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Let’s face it, payroll taxes and insurance will never make for intriguing dinnertime conversation. However, in businesses everywhere, this is a conversation that needs to be had. It’s important to teach your employees about payroll for many reasons, not the least of which is that it clears the air before minor misunderstandings can turn into major unrest within the rank and file employees. Educating your employees is a wise move for almost any business to make for all these reasons and more.

Why is transparency so important to employees?

In the post-Enron and WorldCom world we live in, employees want to know that the company they work for practices straightforward accounting principles that are easy to understand. It’s understandable from the perspective of employees who are concerned about job security, retirement plan stability and the value of any stock options they may own; but there are other considerations. We live in a world that isn’t often kind to businesses.

Many businesses are closing shop and calling it quits. Straightforward accounting and a thorough explanation of the payroll cycle can help employees understand why they aren’t getting raises, bonuses or salary increases: the money simply isn’t there. This will boost morale among employees, because they understand that it’s not a matter of someone else’s greed that’s causing the roadblocks to their raises and bonuses.

How do you educate employees about payroll cycles?

There are many ways you can go about the education process. Some of them are more effective than others. The best methods, however, are easily adaptable to the strengths and weaknesses of employees who learn best through different methods. That’s why redundancy may be in order.

1) Hold regular meetings throughout the year to explain the payroll cycle and the health of the company on an economic level. Some companies choose to hold quarterly meetings for this purpose.

2) Create visual tools such as flow charts and pie charts to show employees where money is going. Primary expenditures are almost always in the form of salaries, taxes, and insurance. Inventory and equipment are other considerations to include in these charts.

3) Create a written quarterly statement that not only offers these charts for employees to look over at their leisure, but also a written explanation of the payroll cycle and the process the company uses to determine salaries and/or bonuses.

4) Find a way to help employees relate. Ask employees to provide specific personal examples, such as mortgages or rent, and then correlate that to the corporate cash flow and payroll structure.

5) Consider outsourcing payroll fulfillment. It’ll make it easier to handle and employees can view their pay stubs online and see a breakdown of all the fees and taxes for each pay period. Plus, they’ll be able to see their tax information after the end of the year, helping them file their tax returns earlier.

The most important thing you want to do in the payroll education process is keep it simple. Transparency is great as long as you’re not going completely over the heads of everyone involved.

By following these steps you can help your employees better understand the company’s financial situation as well as their place in the company. With a greater need for business transparency, this can be a huge factor for some employees facing decisions about their employment futures.