3 Small Business Payroll Myths Debunked

Latest posts by Skylar Barsanti (see all)

When you’re first starting out in business, it seems like everyone and their grandmother has advice to give. Some of it’s good (yes, you can have weekends off), while some of it’s not so good (do not buy a vacation on your first corporate credit card). It can be easy to mistake bad advice for good and perpetuate the myths that lead entrepreneurs down treacherous paths, especially when it coms to employee payroll.

Starting your own business is challenging enough, but starting off on the right foot is easier than you think! Rather than experiencing the pitfalls entrepreneurs before you have made, try learning from their mistakes. To make things that much easier, we’ve compiled our top three small business payroll mistakes.

Myth #1: You must provide paid time off (PTO) to all employees

Years of working for someone else might have led you to believe that a benefit such as paid time off was inherent to your job. So it might surprise you to know that allowing employees to accrue PTO isn’t mandatory practice. According to Fair Labor Standards Act (FLSA) requirements, you aren’t required to provide employees with paid time off or sick leave.

But before you check this box, let’s consider this: If you weren’t working for yourself, wouldn’t you like to have PTO? Paid time off isn’t an expensive detriment to your startup. While you don’t have to provide paid time off, doing so can only increase employee morale and prevent turnover — two things you definitely can’t afford so early in your career as a small business owner.

Myth #2: You can hire and pay seasonal help under the table

Starting your own business, you might be eager to hire on a few extra hands. Maybe you have a teenage son who needs to earn his keep in the summer. Maybe you have a niece who’s working her way through college and you want to do your part by offering her a part-time position in your office. Both are great ideas, but don’t complicate payroll (or rather, try to cut corners) in the process.

You might be tempted to pass cash to these employees under the table, but such a practice can land you in hot water down the road. It’s important you classify each employee correctly when you run payroll. For example: Under the FLSA, if your son is part-time, but he works more than 30 hours in a week, he could be eligible for certain benefits.

On top of that, seasonal employees must still be paid the minimum wage. Handing your niece a crisp $50 at the end of an eight-hour shift means you’re $1 short per hour. Keep your business on the right track and classify all your workers and process their pay correctly.

Myth #3: Running payroll must take hours or days to complete

As an entrepreneur, you might be dreading payroll. You certainly weren’t envious of the bookkeeper at your last job. The image of papers stacked high and late nights in the office are enough to scare any small business owner. But processing payroll doesn’t have to be a chore. In fact, investing in the right tools can help you avoid the top two small business payroll pitfalls!

When you invest in simple, automated time tracking, you can run payroll with ease. Much of what you dread about payroll can be avoided by taking paper time cards out of the equation. With an automated system, clocking in and out takes mere seconds — and all seconds worked are accounted for.

Plus, an automated time tracking system can help you keep a record of all the PTO your employees have used and still have left. And because a time tracking system does all the math for you, you’ll know, down to the second, how much time your seasonal employees have worked. You never have to guess if you’re over or underpaying employees, or when it’s time to send workers home for the day.

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