How Should You Legally Handle Paying Your Employees?

Paying employees is something that every business has to do, but it is a task that can easily be overlooked. While people figure you could set up a direct deposit system, a weekly check, or cash payment, there’s far more that goes involved when paying employees.

There are formalities and rules about how to pay your workers, as well as ways in which you should approach the payment process if you want to keep yourself out of trouble. By following these procedures and best practices, you will be able to properly pay your employees without getting yourself in trouble with the law.

First steps

Before hiring anyone, the first thing you should do is familiarize yourself with the country’s basic employment laws that relate to hiring and paying workers. You can find this information by looking it up on your country’s government website or asking an accountant who specializes in business law.

One general rule you should remember when hiring an employee for your company is you should not hire anyone as a “contractor.” This is because all employees must be classified as either an independent contractor or an actual employee, and it needs to be clear which one you are using.

For example, if someone works for your company for an extended period of time but they are classified as a contractor, they may be able to file for unemployment benefits or worker’s compensation if their work is ever deemed hazardous. As such, it is important that you clearly define the role of all the people who will be working for your company and make sure that they are classified accordingly.

Payment

Once you have all the primary stuff out of the way, there are some other things to remember about how you should handle paying your employees. First and foremost, make sure everyone has a clear understanding of their pay rates and work hours. You don’t want your staff working without knowing what they will be paid or how many hours they will be expected to work.

Nothing in the world of business is free, and therefore all your employees need to receive a paycheck. It is important that everyone receives a check for their work because this helps them pay their taxes, and it puts money into circulation. If someone works for you, but they never receive their paycheck, they may not be able to keep track of their finances or pay bills. This may cause them to fall into debt and possibly even become bankrupt.

Paying employees on time and deductions

Workers need to be paid on time and in full each payday. If someone makes a mistake and forgets to pay one of their employees, it can result in that person not being paid for their work. This is especially bad if the company recently started hiring people because you will set a precedent for your business not paying its workers on time.

It is also crucial that you give them an accurate statement of their hours worked and the money they received. The last thing you want is for your staff to complain about not receiving their full paycheck, or even worse, accuse you of withholding money from them.

Another thing to remember when handling payment concerns is you should process payroll at least twice per month, once near the middle of the month and once near the end. This is because you need to calculate taxes, bonuses, and overtime pay along with regular wages. Also, keep in mind that nothing should be deducted from an employee’s check without their consent. You can’t take out money to cover a loan or a credit card because you will not only be breaking the law, but you will also lose all of your employees’ respect.

Closing thoughts

On a closing note, you should always remember employees generally don’t work for free. In fact, you need to pay your workers in order to avoid breaking the law and because it is a business expense.

Also, remember having employees automatically deduct money from their bank accounts every payday is against the law unless they have authorized you to do so. If they permit you, make sure their bank account information is accurate, or you may end up with a lawsuit on your hands.