Benefits of an HR Paycheck Calculator
If you run a small business with employees, you’ll need to pay those employees fairly and accurately in order to keep them coming back.
But for those without a background in finance or accounting, running payroll can be quite a challenge. Exactly how much do you need to pay in taxes? What are all those deductions? Why does location matter?
For employers, HR workers, and employees alike who want to be completely confident about the company’s paystubs, a paycheck calculator could help shed some light on this mysterious process and make payroll a walk in the park. Below, let’s look at five benefits that an HR paycheck calculator can bring to a business.
Run Payroll Accurately
The first and most obvious benefit of a paycheck calculator is that it calculates your employee’s net salary, taxes, and deduction payments properly. With this information, employers can quickly and accurately pay their employees every pay period.
With a calculator, there’s no need to worry about misreading a one for a seven or making deductions in the improper order – the calculator has everything figured out. All an employer or employee needs to do is put in their information.
Not only does this help an employer calculate each employee’s taxes and deductions, but it also helps facilitate full transparency between employers and employees. If an employee were to make accusations of wage garnishment or improper calculations, the paycheck calculator could easily dispute that by showing an exact breakdown of each deduction, line by line.
Run Payroll More Often
Eager to be duly compensated for their hard work, employees may be more attracted to jobs that provide a more frequent pay schedule. As an employer, then, offering a more frequent pay schedule could help you attract and retain more talent.
But as an employer, calculating all those taxes and deductions could take quite a lot of time that you could spend on other tasks. Week after week, this time calculating payroll could turn into a huge waste of time.
A paycheck calculator comes to the rescue by helping employers calculate each employee’s net paycheck in the blink of an eye, making it less of a hassle to run a more frequent pay schedule.
As a quick example of how beneficial a paycheck calculator can be, consider businesses with hourly workers. These employees work varying hours every week, and therefore receive variable paychecks. As it makes the most sense to pay them weekly, small business owners might be swimming in numbers and spending hours crunching paychecks, potentially making several mistakes along the way.
Even if you don’t have hourly workers, you may be required to run a more frequent pay schedule by default – most states actually require employers to maintain at least a monthly pay schedule. Some even require weekly paychecks! To stay compliant with these laws, a paycheck calculator quickly becomes an essential tool for any business.
Pay Taxes Correctly
If an employer were to over-withhold by taking too much out for taxes or under-withhold by not taking enough, they would have to spend some time down the line correcting it by either refunding the employee or withholding more money from the next paycheck – additional calculations and additional time sinks, but this time without a commonly-available calculator tool to help.
Even if it’s the employer’s mistake that led to a tax miscalculation, the employee is still responsible for paying the correct amount of taxes to the IRS at the end of the year, which can be quite stressful and could lead to resentment on the employee’s part.
A paycheck calculator prevents all of these issues by cleanly stating how much the employee (and employer by default) pays in income tax to the federal, state, and local governments, how much is being deducted for benefits, and how much will be paid as net salary. With this, employers can provide full transparency on wage payments and ensure everything is done right the first time.
Forecast Future Paychecks
Unlike paid payroll software that calculates paychecks behind a black box, another great benefit of paycheck calculators is that employees can use them to calculate their own paychecks in advance. If an employee is particularly fastidious about personal budgeting, access to a paycheck calculator could provide great insight into how much the employee could expect to receive each pay period, and how that figure might change in the future.
For example, an employee might be considering moving to a new location, getting married, or having children. All of these personal decisions would change their W-4 form, which affects their withholding amounts for taxes. Using a paycheck calculator, an employee could adjust each of these line items to see how much their withholding and net paycheck would change for each decision, and make a data-driven decision on whether or not the choice would be worth it financially.
Forecast Future Budgets
Finally, employers can use paycheck calculators to stay in touch with how broader company decisions affect an employee’s net paycheck.
As a quick example, consider that small businesses of under 50 employees aren’t required to provide health insurance for employees. However, doing so would help the business attract more workers, even if the employee pays for a portion of the premium.
How much of the insurance premium is paid by the employer and employee varies from company to company. Though a business might not see much of a difference between paying 50% or 55% of the premium, that 5% could mean a huge change in the employee’s final paycheck.
To get a true sense of how much employees would be paying for insurance, then, an employer could adjust this deduction in the paycheck calculator to see an accurate representation of how this minor change could make a major difference in the employee’s net paycheck.
With these figures on hand, an employer and employee could have an open discussion on the value and merits of offering a benefit or not and the payment split for each benefit. Once both parties agree to a figure, the business can then confidently set aside the budget for each benefit or deduction, knowing that they have their employees’ full approval.
For small businesses and small business employees struggling to calculate payroll and taxes, a paycheck calculator comes as a great tool not only to help businesses run payroll accurately and frequently but also to help forecast future paychecks and the outcomes of business decisions. Any HR department or business owner would benefit from utilizing a paycheck calculator in their day-to-day operations to ensure that employees are fairly and smartly compensated.