By far, the most underrated element of every business has to be managing payroll. I say, “underrated,” because I feel most entrepreneurs, myself included, expect running payroll to be the least of their worries. Especially when they are first gearing up to go into business for themselves.
Managing Payroll – More than Meets the Eye
It sounds so simple on paper. People work, you add up their hours, multiply said hours by the correct pay rate and then write a check. Wash, rinse, repeat. What a gross oversimplification, I’ve come to realize!
How do you classify hours worked? How do you account for paid time off. What about sick days?
These are just a few of the countless questions payroll management teams have to juggle. And the bittersweet part about being a successful company is that with growth comes more complexity. Sure, one could say that the law of diminishing returns applies here. That is, the idea that adding one new employee to a team of 10 has a significantly larger impact than adding one to a team of 1,000. But keep in mind every new addition has the potential to become an outlier. And it’s the outliers that make life tough. A payroll outlier can be a rogue employee taking advantage of a hole discovered in the system. But it could just as well be the go-getter, rock star employee suffering an unexpected loss of a loved one, thus impacting job performance.
Payroll Helps Take Care of Your Employees
Over the years, I’ve come to see payroll as more than a mundane task to address twice a month. It represents taking care of employee needs, so they can take care of their respective families. I know you’re probably thinking I’m making too big of deal about this. After all, wages are a right, and, if you work, you get paid. Plain and simple. Well, just because something is owed to you does not mean everyone is going to follow the rules. I’m sure a lot of people can relate to having worked for some bad apples in the past.
It still grinds my gears to think about the jerk I used to work for as a generator service technician. Part of his poorly-structured on-boarding program required me to spend an entire weekend shadowing one of the other technicians. When the next payday came, I noticed my paycheck was significantly less than what I was expecting. I’m not talking about the boss forgetting to pay time and a half – he did not pay me anything for those hours I was on the clock.
I figured there must be a mistake, so I went into the boss’ office to get it sorted out. Instead of correcting the mistake, he told me, a kid in his early 20’s living paycheck to paycheck, “We all have to sacrifice sometimes.” Needless to say, I did not stay at the job very long. Before I left, my productivity dropped, and so did the productivity of some of the other technicians that caught wind of what the boss did.
The Lesson Learned
It was through that experience that I learned there are few things more important than taking care of the people that are taking care of your business, and it all starts with managing payroll. It’s an essential part of accounting. You should pay your employees a fair and honest wage in a timely fashion and genuinely listen to them when they tell you there is a problem with their pay stub. No payroll system is perfect, and people make mistakes from time to time. Without a dedicated payroll staff in place to resolve these issues, you are almost guaranteed to see employee morale drop, which is generally followed by a drop in profits.
Article written by Vaughn Pourchot
Last updated March 14, 2023