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Jul 10, 2024 Erin Crowley

Payroll for Plumbers: A Step-by-Step Guide

Payroll for Plumbers: A Step-by-Step Guide

Plumbers are some of our society's unsung heroes. They ensure that homes and businesses have functioning water systems and sanitation. As a plumber, you know firsthand your critical role in keeping our communities running smoothly. 

But in order to continue providing these essential services, your plumbing business needs a strong foundation that starts with a solid payroll solution.

Between managing clients, overseeing projects, and ensuring your team has the tools and resources required to provide the best service to your customers, it's easy to let administrative tasks like payroll fall by the wayside. But neglecting your payroll process can seriously affect your business and quickly erode trust between you and your valued employees.

In this step-by-step guide, we'll walk through everything you need to know about payroll for your plumbing business. From understanding the basics of payroll taxes to implementing time and attendance tools and managing compliance, we'll break the process into easy-to-follow steps to help you establish a solid foundation for payroll as you scale your business.

Payroll Basics for Plumbers 

Managing payroll can be challenging, especially for plumbers with workforces that include a wide range of full-time employees, part-time workers, and subcontractors. Tracking time and attendance across multiple pay rates, job sites, and job costing conditions to this complexity.

With a solid payroll process and reliable solution in place, you can improve your business’s finances, reduce errors, and generally allow you to refocus valuable time back into providing excellent plumbing services and attracting new clients. 

A small-business-focused payroll system helps reduce the risk of non-compliance with local, state, and federal regulations. You can avoid costly penalties and legal issues by staying current with the latest requirements and ensuring accurate tax filings and payments. And when your technicians are paid correctly on time, every time–they’re likely to stick around for the long-term. 

As your plumbing business grows, having a robust payroll solution also makes it easier to scale your business–allowing you to onboard new employees and technicians quickly and efficiently.

With these things in mind, let’s dive into a step-by-step process to help set your payroll process up for success.

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Step 1: Understand Payroll Basics 

Let’s start with the basics of payroll for your plumbing business: 

Payroll taxes and compliance requirements: As an employer, you are responsible for withholding the appropriate taxes from your employees' paychecks and remitting them to the relevant government agencies. 

These withholdings include federal income tax, Social Security, Medicare, and unemployment taxes. Compliance with these tax requirements is crucial to avoid penalties and legal issues.

Employee classifications: Your plumbing business likely has a range of full-time employees, part-time workers, and independent contractors. Each classification has different implications for payroll, benefits, and taxes–and it’s important to get these details right each pay run to avoid costly penalties.

Wage and hour laws: These refer to minimum wage, overtime pay, and other aspects of employee compensation. As a business owner, you must ensure that you pay your employees at least the minimum wage required by your city or state and provide overtime pay when necessary.

Step 2: Set Up Your Payroll System 

Once you understand payroll basics, it's time to set up your payroll system. You'll need to decide whether to handle payroll in-house or outsource it to a small-business-focused payroll provider

In-house payroll management gives you more control and can be cost-effective for smaller businesses, but it also requires more time and expertise. 

Selecting the right payroll software is crucial if you choose to handle payroll in-house. Look for user-friendly software that can handle your plumbing business's specific needs and offers features like direct deposit, tax filing, and employee self-service portals. Some popular payroll software options include QuickBooks, Gusto, and ConnectPay.

Before running your first payroll, gather all necessary employee information and documentation. This includes:

  • W-4 forms for tax withholding
  • I-9 forms for employment eligibility verification
  • Workers’ Compensation classification
  • Direct deposit information
  • Employee contact information
  • Pay rates and schedules

Having this information organized and easily accessible will streamline your process and ensure payroll accuracy–preparing your business for success in the event of an audit. 

Step 3: Implement Time-Tracking and Job Costing 

A reliable time and attendance system ensures that your employees are paid for their work hours and helps you manage labor costs more effectively. Time-clock integrations allow your employees to clock in and out from their smartphones, making it easier than ever to capture accurate time and attendance data. Consider using mobile apps with geofencing technology to simplify the time-tracking process, especially for employees who work at multiple job sites or those working across multiple states.

Integrating time tracking with job costing is another key step in effective payroll management. Tracking the costs of each plumbing job, including labor, materials, and overhead costs, is an essential part of the job costing process. 

By connecting time and attendance data to specific jobs, you gain valuable reporting insights into your labor costs and profitability. This information can help you make informed pricing, staffing, and resource allocation decisions.

Step 4: Manage Employee Benefits and Deductions

Are your full-time employees reaping the benefits of Section 125 Pretax deductions? If so, then using a product like our new service Connect Section 125 can help you document the pretax benefits your employees take, ensuring compliance with IRS regulations.

To effectively manage employee benefits and deductions:

  1. Properly calculate and deduct employee contributions for benefits like health insurance, retirement plans, and other pre-tax deductions.
  2. Keep detailed records of benefit enrollments, changes, and terminations to ensure accurate payroll processing.
  3. Regularly review and update employee benefit deductions to reflect any changes in coverage or eligibility.
  4. Accurately track benefit deductions in each payroll run to avoid errors and maintain compliance.
  5. Work with a small-business-focused payroll provider who is able to provide accurate payroll reporting and a Section 125 Plan Document designed to keep your small business in compliance all year round. 

Offering comprehensive benefits to your full-time employees can help you to retain skilled workers–saving you time and resources when it comes to recruiting local talent. 

Step 5: Process Payroll and Maintain Compliance 

To pay your employees accurately and on time, first calculate their gross pay based on hours worked and pay rate, and their pay frequency. Next, figure out the correct amounts to hold back for federal income tax, Social Security, and Medicare. 

You should also keep up to date with federal, state, and local labor laws to ensure compliance with any changes in tax rates, minimum wage, overtime rules, or other relevant laws.

Another important compliance step is to conduct regular audits of your payroll process to find errors, inconsistencies, or areas for improvement. You can utilize the tools in our HR Resource Center to better examine your HR and payroll practices and find these gaps.

Pro Tip: keep detailed payroll records for each pay period. These records should include hours worked, pay rates, deductions, and taxes withheld to keep you compliant and make it easy to resolve any discrepancies down the road.

Step 6: Analyze and Optimize Your Payroll Process Using Reports 

Remember to review payroll reports regularly and analyze the data to improve your payroll management. 

The labor allocation detail report and the labor allocation summary can provide valuable insights into how labor costs are distributed across different jobs, customers, and employees.

To further optimize your payroll process, look for areas where you can streamline workflows. If you can automate manual tasks like data entry or report generation, you’ll increase efficiency and reduce the risk of human error.

The Benefits of Outsourcing Payroll for Plumbers 

By partnering with a small-business-focused payroll partner, you can save time and focus on revenue-generating activities while ensuring compliance with complex tax laws and regulations. 

Payroll providers offer enhanced accuracy, scalability, data security, employee self-service portals, and integration with other systems that streamline your processes. These efficiencies reduce the need for in-house payroll administrators, and provide you with access to the latest technology and custom solutions. 

Additionally, payroll providers often have local connections who can help you save money through pay-as-you-go premium payments. By outsourcing payroll, you can gain valuable expertise, minimize errors, and avoid costly penalties, allowing you to focus on growing your plumbing business.

ConnectPay: The Best Payroll Partner for Plumbers 

We’re the small business payroll specialists! Our proprietary software is designed to meet the unique needs of small business owners like plumbers. Our platform streamlines payroll processing, time and attendance, job-costing, and provides valuable insights to help you manage your labor costs effectively.

Some unique features that make us a great potential partner include:

  • Certified payroll reports: We generate certified payroll reports that comply with federal and state regulations, ensuring your business complies with government contracts.
  • Integrated time and attendance tools: Our digital time and attendance integration allows your employees to clock in and out seamlessly, even from mobile devices using geofencing technology, making it easier than ever to track hours worked across multiple job sites.
  • HR Resource Center: Access a comprehensive library of HR tools, templates, and guides to help you manage your workforce effectively and stay compliant with labor laws and regulations.

Schedule a free Payroll Tax and Compliance Review today to learn more about ConnectPay and how we can help your plumbing business. Are you ready to simplify payroll?

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Published by Erin Crowley July 10, 2024