Workers' Comp and Payroll

Q: This June our store manager will be taking a two-week vacation for her wedding and honeymoon. The store's payroll would normally be due two days before she gets back, and I'm wondering if it's okay for me to tell the staff that their pay will be a little late. She handles all the bookkeeping and tax filing for our payroll, and I'm afraid I'd make a mess of it.

A: You may not be under any legal obligation to pay your employees on a certain date, but I doubt that they will be very happy about the wait. Often retail employees live from paycheck to paycheck, and the delay could make them late in meeting their obligations. The government will be even less understanding if you are also late filing any of your payroll tax reports. As many as one in three businesses incurs a payroll penalty each year either for tardiness or errors in reporting.

One issue you need to confront is your store's lack of cross-training. What if your manager had suddenly taken ill and missed a payroll deadline? If you don't know how to handle to payroll duties, make sure that your bookkeeper, assistant manager, or another trusted employee knows how to take care of this essential task. Your personnel manager, and indeed all other key full-time staff members, should be able to take a vacation without worrying that they will come back to face a store full of unhappy fellow employees.

The other issue that this situation brings to mind is whether you would be better off outsourcing your payroll. There are many local and national payroll service bureaus that can take your payroll data and convert it into paychecks and tax reports. (Unfortunately you still need to provide the money!). One of the big advantages of these companies is that they stay current with payroll tax laws, which takes that responsibility off your shoulders.

Payroll services also produce the end-of-the-year tax statements required by law, such as employee W-2 forms. Be sure to look into whether there is an extra charge for these services. Outsourcing payroll is usually cost-effective, but surcharges can add up. If you are currently issuing weekly paychecks, you may wish to go to biweekly, since most firms charge per payroll.

Another factor in selecting a payroll service company is their reputation for customer service and reliability. Ask some of your fellow business owners for a recommendation, and for details as to the company's punctuality of payroll delivery, courtesy of telephone staff, etc. You will of course want to hire a company that is experienced and insured. If there are several firms operating in your area, get competitive bids.

Making the conversion to a payroll service bureau can be a bit of a trial, since there is a lot of data to be transferred. But after that is done, you can simply phone or fax in the hours worked by each employee and any payroll changes that have occurred since the last pay period. These services can also track bonuses, overtime compensation, and other pay-related issues. However their output is only as precise and complete as the input you provide. Your in-house method of tracking hours, whether through a time clock or pay slips, needs to be monitored periodically for accuracy.

If you would rather do your own payroll, look into the many payroll software programs available for small businesses. They are especially practical if you only have one or two employees on the payroll. Look for a program that can be updated regularly via the Internet as tax laws change. Have your accountant review your work from time to time, especially your tax forms. There is no room for error in reporting and paying payroll taxes.

Whether you keep your payroll in-house or go with a payroll service bureau, have a trial run with someone other than your store manager handling this duty several weeks before her wedding date. You don't want to add payroll worries to her pre-marital jitters!

Q: Operating a cash register or wrapping a gift doesn't seem like hazardous duty, but my insurance agent insists that I need to provide "workers' comp." Are gift shops really required to have this coverage?

A: Life is fraught with dangers. There is no way of guaranteeing that one of your employees won't trip and fall over a child's toy left on the floor or be hit by a bus on the way to the bank with the day's deposit. Workers' Compensation was originally designed to protect individuals undertaking hazardous employment. That does not, however, mean that retailers are exempt.

The purpose of Workers' Compensation is to provide coverage for medical expenses and compensation for lost income resulting from an injury or illness incurred in conjunction with employment. There is usually a requirement of medical proof of the injury, and of the connection between the workplace and the expenses being claimed.

Workers' Comp is a state, rather than federal, program, so you will need to investigate your state's requirements. Some states require, for example, that any business with more than three employees, or combined gross wages of over $500, provide Workers' Compensation insurance. This coverage is usually purchased through private insurance companies, and can be part of your general business insurance package. On the bright side, as a gift shop owner, you'll get a significantly lower rate than a construction contractor or cattle rancher.