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The Importance of Payroll

Every small business owner performs more than one role for his company. One of the most important tasks in running a small business is completing payroll. Employees need to be able to rely on being paid on a consistent basis without delays. Payroll affects every aspect of a small business from the morale of employees to the financial stability of the company.


One of the most important aspects of payroll is its impact on the morale of employees. In a small business, employees tend to be more aware of the company’s financial stability than in a larger business. If payroll is late, employees will start to question the financial integrity of the company. This will cause employees to start underperforming and to care less about their job if they feel it is not secure. Payroll should always be paid in a timely manner to keep employee morale high.


Another important characteristic of payroll is that it allows an employee to feel his net worth within a small company. An employee’s total compensation is built into payroll. This includes his salary, benefits and bonuses. Employees typically undergo annual performance evaluations by their supervisors and are rewarded with an increase in salary or a bonus or both. Benefits also reflect an employee’s worth within a small business. Employees who receive health insurance, life insurance and pension benefits feel they have a higher worth.

Consuming Job

Payroll can be a time consuming job for a small business owner. This job needs to be performed consistently once or twice a month. In addition, the information needs to be correct so that employees are paid the right amount, the withholdings are accurate, and state and federal tax deposits are made timely. To do this efficiently, a small business owner should consider outsourcing this job to free up his time.

Lowers Tax Bills

A final important aspect of payroll is that it needs to be done right to lower state and federal taxes for a small business. Small business owners should make sure that employees fill out their W-4 withholding forms correctly. The information on these forms is used to withhold personal taxes for employees. Owners should also ensure that they are withholding the proper amount of FICA taxes each year from payroll. FICA percentages can change yearly based on legislation.


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