New businesses face unforeseen challenges

When Terry and Bronwyn Dowler decided to open Glenstone Subway Inc. 15 years ago, they were concerned about all the unknowns that come with opening a business.

“You are always afraid you will mess something up or miss something,” Terry Dowler said. “You don’t always know what you are getting into.”

Since it opened its doors, the Dowlers’ business has doubled in size.

Through their growth, the Dowlers had to address challenges that many new businesses face. Business owners frequently are concerned with making sure they are doing things right when it comes to their employees, especially when those employees are family members. Once a business decides to hire employees and begins to grow, many internal management issues begin to surface. Before a new business decides to begin hiring employees, many payroll-related issues need to be evaluated.

Compliance issues

Myriad state and federal laws govern how employees are paid. Many businesses do not realize that new employees must be reported to the state of Missouri within 20 days of their hiring. Federal labor laws also dictate how overtime must be calculated, how to handle multiple rates of pay and when it is appropriate to pay an employee a salary. Workweeks must be established and employees must be correctly classified to make sure all legal requirements are met. State and federal payroll taxes also must be filed and paid correctly and promptly. Systems should be in place to address employee payroll issues and to keep up with the changing legal environment in a way that avoids any legal or financial liability for the company.

Confidentiality and fraud

How do you plan to ensure the confidentiality of your pay systems? Confidentiality is an issue for all businesses. These issues can become particularly sensitive when family members are involved. Before family members are hired, think through what information will be shared, what information should remain confidential and how information will be safeguarded.

Many small businesses make the mistake of not establishing boundaries and checks and balances on financial activities. Even family owned businesses need to have appropriate checks on financial transactions.

Garnishments

As businesses add employees, employee garnishments often become an issue. Prioritizing garnishments, ensuring the proper amount of money is withheld and submitting garnishments in a timely manner can be difficult tasks. In general, employers cannot terminate employees for having a garnishment; therefore, they become a necessary part of dealing with a growing work force.

Employee retention

When it comes to compensation and benefits, many new businesses struggle with what benefits to provide and how to administer them. As you grow, develop a compensation strategy for how you plan to pay and retain your employees. Communicating with your employees on what benefits are important to them can help you prioritize what benefits to add and when to add them.

How much time do you want to devote to handling payroll and compensation issues? Business owners need to analyze when the benefits to their company could better be achieved through alternative methods. Often administrative functions such as payroll, accounting, benefit administration and employee background checks begin to take up personnel, time and financial resources that could be utilized to grow and expand the business. Many times, outsourcing these functions will save the company time and money.

All businesses need to evaluate how they plan to handle employee compensation issues before complicated situations arise that can jeopardize their ability to grow and serve their customers. Entrepreneurs are concerned with how to better serve their customers. Making a plan to handle the necessary functions of managing your employees can allow entrepreneurs to focus on growing their ventures.

Jeff Hunter is president of The Payroll Co.