SALARIES / JUN. 27, 2014
version 5, draft 5

How to Pay Employees When You Can't Make Payroll

There are many presumptions today regarding business accounting practices. One of them being that all businesses use payroll to pay their employees. However, this isn't always the case considering the simplicity and time constraints of some business models. For instance, some companies solely pay their employees according to their daily input. This simple method doesn't necessarily call for daily preparation of a payroll since it would prove to be cumbersome and time-consuming in the long run. We've also got business entrepreneurs with little or no accounting skills yet they're the ones that pay their employees. And thus begs the question, how does one pay employees when they can't make payroll?

#1 Use the Percentage Commission Payment Method
This mainly applies to businesses whose operations largely depend on sales and purchases. That is, a percentage commission is paid to employees out of the profit earned from every sale. This of course means that not all workers get the same amount since everyone has their own unique sales pitch. In addition, the amount of work input doesn't necessarily determine payment. However, we've got businesses that add a marketing commission on top as per the scope of marketing outreach that each employee has achieved. This is evidenced by a subscription list of prospective clients, their contacts and their signatures. This mechanism of course will be at the discretion of the company.

#2 Use the Standard Salaries and Perks Method
This is definitely the simplest method of paying employees without using payroll. In fact, the only real work here will be in the verification of employee attendance and deduction of penalties for absenteeism. The difference however comes in the daily perks and compensative benefits for extra input of each worker. And just as a precautionary measure, you'll have to verify employee identities and account numbers to avoid making wrongful payments.

#3 Use a Working Time Payment Method
There are organizations that pay keen interest to reporting time. That's because it's from this time that the management closely monitors their employees and counts the number of hours spent at work every day. A good example is security companies whereby security guards have to stay at a particular work station for a number of hours to protect individuals, property and so forth. These numbers of hours are them compiled and a time rate is used to determine the total payment for the day. Extra hours should of course come with more attractive rates than normal working hours to encourage extra dedication during emergencies.

#4 Use the Work Rate Method
This method brings into perspective the assembly industry. It mainly applies to motor vehicle and electronic factories. Faster assembling equals more pay. The work rate method of course differs according to the kind of work done. For instance, in the motor vehicle assembly, we've got workers that assemble the engine components, the body, the interior and workers that inspect the vehicles. These workers also get compensative benefits depending on the amount of danger they're exposed to. For instance, the engine assembler is vulnerable to high risks of exposure to molten metal as opposed to the vehicle inspection officer who is exposed to little work risk, if any.

#5 Use the Work Load and Work Input Method
There are businesses that deal with varying customer demands and have to grapple with business cycles. Let's consider a bakery for instance. During holidays such as Christmas and Easter, demand is definitely high and so employees have to make more cakes. It's also important to note that work rate can't solely apply here since these cakes have different designs and some are definitely hard to pull off. Plus, some clients will want small birthday cakes while others want big wedding cakes. Therefore, employees will be paid according to the varying work input of different sizes and complexities of the cakes. And thus, the load and input of work it takes to make every product will determine the amount of pay.

#6 Use the Standard Quality Parameters Method
There are businesses that pay employees according to quality standards. A good example is the dairy industry. Large-scale farmers employed by Dairy product firms have to feed their cows with a certain quality of grass, pay check-up fees to veterinarians and so forth. Well maintained cows will produce high quality milk with high butter fat content. And since the dairy company is aware of what it takes to produce high quality milk, they'll come up with a rate for every litter that has a handsome commission and compensative benefits. This is to encourage the farmer to maintain the high standard of milk. Rates will of course differ according to certain parameters such as butter fat content, milk density and so forth.

#7 Use Hardship Factors and Compensative Benefits Method
The mining industry is a perfect example of such a payment method. As I reiterated earlier, not all employees get to experience the same kind of hardship in their work. Let's take gold mines for example. There are workers deep in the mining caves digging for the precious metal. These workers can be trapped when the mine caves in so they've got to dig carefully. In addition, it's hot and stuffy. Breathing is hard and thus air has to be pumped downwards to the mining caves. Such risks will of course culminate into attractive daily payment rates. Unlike the men at the top who are simply taking stock of the mined rubble before it is processed at the factory. They are breathing okay and the amount of risk is greatly subsidized.

As you can see, not all businesses have sophisticated models of payment. However, this doesn't necessarily mean that accounting skills won't be needed. Remember, when an exploitative opportunity presents itself, disgruntled employees will be more than glad to take advantage of the accounting loophole without second thought. It's thus necessary to sharpen your accounting skills even when paying workers without payroll to ensure accuracy, fairness and equality across the board.

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