Of the things that make your business tick, your employees are probably the most important. Taking great care of your employees is key, so it’s crucial that you find the best way to pay them.
Payment methods should be established early and pose few problems. In order to set yourself up for stress-free payment, though, you have to find the right software or payment delivery method for your business.
We’re going to take a look at some of the best ways to pay your employees, whether your business is small or large.
Software Systems
The necessity of online work has shifted many businesses in the direction of online payments. There are numerous platforms and options for you to pay your employees regularly online.
You could find the best recurring payment system for you or select a platform that allows you to pay your employees whenever you’d like. These options often work for billing customers as well. Going with options like Venmo or Paypal can be effective for a number of reasons.
First, you can pay employees directly. At the worst, they’ll have to wait for the weekend to be over for funds to drop into their account. When you make a transfer on a weekday, though, the money will be available to them almost instantly.
These methods are also smart for businesses because the platforms keep a clear record of all payments made. Losing track of your business payment information can be really dangerous when it comes to tax time.
It’s beneficial to have a platform that keeps close records of times, amounts, and any other payment information that might be pertinent. That way, you won’t lose any paperwork on your employees, especially if there are dozens of them.
Cash
Cash is often thought of as illegal or strictly “under the table.” It’s totally acceptable to use cash as a form of payment, though.
The only catch is that you’ll have to be vigilant about taking taxes out and ensuring that every payment you give is very well documented. Because everything is hand-to-hand, you’ll have to figure out tax rates and do the math on your own.
There are certainly platforms that help you find tax rates and work with the numbers so that you do things accurately, but be sure to keep your own records and check them twice if you’re paying your employees with cash.
It seems that cash is a preferable method of payment for people in some industries. It might not be wise to pay massive sums to your employees in the form of cash, but you never know what they’d prefer.
The main benefit of cash is that your employees will be certain that the funds are theirs. Other forms of payment depend upon bank accounts, and banks can hold money up for significant amounts of time for different reasons.
Check with your employees and see if they’d prefer being paid in cash if you think you have the time to manage the numbers and stay on top of taking taxes out.
Business Checks
Writing a check on payday is another common option that is similar to cash. Checks are a little more practical than cash because you can keep clear and easy receipts of payment.
You should write your own receipts when you pay physical cash as well, but checks offer an immediate receipt that you can throw in the books when you’re done.
Direct Deposit Options
Direct deposit is one of the most common forms of payment these days. It makes sense, too, considering the fact that it’s easy, conducted entirely online, and different payroll software offer the ability to track all payments in real-time.
On the business end, it’s priceless to have a platform that allows you to pay your employees and organize that payment information for tax time.
Your employees will probably expect that you use direct deposit in this day and age. It’s nice to know that your payments will drop into your account on the same day at around the same time. So long as the business owner sets up the payment platform correctly, there isn’t likely to be any problems with payments.
Management’s role is to complete payroll in time for the checks to enter employee accounts at the correct time. This tends to be a day or two before the pay date.
Other Considerations to Make
Before you start paying your employees, make sure that you have the fine details of wage, frequency of payment, deductions, and benefits figured out. Have W-4 forms and state income tax forms nearby and get a good understanding of the different rates that need to be taken out in your state, as well as in your area of business.
For example, tipped workers will be taxed differently than those who aren’t tipped. The nature of your business and how your employees make money will impact how you’re able to pay them.
It’s easy to think that you become an employer, make money, and just pay employees exactly what their hourly wage is. Going forward with payment without understanding the tax and deductions required can lead to hefty penalties from the federal and state government.
This is true regardless of the payment method that you use. Counterintuitively, cash is the riskiest method of payment to slack on. Businesses that pay their employees in cash are targets for audits because there are a lot of organizations that use cash as a way to avoid taxes.
So, if you do go with cash, make sure you are very diligent about tracking and documenting all transactions with proof. Working with immediate transfers like Paypal and Venmo requires that you do all of that math on the front end as well.
So, when you’re dealing with payment information, it’s best to find a platform that helps you deduct taxes and benefits and document that information in a safe place for tax time.
Looking for The Best Way to Pay Your Employees?
There’s a lot to consider when you’re trying to find the best way to pay. It can be confusing, but we’re here to help. A little guidance is sure to point you toward the right option for your business.
Explore our site for more ideas and insights into managing your business in a way that works well for you and your employees.