Top questions to ask when choosing a payroll provider

Making sure your payroll processes are in place makes a huge difference in the way your company runs. Without utilizing the right practices, you can make significant mistakes that will end up costing you hefty fines and penalties. 

As you’re vetting payroll providers, it’s important to know what they are supposed to be well-versed in. If not, you could end up wasting your money. Here are a few questions to ask when interviewing them to see if they really know what they are doing. 

How do you classify a salary-level test and a salary-basis test?

Your full-service payroll provider must know the answer to this to properly classify employees as exempt or non-exempt. The Fair Labor Standards Act (FLSA) has thousands of claims on employers who have violated the law. 

Many employers have a difficult time making the distinction, which leads to mischaracterization. A good payroll provider would ask for job descriptions to make sure all employees are properly classified.

Can I reduce someone’s salary for poor performance?

A payroll provider knows that all exempt employees must receive their full salary regardless of the quality of work or the quantity. If they work during the workweek, they must be paid.

Can I withhold money owed to an employee?

Again, the answer is NO.  You may believe you have carte blanche in withholding a final paycheck because the employee still has some information or something that belongs to the employer. 

This includes commissions, bonuses, and other money owed, including accrued PTO. If it is not written that the employee gets the accrued PTO, then the employer may refrain from paying them that amount.

I want to deduct money from an employee’s paycheck since they went to a meeting for their child for three hours. Can I do that?

The payroll provider should be well-versed in exempt employee law to let you know that you cannot do that because exempt employees cannot be docked for half-day absences under the FLSA.

I had to close the office suddenly and everyone had to go home. Can I dock everyone?

The provider should let you know exempt employees must be paid their full salary when the company closes for less than a full workweek.

I’m not giving my exempt employees holiday pay unless they work the day before and after a company holiday. I can do that, right?

While some employers require non-exempt employees to work the day before and after the holiday for holiday pay, exempt employees are not part of this equation. If they work any part of the workweek for that week, they must receive their full pay.

The employee was insubordinate to one of my top managers and I want to demote them and cut their wages. Can I do that?

Did someone say lawsuit? Federal rules allow deductions from the salary of an exempt employee for serious misconduct but there must be a written policy in place that applies to all employees.

Business owners who don’t know or don’t have the right manpower in place can quickly get in trouble for this line of thinking. This is the quickest way to get sued and the entire company could get shut down. Working with a payroll provider that understands all the legalities involved with exempt employees can save you and your company – again and again.

These are just some of the questions a business owner who doesn’t know or understand the labor laws ask payroll providers because they think they are valid in their thinking. Working with an HR professional that can get your job descriptions written and a living, working employee handbook in place can keep you out of the hot seat, because that’s not where you want to be.

Homebase payroll 

Homebase handles payroll with knowledge of all the laws and things you can and cannot do to your exempt and nonexempt employees. The system makes things easy because it removes the middleman. Employees directly enter their time, and Homebase automates everything with no worry and no hassle. The questions of what can and can’t be done are immediately resolved.

The data entry days are over with Homebase. Everyone self-onboards and e-signs their payroll forms, all the job descriptions, and classifications are entered from the very beginning.

Homebase goes beyond payroll. The system handles HR and compliance, team communication, scheduling, time tracking, and more. The best part? Every employee has access to their information and can conduct transactions right from the app.

If you’re interviewing a payroll provider and they don’t know the answers to these questions, it’s time to move on. Even better, move into the Homebase software and make things a whole lot easier.