Payroll Record-Keeping for Business Owners

Payroll record-keeping is among the tasks most disliked by business people. However, they are obligated to perform this task periodically. All the same, it is one of the most significant of them all. This is for both small and large businesses.

You need to know which records must be kept and for how long they have to be kept. It is always important to protect your business. Also, you’ll always be ready for what may happen. 

In this article, you will learn about payroll record-keeping for business owners.

What Is Payroll Record-Keeping?

Payroll records are not just pay stubs. They include all the data about payment for the services offered by employees. These records provide an account of your interaction with your employees regarding finances. Payroll record-keeping for business owners usually involves basic employee information and records. It also shows specific payments to the employees. Tax and benefits records are also a part. These help business owners meet legal requirements and the demands of running a business.

Requirements for Payroll Record-Keeping for Business Owners

Payroll record-keeping for business owners comes with some requirements:

Federal Requirements

The federal government has set certain rules and regulations depending on the agencies involved. Employment tax records for the IRS should be kept for at least four years. That’s after filing the fourth quarter for the year in question. This includes wages paid, tax remittance, and the tips employees declare.

The Fair Labor Standards Act (FLSA), on the other hand, has its own guidelines for determining employee exemptions. According to FLSA, companies should keep simple records for at least three years. More detailed records should be kept for two years. These include documents with special employee information. Such information includes pay rates and the total remuneration package. Wage earner documents have different guidelines. These are documents like time cards, work schedules, and any others required for calculating wages. They must be retained for a minimum of two years. Knowing the timeframes for various records can help maintain a proper record management system.

State-Level Compliance

Most of the basic guidelines are offered at the federal level. However, some states have increased the requirements for payroll record-keeping. They may have stricter rules than those provided by federal regulations. For instance, New York requires business payroll records to be retained for at least six years. In both California and Texas, the period is four years.

You need to be aware of both federal and state requirements. Then, ensure your business lives up to the higher standard. Your state’s legal retention period may be longer than federal law. In that case, you must keep your records for the period set by your state to meet the legal requirement.

Other Essential Documentation

Business managers and employers often think that pay stubs are enough to keep records. Payroll record-keeping for business owners involves several forms of records. Some of these documents include employment contracts and tax documents. Timesheets, enrollment forms, and paperwork for paid leave aren’t left out. Records can be of a certain type or created for a specific purpose. Therefore, retention periods differ.

For instance, you need to store the W-4 form that displays the employee’s tax withholding options. You also have to store documents proving benefits deductions, as well as records of overtime payments. If you have any special pay agreements, you need to keep documents that prove it. Such records are useful during instances like tax audits or raise negotiations. You may also need it to verify the employment history of a former employee. 

Approaches to Payroll Record-Keeping for Business Owners

It is no longer necessary to have rooms packed with filing cabinets for payroll. Modern technology offers secure and more efficient solutions that make record-keeping less problematic. Computerized storage systems are a good option for storing payroll data. There is a lot to consider when selecting a digital solution for any organizational process. It must comply with specific security protocols necessary for protecting sensitive employee data. Most organizations choose payroll software with integration capabilities.

Despite these advancements in digital solutions, some still consider it necessary to keep hard copies. Keeping physical records is possible if a proper system is followed and the storage place is safe. When it comes to the physical storage of records, other factors need to be considered. These include fire, water damage, and the security and control of the documents. Often, copies of important documents are stored in fireproof safes or secure filing cabinets. It is also important to establish an order for the records. This ensures that documents needed for a certain purpose are easily retrieved.

Pulling It All Together

Being compliant is important for payroll record-keeping for business owners. However, it is not all about compliance with the laws and regulations. It’s also efficient for business needs while shielding you from liability. Business owners need to be fully aware of retention requirements. Then, they should implement adequate storage solutions accordingly. This easily turns around what may seem like a burden. It transforms record-keeping into a business advantage.

Efficient payroll record-keeping is essential for compliance and smooth business operations. Our pay stub creation platform is a reliable solution for generating accurate and professional pay stubs. Simplify your payroll management and ensure you meet all regulatory requirements with ease. Check it out today and take the hassle out of payroll record-keeping. That way, you can focus on growing your business.

Payroll Record-Keeping for Business Owners FAQs