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Demystifying Payroll Can Result In Happier Employees

Human Resources

Demystifying Payroll Can Result In Happier Employees image trainingprograms13

As a human resources manager, company communication and transparency should be one of your main goals. This includes cultivating good relationships with employees across the company. One way to do this is to work with them and explain the payroll process, as one of the biggest concerns is where tax dollars go.

However, for those unfamiliar with it, the nebulous payroll process can be a difficult one to explain to employees. They’re aware of the tax withholding removed from each paycheck, but where the money goes doesn’t make sense. There are so many acronyms and missing dollars that it can be easy for employees to be upset and confused. Be sure to break down the tax contributions in simple terms and explain where their money goes. If your company uses automated payroll processes, explain that these complex equations are accurately completed elsewhere, but still do your best to explain the process.

Statutory

These legally required taxes fund programs at state and federal levels. While state and federal income tax levels vary based on their salary, employees can count on paying 6.2 percent of Social Security Tax and 1.45 percent of their income for Medicare tax every paycheck. These go to fund nationwide funds for retirees and those unable to work or provide for themselves and families. In a perfect world, these funds would ultimately be available to your employees in retirement.

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Additional state, city and municipal taxes go to fund things like public education, parks departments, roads and other public services. Many of these tax contributions fund resources that employees rely on every day, like the protection provided by firefighters or police officers.

Voluntary

Voluntary deductions are those that employees agreed to when starting their job. These include deductions for health insurance, retirement funds and more. Some, such as uniforms and other required expenses, may be one-time or limited occurrences while others, such as stock options and 401(k) contributions, can be tailored to each employee’s individual needs. Be sure to remind your employees of the benefits of these deductions, especially if the company matches a percentage of the contributions to 401(k) funds.

Employer

While employees may feel the real burden of taxes, be sure to explain to them that the employer contributes taxes as well. In addition to Social Security and Medicare contributions, the employer also pays individual state and federal unemployment taxes. It may be useful to go over an employee’s individual paystub if you are in a one-on-one session. However, if you are working with a large group, use generic names and salaries to give them an idea of how much money is withheld from each paycheck and where the money goes.

While the numbers breakdown and explanation of what each tax withholding means to the employee, it can help if you show them how to roughly calculate their own taxes. Direct them to a simple guide online to figure out their federal income tax. Doing their own math can help employees to draw connections they otherwise wouldn’t. However, be sure that the employee understands their money goes to help others and themselves. This is a great opportunity to field questions about company benefits packages, retirement funds and insurance. A thoughtful breakdown of your payroll system can result in greater understanding from your employees.

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