One of the biggest challenges associated with a business, whether large or small, is managing costs. Whether it is outside expenditure, or internal costs, many small business owners find it challenging to keep revenue down while still being financially solvent.
When trying to keep costs, small business owners may automatically jump to quick solutions, such as downsizing or other efforts. However, some of the more simple ways to save on costs tends to be the ones hidden right under the nose – such as payroll costs.
There are many ways payroll, and subsequent operations can be leveraged to keep costs down without resorting to drastic measures. Here are just some of the ways to make that happen:
1. Switch to Salaried Positions
This is an extremely simplified statement, that needs some more unpacking. There are many ways through which a well-designed pay structure will help in payroll cost-saving, and switching to salaried positions could help in those efforts.
This may sound counterproductive at first – after all, wouldn’t salaried workers cost far more than hourly workers? Perhaps, but keep in mind there are other factors at play.
Salaried workers do not have the caveats associated that hourly workers do. That mean switching will save you a massive amount of time and resources in the long run. Processes such as calculating hours worked, overtime and time off will become much easier, while keeping everything running smoothly.
2. Pay Benefits Exempt from Payroll Taxes
Think about benefits and where that fits in a new pay structure. In lieu of raises, consider adding fringe benefits that are exempt from both FICA and FUTA taxes.
Simply put, these benefits will allow employees to use pre-tax money for services or products rather than after-tax money. This gesture may be appreciated more than raise, especially if the right benefits are chosen as it signals that you are tapped into what employees care about most.
An article by American Express delves into this, and explores some of the benefits that may be implemented. As the article mentions, there are many types of benefits that are extremely useful to employees. These may include:
These are just a few examples. Get creative, and think about what your employees need and how this can be structured as a benefit.
Payroll taxes tend to be about 10% of employee compensation, and there are many ways to reduce associated tax costs by employing some simple and legally sound measures while creating goodwill among your employees.
3. Reduce Overstaffing
The truth is, employee scheduling takes an enormous amount of effort but may still not yield the right results. Without the correct tools in place, overstaffing becomes a common occurrence.
This leads to a domino effect, since specific employees will be over scheduled and this will result in overtime. However, if timekeeping and advanced scheduling are combined, supervisors are able to easily avoid these costly mistakes.
4. Reduce Payroll Errors
As a business owner, you know payroll errors are costly. Many business processes can easily be automated and/or outsourced, and this will greatly reduce these errors.
For example, payroll errors tend to be a driving factor in cost. This can be for a variety of reasons, from simple miscalculations to the cost of reprocessing, reprinting and reconciling mistakes. However, by automating some of the functions, this will drastically reduce the amount of errors.
5. Automate Tax Filings
Similarly, automating tax filings will also reduce the frequency of errors. According to an article by the Undercover Recruiter, “27% of small businesses report spending more than $10,000 on the admin of federal tax.” This is already a high amount, especially for a small business.
27% of small businesses report spending more than $10,000 on the admin of federal tax.
Furthermore, if you consider the amount of time and resources that go into tax filings, it begins to make more sense to move these processes out of the business itself, or at least automate to get the best return for investment.
Though it might not seem like it, your time is just as much of a cost as revenue is when it comes to running your businesses. Striking a balance between best payroll practices, benefits and automation will yield the best results while allowing you to focus on what is truly important.