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In our last blog, we started to go over some of the pitfalls that business owners can so easily fall into when it comes to payroll. There are a lot of different rules as well as changing state laws. If you haven’t already read part one, you can find it here.

One of the consequences of having a messy payroll is that you may find your business being audited the EDD and possibly by the IRS. Where they do not happen excessively, we had heard of times when an independent contractor believed that they were an employee and when they had been let go they went to collect unemployment. But because nothing had been paid into that account, it put that business owner under a microscope.

Messy Payroll

Here are some best practices to help keep your business to follow the law when it comes to employees.

  • If you have any question in your mind if a person is your employee or if they are an independent contractor, please call an employment lawyer and pay for a half hour of their time. You can also do your research online and make this determination. Either way, you will get the information you need to make sure that this is not a gray area and that you feel confident in the distinction.
  • Keep good records! Proper documentation for both employees and independent contractors helps you if you should ever find yourself being audited. You can easily hand over your paperwork to prove the exact relationship between you and the worker. Make sure that your contract with your independent contractor spells out what your relationship is with them.
  • Have an Employee Handbook. This takes time on your part up front but pays off in dividends for you and your business. You want to ensure that all of your employees know that they are employees. You can also make sure that they are aware of every policy and expectations that you have for them making your business more efficient. Employee Handbooks take the guesswork out of the employee/contractor debate.
  • Have the right mindset. Employees are a huge part of any business in how it runs and handles its day to day issues. When you remember what a large part of your business this is, it can help clarify how much of a focus it needs from you.

We hope these best practices have helped shed some light on how you can help clarify your payroll process and make your life that much easier if you should ever find yourself being audited. If you ever need additional help with payroll services, always feel free to give us a call.