Salary Management Tips For Small Businesses

Illustration by Kateryna Yemchyk via Dribbble

Small businesses are indeed playing a critical role despite their size and have become significant contributors to the country’s advancement and its economic development. The scope of small businesses has witnessed considerable growth in the past few years.

However, the competition from the big industries is quite a lot. Therefore, small businesses are at times forced to make sure that their functions are effective and that which can contribute to their competitive advantage.

Among the many functions, one that needs to be redesigned by the small companies is its salary management. And that’s what we’ll be discussing in the article.

Top 11 Tips For Small Businesses To Enable An Effective Salary Management

As mentioned, we all realize the need and the possibility of redesigning the management process. But then, many wonder how.

So here are some tips discussed that are sure to help you in achieving the desired improvement in your salary management process. Are you ready to discover ways to strengthen your small business in one of the many aspects? Well, let’s go ahead.

Tip #1 – Create A Suitable Payroll Policy

Create suitable Payroll policy
Illustration by Rafli Zikra via Dribble

The first and foremost step as a tip is to design a draft policy, taking into consideration all the laws governing the labours and the payments made to them. It is a known fact that rules, regulations, and laws related to the government are subject to changes. And these changes happen quite often. Therefore, it is very important to be updated with the latest regulations so as to make sure that none of the laws are violated.

This is because non-compliance to the government-given laws may lead to undesirable consequences, which includes a huge amount of penalties. And that is the reason it is advisable that you prepare and set up a policy that best suits and clearly specifies all the details.

Since you need to process payroll for the salary disbursement, it is important to have a policy that could help you in every detail to ensure a smooth payroll management process. And it is even more essential for the small businesses to be on track right from day one to be aware of payroll’s every detail such as its period, how it works, what are the benefits to be included, etc.

Tip #2 – Make Sure You Are Registered For The EIN

Are you wondering what this EIN means? Well, let me tell you. EIN is a unique code that you will require to process your employee’s payroll, without which you cannot process. Therefore, before you could actually start your payroll, register yourself for the EIN. It stands for Employer Identification Number, and it is essential as it gives an identity to your small business and is a mandatory requirement to file your taxes.

However, make a note that almost every small-scale business (there might be few exceptions) must have an EIN even before you apply for your company’s license, opening a bank account, or filing payroll taxes. Apart from this, you will have to make sure you get an EIN on top of the federal EIN from the state-level according to where your business is situated.

Tip #3 – Finalize The Frequency And The Status Of The Salary

The decision on the payment frequency, as well as its status, is quite important for a small business and can never be overlooked. Let us see what they actually mean. Firstly, the frequency of the payment, which is also known as the payment schedule, demands the small businesses to decide “when” and “how often” do their employees get paid.

The most commonly used schedules are weekly, monthly, and at times bi-weekly. As a small business, you are free to make your choice. And no doubt, make sure that the decisions you make align with the federal as well as the state laws.

Whereas salary or payment status is to discern how you want the wages to be computed. Generally, there are hourly pays or salary pays for non-exempt and exempt employees, respectively. These decisions can be influenced either by the needs of the employees or the position of the small business’s employers.

Tip #4 – Discern The Right System For Your Payroll Process

Discern The Right System For Your Payroll Process
Illustration by Liliana Pérez Rojas via Dribbble

As a small business, you need to understand the significance and the benefits of the various forms of systems available for payroll. Analyze the one that better suits you in terms of calculation, streamlining, and a systematic process. Generally, the are three options available. They are:

 icon-angle-right Manual Payroll Process

It is one of the traditional methods, where the processes are handled manually. If you are looking for a cost-efficient system, then the best option is a manual process. But then, the drawback of this system is that it is subject to errors, and the process becomes too tedious.

 icon-angle-right Outsourcing Payroll Process

It is a method where you kind of ask the hired individual or company to process the payroll for you. This outsourced company or individual does the entire process for you, right from processing the payroll, paychecks to compiling and filing the taxes, etc.

 icon-angle-right Payroll Software

Managing the company’s payroll using software is one of the trending systems as well as an efficient method to implement and follow. The software process is more advisable because of the accuracy in performing the task and the opportunity it provides in saving time and energy. Since all the tasks related to payroll are automated in software, it becomes very user-friendly and has become the most preferred system for many organizations.

Among the three options, make sure you choose the right one. As a growing firm, you also need to consider the future and make the decision based on the long-term goals that can help you in sustaining the challenges posed by the large industries.

Tip #5 – Better To Embrace Paperless Management

As you have read the subheading, you might be wondering what this has got to do with salary processing tips, right? Or is this the time to discuss or promote being eco-friendly? Did you have these additional thoughts too? Well, that’s okay.

I didn’t think of it until I penned it down, but then isn’t it something good that we can do to our mother earth? We sure can. As much as it is important, being eco-friendly alone isn’t the ultimate purpose, to mention paperless tasks.

Apart from that, enabling an eco-friendly environment, embracing paperless payroll management can help you safeguard your data. Especially when you choose to implement software to manage and process your payroll, you indeed are provided with a huge opportunity to save your data on the cloud, using cloud-based solutions.

We all are kind of convinced that the future is so unpredictable. In that case, imagine you have all the documents, attendance sheets, payroll sheets, etc., on papers, are subject to risk factors, for example, due to natural calamities.

In that case, the entire record of massive value could be lost. Why give it a chance when there is a better option? However, with software that provides cloud solutions, you can enable safety and access anytime and anywhere for a seamless process.

Tip #6 – Classify Your Employees Rightly

When we say classification in terms of salary, it means that the employees who generally can be of two types are to be categorized accordingly. The common categories are general salaried employees, while the other is independent contractors.

It is preferred to categorize this way because the salaried employees are obliged to pay taxes and fall under all the rules laid by the government. Whereas independent contractors are responsible for all these by themselves, and there is a very small role played by the company in this regard.

Therefore, when you categorize the employees, the calculation becomes very easy and smooth. And thus contributes to accuracy and streamlined process.

Tip #7 – Take Advantage Of Any Perfect And Reliable Time Tracking Software

There’s absolutely no wonder if many of you may question as to what is the use and significance of software while discussing the tips. There indeed is a massive connection.

The implementation of software is considered a tip, especially concerning the salary strategies, because they help you in deriving accurate data. The usage of manual timesheets might lead to a lot of difficulty in manipulating the data recorded.

Apart from that, salaries are to be paid for the hours worked. However, when there is no accurate data, then it surely reflects on the payroll and an added cost to the company.

Therefore, the software implementation for attendance purposes helps you in paying the employees exactly for hours worked and saves money and efforts. And above all, it enables easy integration and a seamless process.

Tip #8 – Do Not Overlook To Check And Keep Track Of The Cash Flow Regularly

Do Not Overlook To Check And Keep Track Of The Cash Flow Regularly
Illustration by Sarwar Shafi via Dribbble

It is observed that some companies face deficits while processing the salaries of the employees. And this scenario has gradually given rise to a feeling of nervousness and fear among the employers of small businesses. Therefore it becomes quite essential to monitor the flow of cash and make sure that there is enough funds for the process.

Try and figure out where exactly do we go wrong, for instance, overpay or too many staff, etc. Understand the root cause of the deficit situation and come up with a strategy to rectify the problem. Again, another suggestion in this regard would be to be a little stern about collecting your payments from the outstanding customers.

Tip #9 – Timely Payments And Accuracy – Make It Your Priority

Believe it or not, accuracy really pays off very well and contributes to employee’s loyalty and retention. It indeed adds to your goodwill and the company’s reputation.

And as a growing small business, it is preferable to implement automated software so as to make sure that the payroll functions are quicker and on time without much hindrance.

Tip #10 – Make Sure You Maintain A Detailed Record Of Both – The Employees and Their Payments

There are many laws concerning the maintenance of records laid down by the government. Make sure you oblige them so that you don’t have to pay a huge amount of penalties. Apart from that also, the records help you as a handy tool to support and prove your claims, and in case there arise any undesired situations that demand your proof.

Other than that, the government may demand that the companies will have to submit the records for various reasons. In fact, there are laws concerning the way the records of the terminated, excited, or retired employees are to be disposed of.

Tip #11 – Be Open To Suggestions And Opinions

Since it is to the employees that you are making the payments, ask them for suggestions and feedback on how they find the salaries being disbursed to them. No doubt that it may not be possible for you to accept and implement all the suggestions. But then, you would never know what impactful tips that you may be missing out on either.

Therefore, it doesn’t matter if you can implement the suggestion or not, but give it a try which also can emotionally provide a chance for the employees a sense of belonging. Which, in the end, contributes to the salary and payroll’s effectiveness in your company.


Taking into account the tips discussed, I hope that you can enable effective salary management for your company. Whatever method you wish for your organization, make sure that it helps you in adding to your effectiveness with low cost involved.

Above all, satisfaction matters a lot. Ensure that you, as well as your employees, are satisfied with the strategies that you have so that there are no regrets. Because happiness and contentment at the workplace will indeed contribute to better productivity.

About the Author!

Sweta is an experienced content strategist at factoHR, having a keen interest in communication and the latest trends that are useful to entrepreneurs. Her passion for learning aids the team members in representing new ideas that later help businesses achieve their mission and vision.

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  1. […] small business’s HR department spends a huge amount of time calculating and processing the payroll. Because it is a crucial task which they need to execute efficiently, accurately, and timely. It […]

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