Essential tools for hiring and management

Resources every small business needs to hire, pay, and build a successful culture.

Everything you need to know about hiring employees

Don’t know where to start when it comes to hiring and management? You’re in the right place.

We’ve put together great resources to get you up to speed and compliant for each new hire.

When to hire your first employee

It’s exciting to see your business is growing. We’ll guide you on what you need to know when it comes to hiring your first employee.

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How to not lose your best employees

As you grow your company, you’ll learn that your employees are your most valuable asset. See how these startups keep their teams engaged and happy.

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How to create a culture employees will love

Among the top factors that contribute to employee satisfaction are work-life balance, acknowledgement for great work, and autonomy.

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You just hired your first employee—now what?

Your first employee just signed your offer letter and you’re preparing for their first day.

While you’ll want to concentrate on training and onboarding, you need to take care of legal compliance and operational tasks before your new employee begins.

If you address these four areas before your employee’s first day, you can focus fully on setting them up for success:

Reporting and notice requirements
Policies and procedures
Workers’ rights
Accounting

What to do after you've hired your first employee

Explore the hiring guide

Reporting and notice requirements

It should go without saying that the government wants to know when you’ve hired an employee.

Government reporting requirements include three key areas:

Taxes
Immigration
Insurance

Taxes

Before you pay your employee, you’ll need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service.

The IRS uses your EIN to identify your tax account as an employer. When it was just you running your business, you may have used your personal social security number for tax purposes. Now that you have an employee working for you, this is no longer an option.

Applying for an EIN is free and simple. First, visit the EIN application website. To complete your EIN application, you need some basic information about your business:

Your business’ legal structure (e.g. LLC, partnership, sole proprietor, etc.)
Basic ownership information (e.g. members, shareholders, etc.)
Location of your business
Desired tax treatment (e.g. disregarded entity, corporation, partnership, etc,)
Reason for EIN application (e.g. new business, hiring employees, opening bank account, etc.)
The name and social security number of the responsible party (or EIN if the responsible party is an existing business)
Responsible party contact information
Your business’ principal business activity

Once you submit your application, you will immediately receive your EIN number. A few days later, you will receive a paper confirmation of your EIN.

Alternatively, you can apply for an EIN via mail or fax by completing Form SS-4, but this is a slower process. International businesses can apply over the phone.

The W-4 is another tax form required for each employee. The W-4 helps identify the appropriate federal taxes to withhold from your employee’s paycheck.

Your employee must complete their own W-4 and will need to provide some basic personal and tax information such as:

Full name
Social Security Number
Address
Marital status
Total allowances (the W-4 includes a worksheet that walks the employee through calculating allowances based on information such as the number of dependents and tax credits)
Additional withholdings (additional amounts an employee desires to be withheld from each paycheck)
Tax exemptions
Employer name & EIN
First date of employment

In addition to the W-4, you will use the IRS withholding tables to determine how much to withhold from your employee’s paycheck. The withholding tables guide you, as the employer, on how much to withhold from each paycheck based on your employee’s wage, marital status, and the number of allowances claimed.

Keep in mind, the EIN and W-4 are federal tax requirements. State and local governments typically require similar reporting and withholding obligations.

To ensure you comply with state and local requirements, check with an attorney or accountant in your area.

Immigration

Your first employee should have confirmed the following on his or her job application:

“I represent that I am legally eligible to work in the United States and can provide sufficient documentation necessary to establish my identity and eligibility to work in the United States.”

The above representation is important because the Immigration Reform and Control Act of 1986 (IRCA) prohibits employers from:

Hiring workers not legally authorized to work in the US,

but also,

Prevents employers from discriminating based on national origin or citizenship

If your employee is required to make this confirmation before you hire them, you don’t risk accidentally discriminating against them based on national origin or citizenship after offering employment.

Why?

If a candidate is not legally authorized when he or she applies, you may be in the position to sponsor them through the immigration process. However, if you are hiring your first employee, you likely don’t have the budget or the expertise to navigate the complicated immigration system.

At this point, it’s best to require candidates be legally authorized to work in the US before you consider them for employment.

With eligibility taken care of, you have additional IRCA requirements when your first employee arrives.

Your Employee must complete section 1 of Form I-9. The I-9 is often referred to as an Employment Eligibility Verification form, and it is meant to verify an employee’s identity and eligibility to work in the US.

Both US citizens and noncitizens must complete an I-9.

To complete section 1 his or her I-9, your employee will need some personal information:

Complete legal name
Citizenship or immigration status (e.g. US citizen, lawful permanent resident, foreign national, etc.)
- Registration number for lawful resident or foreign national
- Date authorized to work through if lawful resident or foreign national
Maiden name, if applicable
Address
Date of birth
Social security number
Telephone number or email address (not mandatory)
Authorized documents (e.g. US passport, US passport card, green card, employment authorization document (EAD), driver’s license, social security card, etc.)

For an updated list of acceptable authorized documents, and combinations of documents, review the US Citizenship and Immigration Service (USCIS) Handbook for Employers.

After the employee completes section 1 of the I-9, you as the employer have until the employee’s third day of work to:

Review the employee’s completion of section 1 for accuracy
Verify the documents provided are genuine
Complete section 2

The employee must be physically present when you review the documents.

To complete section 2, you need:

Employee’s full name
Employee’s citizen or immigration status (from section 1)
Authorization documents used
Employee’s first day of employment
Employer’s authorized representative name and title (most likely you)
Business name and address

Keep I-9s and copies of the authorization documents for each employee during his or her employment, and for either; one year after the employee’s termination or three years from the employee’s hire date, whichever comes first.

I-9s are not difficult to complete if you and your employee have access to all of the information. Make sure your employee knows what’s needed so the I-9 completion doesn’t take too much time during your employee’s first few days.

The USCIS keeps a Table of Changes so you can stay up to date with any changes to I-9 requirements.

Unless you are a government contractor, you are not required to use the US government’s E-Verify system to verify the documents your employees provide to prove their eligibility to work in the US. However, many employers use E-Verify as a best practice.

For your first hire, E-Verify might be overkill, but you can learn more and enroll at Homeland Security’s E-Verify website.

Employer Insurance

In most states, employers must pay into state-managed insurance funds that protect workers. The most common include:

Worker’s compensation insurance
Unemployment insurance
State disability insurance

Worker’s compensation insurance

Worker’s compensation insurance covers employees who are injured during the course of their employment.

Worker’s compensation insurance is the most common and the majority of states require employers with one or more employees to carry workers’ compensation insurance. A minority of states don’t require workers’ compensation until a certain number of employees are hired. For example, South Carolina requirements don’t apply until an employer reaches 4 employees.

While worker’s compensation will be a new cost to your business when you start hiring employees, one benefit to the coverage is that in many instances worker’s compensation can prevent employees from suing you in civil court for on-the-job injuries.

To learn more about your state’s requirements, visit the worker’s compensation commission, or comparable state agency website for your state.

Unemployment insurance

Unemployment insurance provides temporary income for workers who lose employment, generally when the employee is not at fault.

You pay unemployment taxes through a joint program between the federal government and the states. Employers are the primary funder of this program.

The individual states administer the funds provided by employers. If an employee is eligible for unemployment, the state will pay unemployment under the prescribed guidelines.

Your unemployment tax burden will change based on the number of your former employees who file and receive unemployment benefits.

The best way to minimize your unemployment insurance exposure is to pay unemployment taxes compliantly for each employee on your payroll and avoid employee turnover as much as possible.

The formulas used to calculate employee benefits, and employer insurance amounts vary by state. Consult an expert in your state for specifics.

State disability insurance

State disability insurance is typically managed in one of two ways:

Employer provides disability benefits to employees directly
Employer pays into a state-managed fund that provides disability benefits to employees

Your responsibility for disability insurance will depend on your state’s elected disability program. It’s best to check with an expert to understand your responsibilities for disability insurance.

Workers’ compensation, unemployment, and disability insurance are the most commonly required policies you need to be aware of before your first employee arrives. However, additional insurance may be required or recommended depending on the nature of your business.

For instance, if you run a professionally licensed services company (e.g. legal practice, medical practice, accounting firm, etc.) you may be required to carry some form of malpractice insurance. If you fall into this type of category, start by checking with your state licensing agency. Such agencies are typically well-versed in insurance requirements and options.

Other common insurance coverages that are recommended for business include commercial general liability insurance, directors and officers’ insurance, employer practices liability, property and casualty insurance, and umbrella insurance policies.

HR policies and procedures

Although workplace policies and procedures are not legally required, most employers create and maintain policies and procedures for multiple reasons:

Set expectations between employee and employer
Prevent unlawful conduct by both employee and employer in the workplace
Resolve workplace conflicts before such conflicts escalate into legal claims
Promote a healthy company culture and communicate company values

Employee handbooks

An employee handbook provides a central location to keep company policies. The handbook gives you the ability to accomplish the four goals listed above and easily update the policies as needed.

Frequent changes in law and your goal to constantly improve your company culture creates the need to edit your policies consistently. It’s easier to update a single handbook than to manage dozens of different documents and manuals.

In the unfortunate event that you face a lawsuit or a government inquiry into your employment practices, your handbook is a solid piece of evidence showing your compliance with the law.

There’s no single recipe for drafting an employee handbook. But, there are some best practices:

Use language that balances professionalism and your company culture
Avoid legalese. Use plain language.
Avoid language that suggests your handbook creates a contract between you as the employer and the employee
Avoid absolutes. Leave discretion for the employer to make decisions based on the situation. For example, a set list of “fireable” offenses suggests that employees can be fired only if they violate the list.
Translate the handbook into the languages your employees, or potential employees, speak (and update as your workforce and geography expands)
List company contacts who can answer questions related to a specific policy
Comply with the current law, and update as laws change
Ensure company policies don’t contradict each other
Create a table of contents and organize subjects and policies by subject matter
Create a tracking system for changes (including dates of changes), so employees can easily see what changes have been made and review changes of interest
Always date the first page with the most recent date of any change
If all employees have intranet access, post the handbook on your internal intranet. If intranet access is not available to all employees, make the handbook available in some method for all employees to have access
Proactively inform employees when changes have been made
Include appropriate disclaimers
- The handbook is not a contract. Employment is at-will
- The employer has the right to modify policies at anything with or without notice
- Policies and procedures are guidelines only, and the employer has the discretion to act outside of procedures and guidelines
Create a process for employees to acknowledge receipt, review, and understanding of handbook

The potential list of policies and procedures is limitless. As your company grows, maintaining a compliant handbook will likely become a future employee’s full-time job.

Here’s a list of common policies that you can find in a modern employee handbook:

At-will employment policy
Equal employment policy
Anti-discrimination policy
Anti-retaliation policy
Disability accommodations policy
Religious accommodations policy
Social media policy
Payroll practices
Compensation policy
Workweek and business hours
Timekeeping
Pay period and payday
Bonus program
Retirement benefits
Sick leave
Vacation policy
Lactation breaks
Meal breaks
Business travel and expense policy
Tuition reimbursement policy
Employee referral policy
Nepotism policy
Attendance policy
Code of conduct
Performance review procedure and policy
Dress code
IT resources policy
Communications policy
Social media policy
Privacy policy
Bring your own device to work policy
Outside employment policy
Non-compete policy
Intellectual property rights policy
Confidentiality obligations
Employee non-solicitation policy
Telecommuting and remote work policy
Flexible work schedule policy
Company car policy
Health and safety in the workplace policy
Substance abuse policy
Drug testing policy
Workplace violence
Employee benefits
Pregnancy and parental leave policy
Bereavement policy
Military service leave policy
Jury Duty leave policy

As long as this list seems, the number of procedures and policies continues to grow in modern workplaces.

But, there’s good news. You don’t need all of these policies in place before your first employee arrives.

You need a basic handbook with some critical policies in place before you hire your first employee.

Some of the policies you should consider for your employee handbook before your first employee comes to work are listed below.

At-will employment policy

Unless you have a compelling reason to hire employees on a contract basis, you will most likely hire your first employee on an at-will basis.

At-will employment means that the employee or the employer may voluntarily terminate employment at any time, with or without notice, with or without cause.

Your offer letters should include the mention of at-will employment. However, to reaffirm the at-will status of your employees, it’s best to maintain an independent at-will employment policy that employees can review.

Many employers go the extra step and add an at-will employment disclaimer to any published company policy. A typical policy disclaimer states that the applicable policy doesn’t create a contract between employee and employer, and reiterates at-will employment:

“Nothing in this policy is intended in any way to create a contract of employment. Each employee is employed at-will and both employee and employer have the right to terminate the employment relationship at any time with or without notice or cause.”

Equal Employment and Anti-Discrimination Policies

Although at-will employment seems to allow you to terminate an employee for any reason, anti-discrimination and workers’ rights laws disallow you to terminate or take any action against an employee, or a potential employee, for protected reasons.

Protected reasons include protected characteristics and protected activities.

Examples of protected characteristics include:

Age
Citizenship
Color
Genetic information
National origin or ancestry
Physical or mental disability
Race
Religion or creed
Sex, including pregnancy
Veteran status

Examples of protected activities include:

Making good faith complaints
Filing lawsuits
Concerted activity (e.g. join a representative organization (union), collective bargaining)
Discuss working conditions
Strike
Request access to personal employee file

The list of protected characteristics and protected activities consistently change. Federal, state, and local governments investigate and enforce laws related to protected characteristics and activities.

Unfortunately, there is no single source to ensure your equal employment and anti-discrimination policies are up to date.

Here is a list of government resources to assist you:

Anti-retaliation policy

Similar to equal employment and anti-discrimination policies, you cannot retaliate against an employee for protected reasons. It’s a best practice to create a separate anti-retaliation policy. Even employers with the best intentions can unwittingly retaliate against employees.

A strong anti-retaliation policy clearly states that your company will not tolerate unlawful retaliation in any form such as discipline, intimidation, change of working conditions, or any other form.

Your anti-retaliation policy should clearly show a procedure for how complaints and protected activity is responded to by your company. The company should follow this policy when responding to any such complaint.

Review an example of how a well-intentioned employer accidentally retaliates:

Employee 1 submits a sexual harassment report against Employee 2. Employee 1 and Employee 2 sit in the same area. After the report, Employee 1 no longer feels comfortable sitting closely to Employee 2.

Because you want Employee 1 to feel comfortable, you offer to move Employee 1 to a new location or let Employee 1 work from home until the matter is investigated and resolved.

Unfortunately, your changing Employee 1’s location could be seen as retaliation. The more appropriate action is to send Employee 2 home until the matter is resolved.

Retaliation is a common claim from the modern workforce. Implement your anti-retaliation policy as soon as possible, and use clear examples like the one above, to train yourself and your employees.

Time-off policy

Did you discuss vacation time with your first employee during the interview process? If you did, did you discuss how to request time off, whether sick days and vacation days are treated the same, and what is considered a company holiday and what isn’t?

Not only is time off expected from employees, but more and more states are also implementing laws that mandate minimum levels of time off.

A clear time off policy ensures legal compliance and sets proper expectations for your employees.

Your time off policy should address all aspects of requesting and taking time off:

Paid time off (vacation, sick days)
Unpaid time off (FMLA, leave of absence, etc.)
Company holidays
Request and approval procedure
Work coverage
Voting
Religious rights
Time off accrual methodology
Bereavement
Maternity/Paternity Leave

As with most policies, clarity is key. Use plain language to describe each element of your time off policies. Any employee or candidate should be able to read your time off policy and understand the circumstances under which he or she can request and take time off.

Employee code of conduct

A code of conduct, sometimes referred to as a business code of ethics, allows you to communicate your business values and expected behavior to your employees.

Through a code of conduct, you inform your employees of what’s expected from them in interactions between each other and with customers, suppliers, and other third parties.

Your code of conduct is more than a mere list of “Don’ts”.

Use the code as an opportunity to state your value system. If you have a mission or value statement, restate it in your code of conduct. Use the code to list behavior that builds towards achieving your mission statement.

Balance expected, positive behavior with strictly prohibited behavior.

Common prohibited behavior includes:

Fraud
Theft
Violence
Bribery
Sleeping at work
Habitual absenteeism
Neglecting job duties

Once you have drafted a code of conduct, it’s best to have an attorney review it. Some business’ codes of conduct have been found to violate protected activity.

For instance, a recent court found that a prohibition on defaming the company disallowed workers from discussing their working conditions (a protected activity). Another court decided that a prohibition against profanity in the workplace chilled workers’ first amendment rights (another protected activity).

But, the courts have found that an employer can prohibit employees from defaming customers or using profanity in front of customers.

These small differences are created, and updated, in the courts. Attorneys can help you stay up to date with where the law stands at any given time.

Additional workplace policies

You likely need additional policies in your employee handbook before you hire your first employee. The exact policies will depend on the nature of your business and the role of your first hire.

If your first employee will travel extensively, a travel and expense reimbursement policy is important.

If your employee will actively use social media in his or her role, a social media policy and bring your own device policy are important to have immediately.

Keep in mind, none of these policies are required by law, but implementing such policies is a strong attempt to keep you and your employees from violating the law.

Workers’ rights

No single definition of workers’ rights exists. There is no one law or government agency that dictates workers’ rights.

But, your workers, including your first hire, have plenty of rights. And It is your responsibility to protect their rights.

Focus on two categories to ensure workers’ rights compliance before your first employee arrives:

Wages
Working conditions

Wages

The Fair Labor Standards Act (FSLA) is the primary federal law governing wages for both full time and part-time employees. The FSLA sets standards for minimum wage, overtime, timekeeping, and more.

To ensure you are paying your first employee in compliance with federal law, you must first ensure that you have classified your employee correctly.

Your first employee will be classified as either exempt or nonexempt under the FSLA.

Employees are presumed nonexempt unless a series of tests qualify the employee for exempt status. You, as the employer, must meet minimum requirements to protect your nonexempt employees’ FSLA rights:

Track time
Pay at least the federal minimum wage
- Your state and local government might enforce a minimum wage greater than the federal minimum wage
Pay minimum overtime rate for all hours worked over 40 in a workweek.

You have the burden of protecting your nonexempt employees’ FLSA rights.

You can include your employees in the compliance process through policies and procedures (e.g. require employees to report all hours worked, disallow overtime beyond certain time limits, etc.); however, the employer ultimately maintains responsibility for wage compliance.

It’s critical to implement compliant time tracking and wage compliance policies before your first hire starts. If you are like many entrepreneurs, you work around the clock and time tracking is the last thing on your mind.

Unless your first employee qualifies as an exempt employee under the FLSA, they can’t be expected to have the same disregard for personal time as you do. If your first employee is exempt, you are not required to track time, pay minimum wage, or pay overtime.

To classify an employee as exempt, the employee must pass three tests for exemption:

Salary basis test
Salary level test
Job duties test

An employee meets the salary basis test if you pay the employee:

On a frequent basis (e.g. weekly, bi-monthly, monthly)
A predetermined amount that includes all or part of the employee’s compensation
An amount that is not subject to reduction based on the quality or quantity of the work performed

Certain deductions are permissible under the salary basis test; however, many deductions are not. Rulings on permissible deductions are frequently challenged in court. Visit the DOL’s Wage and Hour division Fact Sheets for updates.

The salary level test varies depending on the job duties test category (discussed below). For Executive, Administrative, and Professional exemptions, you must pay an exempt employee at least $455 per week to meet the salary level test.

For the Computer Professional exemption, you must pay an exempt employee at least $455 per week, or an hourly rate of at least $27.63.

For the Highly Compensated Employee exemption, you must pay an exempt employee at least $455 per week on a salary basis, and at least $100,000 per year in total.

No salary level test applies to the Outside Sales exemption.

The salary level test became a major source of political tension during the past few administrations. Certain changes approved by the Obama Administration were challenged by the states, and the changes were mostly invalidated under the Trump Administration. To stay current on salary levels, review the DOL’s Wage and Hour division Fact Sheets.

An employee meets the job duties test if his or her role falls under one of six categories:

When conducting the job duties test, you should analyze the duties that your employee actually performs in the course of his or her performance. The job description alone will not qualify for one of the exemptions.

Don’t assume that a particular role meets one of the categories because of the job title. Each of the categories includes specific requirements that must be met in order to qualify for an exemption.

For all details on the job duties categories, visit the hyperlinks in the list above. Below is a brief description of each category.

The Executive exemption applies to business owners who:

Own at least a 20% equity interest in your company, AND
Take an active management role your company

The Administrative exemption applies to employees who:

Perform non-manual work in the management or operation of your company or your customers, AND
Use independent judgment in matters of significance (i.e. a decision maker)

The Professional exemption applies to employees who are:

Learned professionals (advanced knowledge and instruction in a field of science or learning), OR
- Examples include lawyers, accountants, engineers, architects, teachers, scientists, pharmacists
Creative professionals (requires invention, imagination, originality, or talent)
- Examples include actors, musicians, conductors, illustrators

The Computer professional exemption applies to:

Perform non-manual work in the management or operation of your company or your customers, AND
Use independent judgment in matters of significance (i.e. a decision maker)

Computer systems analysts, OR
Computer programmers, OR
Software engineers, OR
Other roles with duties similar to the above-listed

The Outside sales exemption applies to employees who:

Make sales, AND
Take orders or make contracts for orders, AND
Regularly work outside of your business office, AND
Do not make sales only by mail, telephone, or internet

The Highly Compensated Employee (HCE) exemption applies to employees who:

Meet the HCE salary level test mentioned above, AND
Perform non-manual work, office work, AND
Regularly engage in administrative, executive, or professional tasks

The job duties categories are broad in title, but specific in practice. Visit the DOL’s Wage and Hour division Fact Sheets and consult an expert if you think your first employee might be exempt under the FLSA.

Working conditions

Working conditions is a broad category that includes the many areas outside of wages where you must respect your workers’ rights. You should focus on compliance in two areas of working conditions when readying your business for its first employees:

Workers’ rights to associate and discuss working conditions
Workers’ safety

Workers’ rights to associate and discuss working conditions is not likely a concern for your first employee. These topics deal mainly with employees’ rights to negotiate better working conditions, form and join unions, strike, and participate in other activities common to large workforces.

While these issues won’t affect you as you prepare for your first hire, you do have some compliance responsibilities regarding these protected activities. Your main responsibilities in this area are to ensure your employees know their rights through posting required signage at your office.

QuickBooks Labor Law Poster Service helps automate your signage obligations. The QuickBooks service creates initial signage and any updates needed when laws are amended.

The service addresses notice requirements for both federal and state law.

The Occupational Safety and Health Administration (OSHA) is the primary government agency protecting worker safety.

As a small business employer, you may have heard that OSHA jurisdiction doesn’t apply to you until you have 10 employees. This is not always this case.

There are some narrow exceptions in certain industries and certain reporting requirements for businesses under 10 employees. However, OSHA generally has jurisdiction over all businesses.

Your OSHA responsibilities will vary depending on the nature of your business. A financial services firm working out of a traditional white collar office space will have drastically different safety requirements than a manufacturing facility.

If your business activity exposes employees to any type of safety hazard, it’s best to seek expert guidance.

Regardless of industry, use two guiding principles from the OSHA duties clause when considering safety in your workplace:

Provide your employees with a work environment that is free from recognized hazards that are likely to cause death or serious physical harm; and
Comply with occupational safety and health standards

Accounting

Once you address the legal and regulatory issues of hiring that first employee, you must consider the accounting process required to pay employees. This section starts with some rules of the road for payroll recordkeeping, then provides a step-by-step process for calculating and paying workers.

If you add employees to support company growth, the accounting process becomes more complicated. As your firm grows, you may add worker benefits, such as health insurance and retirement plans. This discussion wraps up with a look at benefits, and how you can use a procedures manual and outsourcing to manage payroll complexity.

As you read through this section, consider how you’ll manage these processes in your own business.

Recordkeeping basics

In order to generate accurate accounting data, you need to create some basic systems. Every owner should keep business records separate from personal transactions, and you should have a separate bank account for your business activity.

One effective tactic for growing your business is to automate as many routine tasks as possible, including your payroll process. Finally, you need to understand the key components of payroll processing.

Business vs. personal activity

It’s critically important to separate business from personal transactions and to take this step from the moment you start your company. Here are some reasons why:

Legal liability: Some business structures, such as a C corporation, allow you to set up a business entity that is separate from you as an individual. This distinction is important, because you may be able to protect your personal assets from a lawsuit involving your business. If your personal and business records are not carefully separated, this legal separation may not apply. Consult with an attorney on this issue.
Management, taxes: Business owners use accounting data to make informed decisions, such as how to set a price for a product, or how much cash a company needs to operate. If a personal activity is mixed in your business records, you don’t have accurate data to make decisions. You also need an accurate set of company financial statements to prepare your business taxes.
Investors, purchasers: If you decide to bring in another investor, or you want to sell your business down the road, you’ll need to provide financial statements that exclude all personal transactions.

Start your business on the right foot by excluding personal transactions. Using accounting software makes this process easier as all of the accounts in your software will be business-related. As a result, you’re less likely to post a personal transaction to a business account.

Finally, keep your business records in order by using a separate business bank account.

Why automate?

Business growth is exciting.

Getting a new client or signing a contract with a new customer is satisfying, and it validates your business approach. However, business growth makes operating your business more complex. As you add customers, you’ll generate more invoices, spend more money, and post more accounting transactions.

It’s tempting to use the same processes to operate your company as you grow, but those same systems may not be effective over time. This is a big issue for business owners that hire employees and must deal with payroll. As you’ll read below, accounting for payroll is complex, and the tax laws change frequently.

If you use Excel to post your accounting records, you’ll quickly find that spreadsheets are not sufficient for handling payroll. Using Excel is time-consuming, and you’re far more likely to make a posting error. There’s also the risk of losing your files or using the wrong version of a particular file.

When you hire that first employee, you should strongly consider using accounting software to process payroll. To grow your business successfully, you need to automate as many routine tasks as possible, including payroll.

How payroll works

Processing payroll boils down to four steps:

Data collection: You must collect information from your new employee, including tax information. Collecting data is the first step.
Withholding amounts: Employers are required to calculate and withhold federal and state taxes, and other amounts from payroll.
Pay employees: After withholdings are calculated, you pay employees.
Reporting and forwarding payments: The last step in payroll is to forward taxes and other amounts withheld to the correct entity, and to report the amounts to each entity. If $200 in federal taxes are withheld from a worker’s pay, that $200 must be sent to the IRS, and properly reported.

Now that you understand the basics of the process, consider a specific example of payroll processing.

How to do payroll

Assume, for this example, that Julie, the owner of Hillside Landscaping, hires Joe to be her office manager. Joe’s job is to take on many of the tasks that are not directly related to Julie’s landscaping work. Joe answers calls from customers and prospects, handles the mail, and buys supplies with Julie’s approval, among other tasks. Hiring Joe allows Julie to maximize her time providing landscaping work for customers.

Joe’s salary is $52,000 a year, and Julie decides to pay Joe every other week, or 26 times a year. As a result, Joe is paid $2,000 in gross wages each pay period.

Employee decisionsJoe completes the W-4 form and makes decisions regarding federal tax withholdings, and he completes a similar document for state tax withholdings. Julie uses tax tables to calculate Joe’s withholding for federal taxes, and she consults her state department of revenue’s tax tables to compute Joe’s state tax withholdings.

Calculating withholdings

To keep the math simple, assume that Julie computes a 20% withholding for federal taxes and 5% for state taxes.

Employers must also withhold the worker’s share of FICA taxes from payroll. FICA taxes are withheld to fund Social Security and Medicare, and the current tax rate is 7.65% for both the worker and the employer. Julie, the business owner, will also pay 7.65% for FICA, and the employer contribution as a business expense.

The formula to compute Joe’s net pay for the first payroll period is ($2,000 gross pay – $400 federal tax withholdings less $100 state tax withholdings less $153 FICA tax= $1,347 net pay).

Processing payroll

The details of the payroll calculation are posted as an accounting journal entry. A journal entry collects all of the important information for a particular transaction, and the data from each journal entry is used to create the financial statements.

Here is Julie’s journal entry to calculate Joe’s net pay on the first pay date:

How to do payroll manually: table of calculations

You’ll note that the journal entry uses debits and credits, and that the journal entry includes the date and an explanation of the entry (to pay payroll). Note the following:

Wage expense: The $2,000 in gross wages is a company expense, and expenses are increased with a debit.
Withholdings: Hillside Landscaping withholds taxes, and each amount withheld must be submitted to a taxing authority. Until the payments are sent, these amounts are a company liability, and liabilities are increased with a credit entry.
Net pay: The difference between gross pay and the withholdings is net pay, and cash is reduced (credited) to pay the worker.

This type of journal entry is posted on each payment date.

Reporting and paying taxes

The amounts a business withholds from gross pay must be sent to each taxing authority, along with a report that states the amounts and employees who are paid during the period. These payments can be challenging, because the different entities may require payments on different dates. You may have to report and submit payments annually, quarterly, monthly, or even weekly, depending on the type of withholding, and the dollar amount. To determine the correct payment schedule, you need to consult the IRS (federal tax and FICA tax) and state department of revenue (state tax) websites.

To keep things simple for this example, assume that the three amounts withheld are paid on March 15th. Here is the journal entry for paying the amounts withheld:

How to do payroll manually: calculating withholdings

The liability accounts are reduced with debit entries, and cash is reduced by posting a credit entry.

It’s important that every withholding amount is paid on time, because your business may incur late fees and penalties for late payments.

Year-end reporting

Each taxing authority (federal, state, FICA) requires an employer to report the total amounts submitted for the year. Hillside Landscaping will issue Joe a W-2, which lists the total dollar amounts withheld for payroll during the year.

Keep in mind that reporting and paying the correct amounts has a direct impact on your employee’s personal tax return. Joe, for example, will use the total federal taxes withheld by Hillside Landscaping when he prepares his tax return. If the total federal taxes withheld on the W-2 do not match the dollar amount Hillside submitted to the IRS, Joe’s tax return will be incorrect.

Make sure that you carefully handle payment reporting, because generating a tax problem for a worker may damage your relationship with your valued employee.

Managing complexity

As you grow your business, you’ll have to face several issues that make processing payroll more complicated. First, realize that payroll will become more complex simply by hiring more people. If Julie staffs up to five employees, for example, she must collect data, calculate withholdings, pay, and report taxes on five people 26 times a year. Hillside must generate five W-2s at year end, and submit tax payments for each worker.

How complicated would Julie’s payroll and accounting be for 50 workers?

As Julie adds to her staff, she may want to start offering benefits as an incentive to retain valuable workers. Two common types of benefits are health insurance and retirement plans.

Finally, to manage the growing complexity of payroll, a business owner needs to leverage technology and hire experts.

Adding employee benefits

Most employer-provided health insurance plans require that the employer and the worker each pay a portion of the insurance premiums. Just as with FICA taxes, the employer-paid portion of the insurance coverage is a business expense.

Premiums paid by workers must be part of the net pay calculation and withheld from the payroll. The employer must submit the premium payments to the insurance company, along with a report of the worker names and amounts paid.

In a similar way, retirement plan funding may include company contributions and dollars contributed by the worker. Offering a retirement plan adds another step to the net pay calculation, and to a company’s accounting and payroll reporting process.

Preparing for growth

To avoid a huge investment of time in the payroll process, smart business owners must prepare for growth, using these resources:

Procedures manual: Your business should have a written procedure manual for every routine task that you must complete every month, and that includes payroll processing. Your manual should include each step of the process, who performs each step, and access to the records needed to complete the work.
Accounting software: Find accounting software that is user-friendly, and a system that is designed to handle your business needs as you grow over time.
Payroll company: Many companies, even businesses with just a few employees, use a third-party payroll service for a portion of their payroll processing. For example, you may use an outside firm to submit direct deposit payments to each of your employees. A payroll company can also provide updates for changes in federal and state payroll tax laws.

Set yourself up for growth by writing a formal procedures manual, purchasing accounting software, and by considering the services of a payroll company.

Conclusion

Just about every business owner must hire employees to grow a company over time, and hiring your first worker can be exciting.

Before you take the plunge and hire staff, think carefully about the topics covered here. You need to plan for hiring so that you properly address the related legal and accounting issues. Follow these steps to hire that first worker and to increase your sales and profits.

You’ve got this!

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How to write an employee handbook

By Ken Boyd September 12, 2019

Do your employees understand the rules of the road?

As a business owner, you need to explain your company policies and procedures to your staff. Your team members need to know what is expected of them, and what they can expect from you. If you handle these expectations properly, you can avoid misunderstandings and limit any potential legal liability.

The best way to explain the rules of the road is to create an employee handbook, which documents your company’s policies, procedures, and expectations. This discussion explains why a handbook is important, how to start writing the document, and what your employee handbook should include.

Why it’s important

Is writing an employee handbook really that important?

If you communicate frequently with your staff, and your workers perform well and seem to be content, you may decide that writing a handbook isn’t necessary. After all, creating a handbook is time-consuming.

Operating your company without that handbook, however, is a mistake. Here are some of the benefits you’ll gain by writing an employee handbook:

Vision and mission: Your handbook should include your firm’s mission statement, which is your description of where you are headed as a company. If your staff understands your mission statement, they may feel a stronger bond to your company, and be more passionate about the work.
Supervision: The handbook makes employee supervision more transparent because the handbook explains the rights and responsibilities of both the worker and the employer. Everyone in the organization can refer to the handbook to make informed decisions about workplace behavior.
Productivity: If you discuss the employee handbook with each new hire, you’ll speed up the onboarding process, and help new employees to work productively. When you provide clear guidelines using a handbook, your new staff members will start work with more confidence.
Discipline: Many business owners dread the prospect of confronting an employee who makes a serious mistake. To minimize confusion on both sides, you should clearly state your disciplinary procedures in the handbook. Disciplining a worker is stressful, but implementing the procedures stated in the manual will make the process less difficult for both parties.

The handbook should also explain the benefits you offer employees, which can be a powerful incentive to retain workers over time. A handbook helps your business comply with federal, state, and local laws and should provide a confidential system that workers can access if they believe a policy or law has been violated.

Perhaps most important, operating with an employee handbook may reduce your legal liability. If you consistently follow the policies and procedures stated in the manual, each employee will be managed using the same set of rules. This practice can reduce your legal exposure if a worker brings a legal action against you. Consult with your attorney on these issues.

How to start

Once you understand why an employee handbook is important, how do you start the writing process?

Most business owners create company policies as they run the business. You may, for example, have a process workers use to request time off. You’ve emailed a memo that explains the policy, but the information is not in a formal employee handbook.

You’re not starting the writing process at zero, because you’ve already created some policies.

Here are some steps that you can take to start the writing process:

Google search: Perform a Google search to find an employee handbook template that applies to your industry. If you Google “employee handbook restaurant”, for example, you’ll find templates for restaurant owners. The template that you find can help you understand what topics to include.
Outline: Once you find a template, outline your employee handbook topics, using the template and your own management experience. For example, a restaurant owner must manage a large number of workers and deal with employee turnover, so the employee handbook must focus on hiring and termination policies.
Clear language: After you outline the handbook and start writing, use clear and simple language. Avoid using jargon, so that your staff can understand your policies, and provide links to more complex topics, such as laws and regulations. While a clearly written handbook will minimize questions, encourage your employees to ask questions if a policy isn’t clear to them.

You should meet with each new worker, either in person or online, to discuss the employee handbook, and each new worker should sign an acknowledgment that they received a handbook. This documentation will help to protect your firm if you must terminate an employee for violating a policy in the handbook.

Make sure that the employee handbook can be easily accessed online, and update the handbook as policies change.

What to include

Your firm’s employee handbook is a reflection of the type of business you want to operate, so take the writing process seriously. The handbook sets the tone that you want to establish with your staff, and a well-written handbook makes the supervision process much easier for you and your employees.

Here are some important considerations for your handbook:

Safety: Worker safety is your first priority, so begin your handbook by explaining how your firm will deal with an employee injury, a crime (robbery), or a natural disaster (flood, fire). Each of these events is stressful, and your workers should understand how your company would address these types of issues.
Expectations: The handbook is your opportunity is set expectations, and you should include all relevant policies. For example, what’s your policy regarding cell phone use during work hours? Where should employees take their lunch break? State your policies in writing.
Attorney review: Your handbook must address a variety of employment and legal policies, including overtime pay, workplace harassment policies, and other issues. An employment attorney should review your manual, to ensure that you’ve complied with federal, state, and local laws and regulations.

As you grow your business and hire more workers, you’ll need to add to and change your employee handbook. Remind your staff that an updated version of the handbook can always be found online.

Don’t wait

Make the commitment to create an employee handbook sooner, rather than later. Your handbook will make it easier to manage your staff, and the document will reduce your potential legal liability. Make the effort- you got this!

Employee compensation and benefits: the complete guide

By Katey Maddux September 12, 2019

When it comes to employee compensation, there isn’t a one-size-fits-all solution. The right plan will not only motivate your workforce, but it will also align with your business goals and profitability.

So what is compensation? Is it just monetary? Are benefits included in the definition?

In my experience, both in the corporate (salary) and retail (hourly) space, an employee compensation plan encompasses salary or hourly pay and any benefits added to the package.

How to find a balance between employee pay and benefits

Companies often feel they can justify a lower salary or rate if they include a more robust benefits package. These can range from monetary benefits (like extra paid time off, holiday pay, and parental leave) to lifestyle benefits (like flexible working hours, the ability to work from home, a pet-friendly working environment, etc.).

Some of this is likely due to a generational shift in what employees are really looking for. For post-Depression-era baby boomers, the security of a steady salary is important. Many millennials, however, are more focused on work-life balance and lifestyle plans, valuing more vacation or the freedom to work from home.

What are the most popular types of compensation packages?

Employers have to think about who their target employee is and what that employee is looking for. Are they just trying to pay their way through college? If so, an hourly rate with a flexible schedule could be more attractive. If they’ve just started a family, they may be looking for benefits like parental leave and the chance to work from home. It’s critical for employers to keep this in mind when deciding between different types of compensation packages.

The ten different types of compensation packages include:

Straight salary

This type of compensation refers to a set annual amount, divided by the year’s pay periods to get a pay rate weekly, every two weeks, or monthly. There is no additional performance or sales-based income added to the employee’s compensation.

Salaried workers who earn more than $23,660 per year are considered “exempt” under the Fair Labor Standards Act (FLSA). Therefore, employers are not required to pay overtime if employees work more than 40 hours per week. As a result, salaried workers often don’t track hours worked. A job like this is more likely to have flexible working hours or the ability to work from home.

Who’s using straight salary compensation?

Straight salary compensation plans are ideal in industries where the normal structure does not involve (and might even prohibit) direct sales. Companies with employees who work in teams, spend a lot of time on projects, or whose performance is difficult to measure might also be better suited for straight salary compensation.

Teams in human resources, graphic design, or other supportive departments will often use straight salary compensation. Companies looking for long-term growth as opposed to short-term sales may opt for this type of compensation as well. It can also be beneficial if a firm is entering a new market or location.

Benefits of straight salary compensation

Companies looking for a simple or consistent payroll solution without any surprise payroll expenses will likely build their compensation offering around straight salaries. Employees who like to work on teams and don’t want their compensation to be judged on individual performance may be attracted to this kind of plan as well. Straight salary offerings can also be good for attracting new talent that’s concerned with stability.

Disadvantages of straight salary compensation

Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees don’t see opportunities to increase their pay. Since there are no (monetary) incentives to work harder, a non-competitive environment may tempt employees to become complacent, limiting the company’s growth. It could be difficult to attract top performers who know they can make more in a job that rewards their work with a more commission-based pay structure.

Of course, there are exceptions to every rule. Salaried individuals who earn less than $23,660 per year often qualify for additional compensation, including overtime pay, per the FLSA’s standard for non-exempt salaried employees. In this situation, employers have to pay overtime, despite the employee being salaried. Laws differ by state, so do your research before making any decisions.

Salary plus commission compensation

Salary plus commission is a balance of both stability and performance-based income. Similar to straight salary, this compensation structure offers employees a guaranteed base income annually, but also offers performance-based income in addition, unlike straight salary.

The commission can include (but is not limited to) a percentage of personal sales, a percentage of team sales, bonuses, or overtime pay. These plans often include a straight salary income for training periods or during low seasons. A good salary plus commission plan will motivate employees to higher sales and performance while giving them the peace of mind of regular, stable income.

Who’s using straight salary plus commission compensation?

Salary plus commission plans are often used for sales positions or corporate positions when the company wants to encourage leaders to push for substantial growth and high performance. It is critical that companies using this type of system have good metrics in place for tracking sales so they can fairly and accurately calculate commissions.

Benefits of salary plus commission compensation

One benefit, from the employer’s perspective, is the company only pays commissions when the top line improves, so it’s beneficial from a profitability standpoint. The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. Employees like it because it rewards those who work hard. Many appreciate the fallback stability of the base salary paired with performance incentives.

Disadvantages of salary plus commission compensation

From a payroll standpoint, this type of compensation is harder to administer. There may be multiple rates of bonuses and commission, and payroll managers must have a system in place to keep track of everything. Employees may be confused as to how pay is calculated, so transparency is important. One thing to keep in mind: If the commission rates are too low, they may seem disingenuous and could decrease morale or cause bitterness among employees. The key to this type of plan is to offer enough stability that employees feel satisfied and secure but to pair that salary with a commission that motivates stellar performance.

Straight hourly compensation

This type of compensation refers to a set hourly amount without additional performance-based income. Employees who receive it are considered “nonexempt” by the FLSA, meaning their compensation is regulated. One regulation is employers are required to pay overtime at a rate of time and a half if an employee works over 40 hours in one week (this is a U.S. standard and differs by country). Employers are also required to pay employees the minimum wage, which can vary depending on their state’s minimum wage.

Who’s using straight hourly compensation?

This type of compensation is often used for entry-level jobs or employees working in restaurants, retail, or the service industry, usually in non-management roles.

Hourly roles can often be perceived as less valuable or easier to replace. Because so many hourly employees work in entry-level positions, education requirements are usually lower than those of salaried positions, which adds to this assumption.

Benefits of straight hourly compensation

For employers, hourly employees can be a good option for work that fluctuates seasonally. Employees need not be scheduled for the same number of hours each week. Running payroll for hourly employees, as opposed to salaried employees, can also be significantly cheaper, making it easier for companies to hit financial goals. Employees who also have seasonal or fluctuating availability, like students or people with children, also benefit from the flexibility that comes from hourly compensated positions.

Disadvantages of straight hourly compensation

It’s worth noting that inconsistent working hours can also hurt employees who may be counting on a consistent income. This can lead to high turnover, a need for more recruitment resources, and higher training costs—all of which cuts into potential bottom-line savings.

Another disadvantage is that hourly employees often have fewer benefits than salaried employees and are sometimes required to contribute more toward their health insurance premiums. They may have less vacation time or even zero paid vacation time.

Employers who pay by the hour should focus on increasing morale and showing employees they are valued in order to avoid turnover. For more information on your state’s minimum wage requirements, read up on minimum wage requirements or visit the Department of Labor’s website.

Hourly plus commission compensation

In this compensation structure, the employee receives a set hourly rate, plus a percentage of their sales. The hourly rate can be less than the required minimum wage. However, if the employee’s commissions, plus their hourly rate, are together less than the minimum wage, the employer is required to make up the difference. Similar to hourly employees, workers who are paid with this type of compensation are usually governed by the FLSA’s nonexempt requirements and earn overtime.

Who’s using hourly plus commission compensation

Such positions might include retail sales, restaurant employees, barbers and cosmetologists, and customer service reps. Employers may use this type of compensation to keep payroll expenses low while still motivating employees to perform.

This compensation category also includes restaurant employees paid mostly in tips. Defined by the FLSA, “tipped employees” are those who receive more than $30 per month in tips. Tips may be considered part of the employee’s wages, but the employer must pay no less than $2.13 an hour in direct wages and make sure that the amount of tips received is enough to meet the remainder of the hourly minimum wage.

Benefits of hourly plus commission compensation

Employees who are self-motivated and hardworking are attracted to this type of work because there’s typically no upper limit to the amount in tips or commission they can take home. Some of these jobs also have flexible schedules, which can be beneficial to employees. In addition, employers also enjoy the flexibility of being able to increase or decrease employee hours seasonally or to reflect sales growth.

Disadvantages of hourly plus commission compensation

Hourly plus commission compensation does have its disadvantages as well. Because employee base pay is often low (employers can pay as low as $2.13 hour, which means the entire paycheck can go to taxes or withholding), making a livable income can be tough without significant sales. And while some competition in the workplace is good, this kind of motivation to not only succeed but to survive can sometimes breed distrust and a lack of camaraderie.

Commission-only compensation

Territory volume compensation

Profit margin/revenue-based compensation

Residual commission compensation

Contractor commission compensation

This is a very broad category of compensation. As defined by the IRS, independent contractors are people who “are in an independent trade, business, or profession in which they offer their services to the general public.” Employees and independent contractors are mutually exclusive, as a person is either one or the other.

Per the IRS website, the general rule is that “an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to self-employment tax.”

This is a very important distinction, as it determines who pays the taxes (the worker, not the employer) and to what standard an employer is held.

Who’s using contractor commission

The independent contractor category is broad and includes everything from lawn services to sales to doctors and lawyers.

Commission for independent sales reps can range from 5% to 40%, with the average ranging from 20% to 30% of gross margins or 7% to 15% of gross sales. Factors that might affect commission rates include the difficulty of the sale, education and training required, costs associated with the geographical location, work environment, the process of approaching clients, and bonus structures (if applicable).

Benefits of contractor commission

Working as a contractor definitely has its benefits. Per the IRS definition, the contractor is in control of how the work gets done, so there is a lot of freedom. Contractors can determine their own fees, working hours, employees, etc. Additionally, they have full control over benefits like insurance and retirement management. Because they are self-employed, contractors are eligible for SEP IRAs. These have a significantly higher (pre-tax) contribution limit than company IRAs.

Disadvantages of contractor commission

In the same vein, contractors are not subject to withholding and are therefore responsible for their own taxes (the self-employment tax). Since no one is taking out taxes for them, it is up to the contractor to budget and remit taxes quarterly to prevent a fine and a huge tax bill at year-end (April 15). Another disadvantage is the lack of benefits. Contractors are required to find health insurance and retirement plans on their own.

Hourly vs salary

Depending on a company’s compensation strategy, there are both pros and cons for hourly versus salaried employees.

Pros of hourly compensation for employees

Overtime and holiday pay
The freedom to change work schedules in accordance with other schedules
The opportunity to work more hours to make more money
It’s often easier to get a new job if the current one isn’t a good fit

Cons of hourly compensation for employees

Hours can be inconsistent
Lack of security
Generally lower pay
Fewer or no benefits

Pros of hourly compensation for employers

Employers can increase or decrease hours based on heavy or slow seasons
Depending on how many employees are on the payroll, employers may not be required to provide benefits, including health insurance or PTO
Often lower payroll costs

Cons of hourly compensation for employers

Payroll can be more complex and difficult to calculate if using multiple rates
High turnover
Increased training and hiring expenses (as a result of high turnover)

Pros of salary compensation for employees

Consistent hours and income create more security
Better benefits
Often more flexible working hours
Often more opportunity to work from home

Cons of salary compensation for employees

If working for a straight salary, better performance doesn’t constitute higher pay
No monetary incentives to work harder
Switching between jobs can be more difficult, as there’s often a more intense hiring process

Pros of salary compensation for employers

Consistent payroll workload and expenses
Often higher retention rates
Salaried employees can be more loyal than hourly employees
Often a higher level of talent or education

Cons of salary compensation for employers

Payroll expenses are fixed, even if profitability decreases
Hiring can be more complex
It can be more expensive to attract top talent

Why employee classification is so important

The Department of Labor has very specific requirements for classifying and paying employees. Before making any decisions, consider what type of compensation you can offer potential employees and what the stipulations of that compensation plan are.

To ensure proper classification, employers should begin with the assumption that their commissioned employees are nonexempt, and then review the potential exemptions to determine whether they apply. The most common exemptions are executive, administrative, and professional exemptions. In fields that typically involve commissions, the outside sales exemption and the retail sales exemption may also apply.

Small business employers say they care about employees like family

8 in 10 business owners say they care about their employees like family. And they equate new hires to new family members, according to the latest QuickBooks Payroll survey.* Many employers are willing to do a lot to ensure their employees’ happiness, livelihood, and well-being in attaining a work-life balance.

Employers’ motto: Sharing is caring

2 in 5 employers say they’d share their winnings with employees if they won the lottery. Some are even willing to donate an organ if it means helping an employee in need.

But it’s also about the little things. 8 in 10 treat their employees to a combination of meals, snacks, and gift cards.

Employers celebrate employees’ personal milestones

Half of employers say they make an effort to know and celebrate their employees outside of their job duties. How do they do it?

They never forget their employees’ birthdays.
They know the names of their employees’ children and pets.

Employers want employees to achieve a work-life balance

4 in 5 employers care about their employees’ financial health. 1 in 3 would take a pay cut to avoid layoffs.

Concerns go beyond professional well-being.

3 in 5 employers encourage their employees to take a personal day off when needed.

More than half of the respondents have done personal chores and run errands for their employees.

Employers know getting things right is key

Accurate payroll is a common struggle for small business owners. And they stress over how it might affect their teams.

63% worry about how late or inaccurate payroll could impact their employees.
31% worry about the possible penalties from filing late or inaccurate payroll taxes.

Employers want help beyond payroll

1 in 2 employers is not confident about hiring on their own. 1 in 3 is worried about hiring the wrong person for the job.

2 in 5 employers worry about losing their best employees because they cannot offer better benefits.

Another 3 in 5 wish they had more time to make their employees feel appreciated and invest in their professional development.

As a small business owner, you should have complete confidence when taking care of your work family. QuickBooks Online Payroll helps you do that with:

Auto payroll¹
Same-day direct deposit²
Automatic tax deductions and filing
Integrated time tracking
HR advisory³
Employee health benefits
Workers’ compensation

Keeping your work family happy may be hard. But just like family, it’s always worth it.

Full survey results

How long have you owned or operated your business?

41.97% have owned or operated their business for more than 8 years.

Which of the following is true about you? (Check all that apply)

80.65% say they care about their employees like family.

Have you ever surprised your employees with one of the below? (Check all that apply)

84.42% say they have surprised their employees with lunch.

How many times per week do you share a meal with your employees?

Which of the following are true about you? (Check all that apply)

80.98% say they care about the financial health of their employees.

Which of the following are true about you? (Check all that apply)

40.81% say they worry about losing their best employees because they cannot afford to offer enough benefits.

Healthy employees are more productive employees.

Which of the following are true about you? (Check all that apply)

70.81% care as much about the personality of a new hire as they do about their skill set.

Hiring a full-time employee is like adding a new member to the family?

Which of the following are true about you? (Check all that apply)

63.28% worry about late or inaccurate payroll because it would impact their employees negatively.

*Methodology: QuickBooks Payroll commissioned Qualtrics to survey anonymously 610 adult business owners in the U.S. with internet access. Respondents were rewarded for their participation. The survey was conducted in November 2019, and the margin of error is ±5 percentage points. The margin of error is higher for subgroups.

QuickBooks Payroll welcomes the re-use of this data under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium provided the original source is cited with attribution to “QuickBooks Payroll.”

¹Auto payroll is available if setup for employees and the company are complete, all employees are salaried employees, all employees are set up on direct deposit, bank verification, e-services is enabled, all employees are located in the same state and the company is not a multi-state company, and the account has not been on hold in the last 6 months.

²Same-Day Deposit available to QuickBooks Online Payroll Premium and Elite users. Payroll processed before 7AM PST shall arrive the same business day (excluding weekends and holidays). Requires setup of direct deposit and bank verification. Same-Day direct deposit may be subject to eligibility criteria. Deposit delays may vary because of third party delays, risk reviews, or issues beyond Intuit’s control. Same-Day Deposit available only for employees.

³HR support is provided by experts at Mammoth, Inc. See Mammoth’s privacy policy and Terms of Use. HR Support Center available only to QuickBooks Online Premium and Elite subscriptions. HR Advisor support only available in QuickBooks Online Payroll Elite. HR support is not available to accountants who are calling on behalf of their clients.

⁴Health benefits are powered by SimplyInsured and require acceptance of SimplyInsured’s privacy policy and Terms of Service. Additional fees will apply. SimplyInsured does not offer insurance in HI, VT, and DC. Insurance coverage eligibility is not guaranteed, and dependent solely on the rules of insurance carrier. The insurance carrier has sole and final discretion as to the eligibility for health insurance products.

⁵Workers’ Compensation Service is provided through an insurance policy by AP Intego Insurance Group, and it requires a paid Intuit payroll subscription.