The employee handbook can be used as a handy reference source for current and future employees. This handbook should provide more than just answers to where, when, how, and what. It should also describe your organization’s mission, culture, and values.
When it comes to the part that lays out your payroll policies, be sure to be specific and thorough in order to legally protect your business.
Having a well-thought-out payroll policy ensures that employees always will receive accurate pay at precise times. The policy should guarantee that the company follows federal, state, and local laws such as those concerning Medicare and Social Security.
Why Is a Payroll Policy Important?
It’s important to document in the employee handbook, for current and future employees, your company’s payroll policies.
It tells them what to expect. The payroll policy handbook tells employees that they can rely on being paid in a consistent manner without delays. A company’s payroll can boost or deplete the morale of employees. Payroll is essential to the financial stability of your company as well.
Stating your payroll policy also protects you legally. Anything described in the employee handbook is legally binding, whether or not the employee signs it.
The Business Journals says that in general, the policies contained in the handbook still will apply to the employee even if they refuse to sign. Just be sure to inform the employee in writing that his or her refusal to sign will not result in an exemption from the policies contained in the handbook, and then finish by noting the date and that the employee refused to sign the acknowledgment form.
The purpose of the form is to serve as a receipt and to document that the employee was made aware of the existence of the policies.
What to Include in Your Payroll Policy
The other sections of your employee handbook mentioned previously are significant, but the section regarding compensation is one your employees are likely to refer back to often.
According to Gusto, the following is what you should include in your employee handbook:
- Whether it be weekly, biweekly, or monthly, outline how often employees will be paid.
- Pinpoint payday(s) with specific dates and times.
- Describe methods of payment available (direct deposit, outsource payroll service, check, etc.)
If you offer pay advances, then be sure to clearly state your policy and procedure.
- List all the payroll deductions for taxes, benefits, or other fees, including detailed explanations.
- Don’t forget pre-tax deductions and contributions such as retirement funds or health insurance.
- Include local, state, and federal taxes.
- Add post-tax deductions and contributions such as wage garnishments or union dues.
Salary and Bonuses
- List the policies that apply to salaried versus hourly employees.
- Describe your bonus program.
- List all bonuses such as referral, annual, quarterly, anniversary, and sign-on bonuses.
- Explain the classifications of employment.
Travel and Business Expense Policies
- Confidentiality: The payroll policy should include a confidentiality statement saying that sensitive employee data (e.g., salary, bank account, Social Security number, garnishments, etc.) will be protected.
- Method of Payroll Record-Keeping and Security: If sensitive information about an employee is leaked, it could make your business vulnerable to legal ramifications. Be sure to cover the method of record-keeping, how long these records are kept and what security measures are applied.
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