Before you can start paying your employees, you need to decide on a payroll process that fits your needs. Which method is best for you will depend on several factors, primarily how many employees you have and how much you can afford to invest in a payroll system.
The four most common payroll operations methods are in-house manual payroll, outsourced payroll, bookkeeper-managed payroll, and automated payroll systems. Each of these systems has pros and cons to consider. For example, in-house payroll can be a cost-effective option for small businesses with few employees; however, it becomes less favorable as your business grows and adds more employees, particularly as you expand internationallY.
One fine day you decided to turn your passion into a profession and get started on the journey of entrepreneurship. You have finally turned your dreams into reality and are running a successful small business. It’s now time to expand your business, and so you have hired or are thinking of hiring employees. But the biggest hurdle is that you have no idea how to pay employees as the owner of a small business.
Business ownership presents the constant challenge of balancing things together. If you are a small business owner, managing all responsibilities yourself, you will relate to what we are saying. So stop scratching your head over how to pay employees and read this simple step-by-step guide to paying employees of small businesses.
Before we jump into the step-by-step process, first let us understand what are the different types of compensation and how much you should pay your employees.
Types Of Compensation
There are three ways you can compensate your employees.
1. Hourly Compensation
Employees are paid hourly compensation depending on the number of hours they work each week depending on a predetermined rate. Hourly compensation is generally preferred for part-time employees. Or if you are yet to figure out how much employees need to be paid and what your budget is, this should be the ideal compensation type for you.
2. Salary Compensation
Salary means you pay a fixed amount typically every month but it is expressed as an annual sum. This type of compensation is given to full-time employees. A fixed salary includes components like basic pay, dearness allowance (DA), and other special allowances. Salary should be paid depending on the employee’s education, previous work experience, and the amount of time they will be working per week or month.
3. Commission-Based Compensation
The commission-based payment system involves paying an employee based on the number of sales an employee makes and is usually based on a percentage of total sales. So you have to pay them basic compensation. It can be hourly or salary plus the commission they earn through sales. Commission-based compensation is preferred for sales and marketing job roles. This also motivates employees to achieve weekly or monthly sales goals.
Now that you are clear about the types of compensation, let us find out how much you should pay to employees.
How Much To Pay Employees?
You should pay employees according to industry standards. You should determine the payment structure of employees depending on their education and previous work experience.
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19 окт 2023
