The growth of the South African economy is inextricably linked to the success of our small businesses. But what exactly constitutes a small business? The Banking Association of South Africa defines a small business as any entity with 50 employees and an annual total turnover of between R3m and R32m – depending on the sector in which it operates. These are sizeable figures that challenge the typical image of a small business as a ‘one-man band’.
Regardless of actual size, managing a small business is no small endeavour. Compliance is crucial and while various support tools exist like the SARS Small Business Tax Kit, there are a lot of administrative tasks to juggle and pressures to cope with.
On top of everything else, small business payroll management is undeniably stressful – but there are some things you can do to make it easier for yourself. These five top tips will help you get rid of your payroll headache, which means less time spent stressing and more time spent running your business!
- Set up direct payments
It’s crucial that you pay your employees on time. Workers who are paid late will not deliver quality work, plus your company’s reputation will suffer. This overall negativity will impact the success of your business and cause significant issues.
The best way to ensure that employees are paid on time – every time – is to set up automatically scheduled payments. If your workload gets heavy, or you are away on business or vacation, your staff will still get paid directly without any delay. It’s also a good idea to have a financial backup plan in place. In other words, if your clients are late with an invoice, you’ll still have enough cash on hand to pay your employees.
- Classify employees correctly
To make sure that your payroll operates in line with the law, you need to classify your employees and independent contractors correctly. Different categories of employees are subject to different tax rules and benefits. Proper classification is crucial to avoid any compliance issues, confusion and errors.
- Keep employee information up to date
A payroll system that functions on out-of-date information is only going to lead to problems. One of the most important aspects of successful small business payroll management is to ensure that employee information is regularly reviewed and edited. This includes adding new workers to the payroll system as soon as they join the company, and removing ex-employees once you no longer need their details.
You should also request that all employees check their contact information, banking details and job level information on the system annually. This will ensure that everyone is always paid the correct amount into the correct bank account.
- Stay on top of tax deductions
As an employer, it is your duty to ensure that the correct tax amount is subtracted from your employees’ salaries and paid to government at the appropriate time. To get this right, make sure you are fully aware of all tax legislation and that all payments are carefully calculated.
- Choose the right software
As a small business, you may choose to manage your payroll on an Excel spreadsheet. While this may seem like the best and most affordable option to begin with, payroll systems that rely on spreadsheets are prone to errors. This can end up costing your business in the long-run.
Investing in a modern payroll system is a far better idea than spreadsheets. It will help you carry out all necessary calculations correctly, and keep your business legislatively compliant at all times.
Payroll is a complex issue, but your small business payroll management doesn’t have to give you a headache! Enjoy a smooth-running payroll and spend more time growing your business. If this sounds good, why not consider outsourcing your payroll management to a specialist?
Or, give us a call for more specialist payroll advice – we’d be glad to help!