A remote workforce allows employees to work outside the traditional office setting, typically at home or in a virtual work environment. Many companies use remote workforces because of their advantages, such as flexible hours, less commuting time for staff members, reduced labor costs, and increased productivity among workers.
Your remote onboarding strategy must thus be highly efficient to acquire the best workers from the broad talent pool. It needs a system that makes it easy to calculate salary, manage tax withholding, and keep track of time worked.
That’s where payroll comes in. It involves calculating and distributing payroll checks, ultimately determining how much an employee will get paid.
Steps To Follow When Setting up Payroll
Setting up payroll is a complex task. You can manage a remote workforce’s finances with a specialized payroll system. Setting up payroll involves finding ways to accurately calculate salaries, manage tax withholding, and ensure employee benefits compliance.
Here are the necessary steps to follow when setting up payroll.
Identify and Classify Types of Remote Workers on Your Team
Duringremote onboarding, you divide your employees into separate classes of workers and categorize them according to their hourly, salary, and pay frequency. This classification enables you to implement a system that ensures compliance with government regulations.
Build a database on each remote worker to check and compare the data needed to make payroll adjustments or changes in benefits. Work with HR and management staff to identify employees in remote locations and collect information such as home addresses, start dates, type of work they do at home, and salaries.
Under theremote workforce, there are remote employees and independent contractors.
Remote employees are your workers who operate remotely, often referred to as telecommuters. These employees work from home or in a virtual office in a different geographical setting.
Payroll taxes must be deducted from remote employees’ paychecks in the same manner as you do for your in-house staff. You must also abide by all tax laws and rules in the nation, state, or city where the employee resides.
Independent contractors work for your organization from home or in a virtual office in a different country but are self-employed. They work on specific projects rather than full-time in your organization and get paid on commission.
You are not required to deduct payroll taxes from their pay or abide by local laws that apply to the employee’s place of residence as they handle their taxes.
Collect Tax Forms
A tax form is a document prepared by an employer to show how much an employee gets paid. To set up payroll successfully, you need to collect all necessary data and prepare a tax form that shows how much your employee gets paid.
A tax form is an employee’s proof of income for the year. It shows how much you paid your employee and qualifies as your employer’s pay stub. Tax forms also offer the employee’s monthly-to-yearly salary comparison and whether they received any bonuses or awards such as commissions.
Collecting all tax forms from remote workers is essential as they classify their work in your company. It also tells you how much they get paid and how often they get paid.
Let’s look at examples of tax forms that you should collect.
Form W-9 is a tax form that documents a business or individual’s identity or tax information. An independent contractor, freelancer, self-employed individual, or single proprietor provides the following information to an employer via Form W-9:
Their legal name
Taxpayer identification number (TIN)
Or social security number (SSN)
Form 1099 reveals the revenue that a firm pays to taxpayers who are not full-time workers. These documents show how much you pay your employee, who they work for, and how much they get paid daily, monthly, or yearly. You must prepare one form for each type of payment you make to an employee.
Choose a Payroll Method
A payroll method enables you to pay employees by transferring money electronically, writing checks, or preparing a paper check.
You must choose a payroll method that you can use to record a remote worker’s pay in your organization. Payroll methods differ in calculating an employee’s salary and distributing the cash they receive.
To set up payroll, you must consider what benefits your employee receives and how often they get paid. You must also assess how much you are paying them, whether their salary is for hourly wages or a monthly income, and the number of hours they work per month. The following are examples of the most common payroll methods.
Direct deposit is a way to pay employees automatically by depositing cash into their bank or investment accounts without having to reconcile their records at the end of the year. It is a convenient way to pay your employees because it eliminates the need for paper statements, time-consuming calculations, and errors in the system.
Electronic checks are paper checks that you print out using a check writer. They are suitable for paying employees who do not have a bank account or an investment or savings account.
Third-party tools are financial software systems that automatically calculate your employee’s pay, send notifications, and store your payroll data safely. Platforms such as PayPal, Venmo, and CashApp can integrate services with your business or accounting and HR systems and offer mobile services, enabling you to pay employees from any location.
Four Best Practices When Setting up Payroll
Before you start working on payroll taxes and tax forms, ensure you are familiar with the best practices when setting up payroll in your organization. These processes are critical for your business to benefit from those remote workers. Here is a set of best practices you can provide to your business.
Payroll automation software saves you time, money, and effort by reducing errors. Online payroll software is ideal for businesses as it helps you get neat and quick reports on your employees’ income right away and manage their taxes online.
Sync All Payroll-related Variables Into a Single System
When setting up payroll, it’s essential to maintain all your payroll-related details in one place. Syncing helps you save time and avoid fraud. Store all your payroll-related variables into a single integrated system that records all your employees’ income, expenses, and taxes and figures tax-deductible benefits.
Remain Mindful of Payroll Regulations
Payroll laws are the rules and guidelines a government agency sets to manage and organize tax laws within a country. It is essential to stay current with new payroll laws by researching them and updating your payroll software when necessary, as they change frequently. You must comply with the reporting rules to avoid unnecessary penalties.
Organize Payroll Records
Quick and accurate information management is essential to setting up payroll, managing taxes, and getting accurate reports. Organize your payroll data in an integrated financial management system that supports your business processes.
With the right payroll processes, you can set up an automated system that pays your remote workers promptly. When setting up payroll in your organization, you must consider your current remote workforce and the financial tasks you must perform so it can integrate with your company’s operations.