Startups are natural transgressors, but payroll and HR is one area where a startup simply cannot afford to break rules. Entrepreneurs of startups may have to come up with disruptive ideas if they want their enterprises to be listed in Fortune 1000, but there is one particular area, where entrepreneurs of startups certainly would not want to break the rules: HR and payroll.
Startups that fail to comply or neglect HR and payroll laws are often slapped with stringent financial and legal consequences. In fact, some penalties are so stringent that they can throw the entire business off track. With that being said, here are five common yet biggest HR and payroll mistakes that startups commit and why it’s time to embrace a mobile payroll app or cloud-SaaS based payroll software.
Mixing Business and Personal Finances
During the initial days, a business banking account may seem pointless for a startup. This is because a startup in its initial days hardly makes any money and for most of the entrepreneurs of newly launched startups, it is pointless to pretend that they are paying their employees with the company and not from their personal pockets.
Such a thinking in particular can have grave consequences in the long run. Eventually, a startup would need to separate all the expenses and repay taxes.
In case the startup is audited or sued, the blurry discrepancy of business and personal finances can render the entrepreneur’s personal assets vulnerable to seizure by the court. To make it worse, the startup might even lose its corporate status. Unfortunately, most of the startup founders are of the notion that this won’t happen to them, but it does and quite often.
Thus, to keep away from legal hassles during such untoward incidents, payroll software for startups is your best bet.
Relegating Employees as Independent Workers
Treating or misclassifying your employees as independent contractors or workers when in fact they ought to be legally regarded as employees is one of the gravest mistakes that startups commit these days. The major reason of doing this is that they don’t have to pay insurance, overtime or taxes for independent contractors. Also, they don’t have to bear other contractor benefits.
Misclassifying is quite common among startups, where several entrepreneurs practice the “try before buy” recruitment technique. It is one of the biggest human resource management mistakes that owners of many startups commit resulting in increased employee turnover rates.
Nevertheless, if you are still relegating employees as independent workers, then it’s advisable to have an automated SaaS based mobile payroll app or cloud based payroll software for startups that can sort out or distinguish payroll and all other independent contractor benefits from what is offered to employees in your company.
Attempting to Manage Compliance and Payroll through Spreadsheets
Payroll undoubtedly is a complex and tricky process, most of the businesses especially startups screw at it often only to be penalized for compliance violations by using spreadsheets. This is the reason many businesses resort to employing some or the other kind of payroll service.
However, startups require compliance such as compensation, healthcare, employment insurance, etc. These are mandatory in almost every state. Compliance overheads even in a freshly launched startup can escalate quite fast.
Thus, many tech-savvy startups make use of cloud based HRMS and payroll software for startups instead of spreadsheets to manage their payroll and compliance. A mobile payroll app helps to manage payroll for a startup including a range of taxes whilst ensuring compliance with all the necessary insurance and other stuffs as well as reporting.
Over/Under Paying Employee Benefits
With the startup competition getting fierce with each passing day, recruiting and retaining best talents has turned a lot more difficult and challenging. Thus, you must offer amazing employee benefits to retain the best talent pool that can drive your startup.
A cloud payroll software for startups can be of great help here, because a mobile payroll app with its excellent automation functionalities computes accurate figures to be administered as benefits thus, ruling out odds of human errors paving way for redundant and error-free benefits payouts.
Being SaaS based makes it scalable thus, startups don’t have to spend a fortune making it budget-friendly. It eliminates the cumbersome paperwork that goes into filings and benefits administration for your HR and payroll department saving them time and efforts.
Frustrating their Employees with Endless Paperwork
No one likes paperwork and startups are no exception. Yet, a number of businesses are still stuck in ice-age, as they use outdated HR practices or legacy software.
As we are living in the 21st century, gone are the days of asking your employees to filling out forms and email or fax them to the respective departments. Several businesses are making use of payroll software for startups to automate this entire process making it easy for both HRs as well as employees. A mobile payroll app helps a startup to go paperless when it comes to carrying out payroll and other key HR processes.
So these are five signs a startup needs to shun those legacy HR/payroll software or practices and embrace a cloud and SaaS based payroll software now.
Guest post by Anwar Shaikh writes about HRMS solutions and Payroll Software. A self-made, reared-up writer, Anwar is a wannabe Cloud evangelist and has a great penchant for cloud SaaS and automation technologies, SMAC, CRM, ERP and human resources.