Managing payroll, compensating employees, and rectifying errors can result in substantial expenses for businesses. Often, it proves to be the largest one. Nevertheless, there are effective ways to curtail payroll-related costs without compromising employee salaries or resorting to layoffs. Explore the following recommendations if you’re looking for ways to reduce payroll expenses while ensuring your employees’ satisfaction.
Automate Payroll With an HRIS
Processing payroll manually can be complex due to the different laws and regulations involved. Errors in payroll processing are not uncommon and can be costly to rectify. However, with the right payroll software, there’s no need to worry about potential payroll errors, penalties, or other expenses. Payroll software utilizes automated tools that guarantee accuracy and compliance with each pay period.
It’s worth noting that automating payroll can significantly reduce manual paycheck errors. The American Payroll Association says this can translate into an impressive 80% reduction in overall payroll costs. Incorporating automation is a highly effective measure to streamline your payroll process while optimizing time and resources.
Hire Strategically for Tax Credits
Become familiar with the requirements and take advantage of the Federal Work Opportunity Tax Credit (WOTC), Research and Development (R&D), Location-Based Tax Credits, and Job Growth Credits. Determine if you qualify for these valuable tax credits based on your existing employees, and incorporate the requirements into your hiring policy where possible.
Note that there are also state-specific credits, such as the Georgia Retraining Tax Credit, for Georgia-based businesses to consider.
Reduce Your Payroll Taxes
Talk to your CPA about reducing payroll taxes with the following:
- Health savings accounts (HSAs)
- Flexible spending accounts (FSAs)
- Achievement awards
- Fringe benefits
- Create an accountable plan for employee reimbursements
- Match a percentage of employee contributions
- Contribute more to employee health insurance premiums
- Tax deductions
A couple of common approaches to reducing payroll taxes are:
- Offering benefits such as health savings accounts (HSAs) and flexible spending accounts (FSAs) to your benefits package.
- Develop a written achievement award plan that treats all employees fairly and deducts up to $1,600 for achievement awards.
Evaluate Additional Benefits
While some benefits are taxable, the IRS allows certain pre-tax benefits that can help your employees and help you save on taxes. Dependent care assistance, adoption assistance, and employer-sponsored 401(k)s are good examples. Work with your CPA. You can view a list of pre-tax benefits here, and ask your CPA to help you find benefits-related tax savings.
Boost Employee Retention
Improving employee retention comes with significant cost savings. Retaining a current employee is cheaper than hiring (and training) a new one. On average, replacing an employee costs 32% of their annual salary. Those numbers can add up quickly for more expensive employees, like engineers or senior leaders.
Reduce Payroll Expense by Outsourcing
By outsourcing payroll processing to SmartPayroll Solutions – HCM, employers are reducing payroll expenses by,
- Streamline administrative tasks
- Eliminate redundant data entry
- Avoid expensive errors
- Mitigate risks
- Reduce paper and printing costs
- Hire great talent
- Improve employee retention
- Eliminate employee time theft
- Find tax credits
- Reduce the cost of employee benefits
- Save on Workers’ Comp insurance
- Possible reduction in administrative staff
And our Payroll Account Managers ensure every client gets maximum ROI by properly utilizing our system.
Want to know more? Here’s a list of frequently asked questions about our payroll services.