Completing payroll is considerably more complicated than cutting a check. Dianne M. Saunders, CPA, offers comprehensive bookkeeping and payroll services in Litchfield, CT. Below, she reveals some of the most important facts you should know about the process.

Employee Classification

The Fair Labor and Standards Act (FLSA) requires employers to classify workers as either "exempt" or "nonexempt" from federal overtime requirements. Nonexempt staff must be paid overtime if they work more than 40 hours per week, while exempt employees do not. Those who receive a salary rather than hourly wage are often exempt. Also, it's crucial to classify workers properly as either employees or independent contractors. Improper classification can result in team members not receiving all the benefits to which they're entitled, such as family medical leave or unemployment.

Record Keeping

As an employer, you must keep records of your staff. The requirements differ for exempt and nonexempt individuals, but usually include time cards, deduction amounts, and employment contracts. The FLSA governs where and how long you keep this information, though many states have separate record-keeping rules too.

Wages & Withholdings

Your dedicated department or independent payroll service must also handle wages and withhold taxes. The approach must comply with federal and state minimum wage laws, which apply to salaried and tipped employees as well as hourly workers. Income taxes must be withheld and paid, as well as both the employer and employee portions of the payroll taxes for Social Security and Medicare. Businesses must then accurately report their taxes to the appropriate federal or state agency; otherwise, you could face criminal penalties.

The information above should help you decide whether your business could benefit from a professional payroll service. If so, contact Dianne M. Saunders, CPA, for a consultation. She's been serving businesses in and around Litchfield since 1992 and also specializes in tax preparation, estates and trusts, and bookkeeping services. Visit her website for more information on how she can assist, or call (860) 567-3022 to schedule an appointment.