This may be a really dumb question, but for those of you with employees, how do you make payroll every pay period? How can you guarantee that you will have enough money to pay all your workers, yourself, and still make a business profit? Is there a formula I'm missing? Can someone lead me in the right direction?
Thanks in advance.
I only have one employee. But you should have some cushion in the bank account. This is something you plan for when doing the pro forma financials in your business plan. If you don't have enough $, then you as the owner make a loan to the company, and very quickly find out where you need to increase marketing or cut expenses.
Thanks Leah_s,
I apologize for the delay in my response. I tried posting yesterday, but it wouldn't go through.
When making your proforma, is there a standard rate of increase you should apply as look forward? Also, what is considered a good rate of increase for employees when working on the proforma?
This may be a really dumb question, but for those of you with employees, how do you make payroll every pay period? How can you guarantee that you will have enough money to pay all your workers, yourself, and still make a business profit? Is there a formula I'm missing? Can someone lead me in the right direction?
Thanks in advance.
At one point early on, my bakery had one employee, me. At another time, my bakery and cafe had 19 employees. But the rule was the same: first, pay all bills and make payroll. If there's no money left for you, then you don't get paid that week.
If there's not enough money to pay bills and employees, take a short term loan and look at your expenses. Can you cut employee work hours? Can you make changes in your product line? Are there less expensive suppliers? etc. There's often ways to handle this but you may need to talk with someone - perhaps a business adviser, SCORE, or a trusted fellow business person. Don't give up, business goes in cycles, we have good times and bad times. Good luck.
If there's not enough money to pay bills and employees, take a short term loan and look at your expenses. Can you cut employee work hours? Can you make changes in your product line? Are there less expensive suppliers? etc. There's often ways to handle this but you may need to talk with someone - perhaps a business adviser, SCORE, or a trusted fellow business person. Don't give up, business goes in cycles, we have good times and bad times. Good luck.
............or, you could just take your electricity bill, water bill, gas bill, and the rest of them back into your bakery with your busy workers and slam them down on the counter and start screaming at how wasteful they are, how stupid they are and then stomp around and yell at each one if you see a small spill of flour next to the mixer, pull the margarine wrapper out of the garbage with a gram of margarine clinging to it.........................
I think it was quarterly taxes that got my old boss going more than anything, but after Christmas when things slowed down all of a sudden NOTHING looked right, tasted right or was frugal enough for her.
Tami 
If there's not enough money to pay bills and employees, take a short term loan and look at your expenses. Can you cut employee work hours? Can you make changes in your product line? Are there less expensive suppliers? etc. There's often ways to handle this but you may need to talk with someone - perhaps a business adviser, SCORE, or a trusted fellow business person. Don't give up, business goes in cycles, we have good times and bad times. Good luck.
............or, you could just take your electricity bill, water bill, gas bill, and the rest of them back into your bakery with your busy workers and slam them down on the counter and start screaming at how wasteful they are, how stupid they are and then stomp around and yell at each one if you see a small spill of flour next to the mixer, pull the margarine wrapper out of the garbage with a gram of margarine clinging to it.........................
I think it was quarterly taxes that got my old boss going more than anything, but after Christmas when things slowed down all of a sudden NOTHING looked right, tasted right or was frugal enough for her.
Tami
Funny!
Pay them first. You don't want to find out the hard way about the penalties for being late or not paying your employees. They just report you to the labor board and the labor board comes after you.
A good boss that cares about their employees does this. But the labor board may or may not put it into priority. My husband quit his long time job with a "real winner of a boss" last year. We would take his paycheck to the bank within minutes of getting it in the mail because many of them bounced. We went through one year where so many bounced that I couldn't even write checks at two grocery stores and our old bank would freeze the WHOLE account when the paycheck bounced.
Several guys got together to try to do something and they were told by the labor board and lawyers that the only thing they could do was sue the company for the wages. How long that would take I don't know.
My husband is waiting on a check from back wages due him from 2 - 5 years ago. The labor guy did a investigation and from start to finish that was over a year. It took another year to bring charges, and we are now 18 months from the original court date. Total 3 1/2 years. His old boss played the continuance game over and over, it was finally settled 2 months ago. We received word of the payout but haven't gotten that check from the mail yet!!!
So yes, you can call the labor board, but don't hold your breath, the system takes a L*O*N*G time.
Tami
Pay them first. You don't want to find out the hard way about the penalties for being late or not paying your employees. They just report you to the labor board and the labor board comes after you.
A good boss that cares about their employees does this. But the labor board may or may not put it into priority. My husband quit his long time job with a "real winner of a boss" last year. We would take his paycheck to the bank within minutes of getting it in the mail because many of them bounced. We went through one year where so many bounced that I couldn't even write checks at two grocery stores and our old bank would freeze the WHOLE account when the paycheck bounced.
Several guys got together to try to do something and they were told by the labor board and lawyers that the only thing they could do was sue the company for the wages. How long that would take I don't know.
My husband is waiting on a check from back wages due him from 2 - 5 years ago. The labor guy did a investigation and from start to finish that was over a year. It took another year to bring charges, and we are now 18 months from the original court date. Total 3 1/2 years. His old boss played the continuance game over and over, it was finally settled 2 months ago. We received word of the payout but haven't gotten that check from the mail yet!!!
So yes, you can call the labor board, but don't hold your breath, the system takes a L*O*N*G time.
Tami
Sorry to hear about your family's horrible experience. I would like to NEVER be that type of manager which is why I am putting so much effort into figuring all of this out.
Thanks sweetlayers. All is so much better now. He gets direct deposit now and so gone are the days of chewing your nails off EVERY Friday.
But, a good way to look at business, but a strange one is an old South Park episode. I know that it is hard to everyone to stomach but this one has a really great message.
The little horrid boy Cartmen gets a million dollars from a relative. All he wants more that anything is his own amusement park. So he spends the whole amount, and he buys his very own amusement park. But he is a selfish, horrid little boy and he only wants the park to himself. He hates going to parks and waiting in line and being bothered by other people. So he has this park ALL to himself, but his "friends" want to ride to, and they try to break it, so he has to hire security. But all his money is gone so how will he pay for security? Well he has to let in two people everyday to make enough money to cover the security guy. But then he can't run the rides by himself, so he has to hire someone, and then ends up letting in 4 people everyday. See where it's going?? Once he's done with concession people, maintenance, ticket takers, janitors etc he is back to a fully open amusement park. And it's even better because the park wasn't doing well in the first place and by him saying no one is allowed in the park it is now VERY popular. He ends up selling the park back to the old owner because he isn't willing to share and then the IRS take all his money in taxes and fees.
It's a really cute episode, not as raunchy as most.
Anyway, the moral of my rant is simple. Figure out how many cakes you are making now and about how much you have left after paying your bills AND yourself. Add up the costs of one employee, say, full time with all the extra taxes etc, some extra time to yourself for extra paperwork and then see how many cakes need to be made to pay for the employee.
If the employee gets a total of $500 per week, how many cakes is that on top of what you already do? Do you turn cakes away that you could take with the employee?? What about slow periods in the year? It's a lot of thought, maybe hire someone only in your busy seasons.
BUT, as much as I go on about my old boss the Wicked Witch I will give her this. She always made sure we were paid on time and my check NEVER bounced. If payday was on Friday and it was a holiday we were paid on Wednesday with a check for Wednesday, not dated Friday.
Tami
My labor board experience was different and it may be a state thing. I had an employer not pay... maybe yours was a check thing. There is a per day amount that must be paid on wages not paid. Mine was part of a bigger lawsuit, but I got a per diem on that part of the settlement. As an employer, I know that final wages from someone fired must be paid within the 72 hours or the per diem rate applies. The $1500 amount was $4500 in the award, and yes, I waited forever too. The legal fees were above that. My amount for that offense was set by law. This was a small part of an illegal non-compete lawsuit where I was awarded over $100K. I always warn employers to watch out for these when the subject comes up, but usually everyone tells me I'm wrong.
My labor board experience was different and it may be a state thing. I had an employer not pay... maybe yours was a check thing. There is a per day amount that must be paid on wages not paid. Mine was part of a bigger lawsuit, but I got a per diem on that part of the settlement. As an employer, I know that final wages from someone fired must be paid within the 72 hours or the per diem rate applies. The $1500 amount was $4500 in the award, and yes, I waited forever too. The legal fees were above that. My amount for that offense was set by law. This was a small part of an illegal non-compete lawsuit where I was awarded over $100K. I always warn employers to watch out for these when the subject comes up, but usually everyone tells me I'm wrong.
WOW!! I wonder if he would have gotten more if we would have known more about the law.
My husband used to be an "Air Balance Technician" He went into new or renovated construction sites and made the air flow the way the air was supposed to flow. That's as much as I understood his job. So, there is a law that states for federal projects (schools, fed buildings, military, prisons etc) that the wage to pay each profession is set by the project. So a plumber makes X amount, but on a federal job the wage is preset at around $50 per hour (I'm guessing low) EVEN if the plumber is paid by his company at say $30/hr he is to be paid the $50 for the hours he works on the fed. project. Your tax dollars at work folks. Union guys make the higher wage because they are usually ONLY working the fed. projects with the higher wage. This is called "Prevailing wage"
His old employeer didn't think he should have to pay that (it's the law. Period.) and so his job bids did not reflect the higher wage for the fed jobs. So his bid was WAY lower than anyone elses. So, YEARS later a newly hired guy was talking to the union and mentioned this. The union wants more guys so they call the labor board and start the ball rolling.
I would LOVE to know if PA has that per day thing, because these back wages due him were from as long as 5 years BEFORE this all started, so 8 1/2 years now. AND they only looked at a few projects, when he had many more prevailing wage projects. I have a feeling that if we would have gotten a lawyer ourselves we would be seeing a lot more money, but the lawyer would have taken a lot too. Maybe it would just cancel it all out. I don't know. The original court papers had about $3000 more than the check is coming in, so maybe there was a lesser amount settled for in the end. We are accepting it, if we dispute it may be a lot longer wait.
We did find out that the old boss is in DEEP with this, state and federal. He was a real S.O.B. and his wife was much worse. They were offended when we would call to complain about the checks bouncing, and she told my husband, "Well, we pay for all the fees, don't we??" Big-Whoop. That didn't help my bank account being frozen with ALL the money in it, not just the check amount. That didn't help the checks that were returned "Unpaid". Which in the retail world is WORSE than being returned "insufficient funds"!
The whole thing frosts my cookies.............
Tami
....................be nice to employees!! Especially the really good, loyal and hard working ones!!
A lawyer found me. Someone had mentioned my issue and he jumped on it. The $4500 was mine and fees were added. The rest of the money was 1/3 lawyer and 2/3 me. I got over half plus the $4500. That was after taxes. When you are awarded salary/compensation you pay taxes on the income part only. Not on the punitive/per diem. The lawsuit was in WV. The only people that really know the law are employment attorneys. The lawyers for the other side eventually had to hire employment attorneys. That was 15 years ago, but as a business owner, it has made me very aware of employee rights and how much trouble an employer can get into when an employee's rights are violated. The courts are pro employee, as they should be.
When you're looking at whether or not to do payroll, remember to calculate the employer taxes into your budget. The employer taxes range from 8-12% depending on the state you're in. I would also recommend paying those taxes monthly, even if they aren't due. Or, at least put the money in a savings account.
And, check the regulations carefully if you have someone working for you as contract labor. Be extra sure they can't be considered an employee because IRS is cracking down on the employee vs. contract labor or 1099.
Payroll is easy but if you don't know all the deadlines and percentages and laws, get someone to help you or do it for you.
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