountant
An accountant should always be consulted before making changes to payroll - including offering more benefits.
Ultimately, they should double check that all of your costs are being properly covered before any extra expense (for, say, an employee benefit) is spent. The biggest question that needs to be asked, therefore, is can we afford to be better towards our employees?
If you can’t afford to offer more benefits than you already do, maybe it would be wise to think about what you can do cost free. For instance, the UK’s policy of an agreement between an employee and employer before any contract or policy change will not cost you extra money - so that’s a good place to start. Hopefully, they’ll be encouraged to keep working for you so you make more money and are able to spend more on them as well.
If you have payroll experience, recommendations, or insight you’d like to share after reading this, I’d love to hear whatever you have to say! You can contact me via Twitter any time @Robolitious.
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