Having a properly structured payroll policy is important for any business in California. It is more than just paying your employees; it is also about fairness, compliance, and transparency. A payroll policy outlines how you handle payments. It also helps retain employee satisfaction as they know how, when, and why they are paid. 

However, payroll is not always straightforward. Properly classifying employees and managing deductions while ensuring that you do not defy the law can be challenging. This is where a Newport Beach accountant can be of great help. 

Things to include in your business’ payroll policy

Payroll Schedule

A payroll schedule is a plan that determines when the employees will get their paychecks. It is used to determine the pay periods, whether weekly, bi-weekly, or monthly. It specifies the exact day of the week or month when payments will be made to the employees, such as the last Saturday of the month. 

Methods of payment

Employees have the right to choose their method of payment. Common payment methods include direct deposit, where employees’ wages are automatically deposited into their bank accounts; paper checks for those who prefer a physical form; and pay cards in some situations. 

Employee classification

Employee classification is important to determine which benefits an employee is eligible for. For example, full-time employees are eligible for health insurance, while part-time workers are not. The policy should also describe overtime eligibility and determine which employee can qualify for overtime pay and in what situation.

Timekeeping procedures

It is important to track employee hours to ensure fair pay accurately. The policy should establish ways of time tracking, such as using time clocks, special software, or manual logs. Employees must be instructed to report their hours correctly.

Deductions and withholding

Employees must be aware of their rights regarding their deductions. The payroll policy should clearly state the mandatory deductions, such as federal and state taxes, Social Security, and Medicare contributions, and voluntary deductions, such as health insurance and retirement contributions. 

Overtime and holiday pay

=The payroll policy must establish the eligibility criteria for overtime. This includes the definition of overtime hours, how they are calculated, and how the employees would be compensated. It should also state how employees will be paid for working on holidays.

Sick leave, vacation, and PTO (Paid Time Off)

The policy should clearly state guidelines for sick leave, vacation, and Paid Time Off. It should also mention the requesting process for these leaves and the expected approval time.

Payroll corrections

Mistakes do happen. Therefore, there must be a proper procedure for reporting these payroll errors. The policy should determine the timeline for correcting mistakes and how retroactive adjustments will be handled if necessary. 

Termination and final pay

The policy should clearly state how quickly employees will receive their final paycheck after they leave the company. It should also explain how any unused vacation will be paid out to the employees and what happens to benefits, like health insurance after they leave the company.

Compliance and legal considerations

The payroll policy must comply with all the rules and regulations established by federal, state, and local payroll laws. The policy should also adhere to tax regulations and employment laws, including the Fair Labor Standards Act (FLSA). Noncompliance can result in consequences such as penalties or fines.

Policy updates and revisions

To keep the policy up to date, it should define how often it will be reviewed and who will be responsible for this task. Moreover, if any policy changes, the employees must be sent an urgent notice to ensure they remain updated with the latest regulations.

Ensure proper payroll today!

When you are setting up your payroll policies, it is good to have an accountant working with you. With their expertise, you can establish an efficient payroll policy that includes everything. Consult with an accountant in Newport Beach today!