A key part of running a successful cannabis retail store is choosing the right compliant payroll for your dispensary organization.
Many businesses find themselves on the wrong side of the law before they can even properly take off because they’re unable to find a compliant payroll solution.
With compliant payroll, you are assured that your business is safe from financial penalties, interest fees, tax trouble, and even potential closure.
There are several factors to take into consideration when selecting the right payroll solution for your cannabis dispensary. In this post, we’ll cover 4 tips to consider when choosing a compliant dispensary payroll solution.
1. Choose a provider who specializes in payroll for dispensaries
When it comes to cannabis businesses, choosing a vendor who understands the industry is non-negotiable. Because the industry has several unique tax laws, compliance requirements, and banking regulations, it’s better to choose a provider who specializes in payroll for dispensaries.
Mainstream payroll providers have become increasingly wary of federal banking regulations surrounding cannabis.
As a result of this, several companies that previously provided payroll management services to dispensaries have dropped their clients once they realized they were a part of the cannabis industry. In some cases, cannabis businesses were given only 30 to 90 days to find a new provider.
Although there are no explicit laws prohibiting financial institutions from doing business with cannabis retailers, federal law requires that banks file regular Suspicious Activity Reports (SARs) to allow monitoring of cannabis businesses for signs of illegal activity. There is also the added requirement that they comply with the 2014 FinCEN guidance.
For the majority of banks, these requirements make banking cannabis-related businesses too high risk and too costly, and they opt against it.
As a result, mainstream payroll providers who collaborate with such financial institutions to manage payroll for businesses also shy away from cannabis businesses.
That’s why it is best to work with providers who specialize in payroll for dispensaries, as they offer cannabis businesses the assurance that their payroll needs will be met with full transparency and assistance with banking challenges.
Because they’re specifically dedicated to providing payroll for dispensaries, cannabis businesses don’t have to worry about being dropped on short notice.
2. Opt for a payroll that integrates with your time tracking solution
Time is one of the most valuable resources for any business. Using a compliant payroll solution that offers integrated time tracking can save marijuana dispensary owners up to 40 hours per week.
But equally as important, it can help you stay compliant!
Integrated time tracking and payroll is paramount for ensuring compliance to the Fair Labor Standards Act — A law supported by the federal government that sets overtime rules that all businesses must comply with. Failure to compensate employees for all hours worked can lead to legal action against your business.
Plus, once tax season rolls around, you will have a precise digital trail of how many confirmed worked hours your employees are being paid for, and thanks to facial recognition punch ins, photographic proof that they did in fact work those hours.
The best part of an integrated time tracking and payroll solution is that you can streamline approved clocked hours to payroll. Meaning you don’t have to do any manual calculations, leaving little to no chance for errors made by human calculation.
3. Be sure it will help you save money with scheduling
Employee scheduling is the process of allocating how many hours employees should work, and when they should work. It’s an integral part of workforce management and, when done right, helps with cutting operational costs by maximizing employee efficiency.
Subpar employee scheduling can have disastrous effects on the success of your business.
With poor scheduling, employees are more likely to arrive late for shifts or even take longer breaks than allowed. This will eventually have a direct negative impact on sales and revenues.
On the other hand, schedules that require employees to put in more than their fair share of work can also be troublesome.
Employees will often quit if they feel they are being unfairly scheduled, and staff morale will take a hit if people feel they are being overworked. High employee turnover rates mean extra costs incurred on hiring and training new staff.
These issues can be circumvented by choosing a payroll solution that integrates with your cannabis company’s employee scheduling system, creating a direct line between the processes of scheduling, time tracking, and payroll services.
Additionally, payroll providers that integrate a POS solution with scheduling allow you the unique opportunity to forecast your labor based on historical data and set yourself up for success.
To help you keep on top of things at all times, a good payroll company should send you alerts during staff shifts when staff go into overtime.
This is particularly important because the federal Fair Labor Standards Act (FLSA) has special rules in place to guide the reimbursement of hourly employees doing overtime work. Failure to comply with these rules can land your dispensary in legal trouble.
4. Choose a platform that offers automated tip and overtime calculations
The bulk of the cannabis workforce is composed of hourly employees like budtenders, dispensary technicians, and growers. Hourly employees, also known as hourly workers, are individuals who receive an hourly wage for work done.
Federal law classifies hourly employees as “nonexempt”, which means they are subject to the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA). In 2019, the U.S. Court of Appeals for the Tenth Circuit ruled that the FLSA applies to the cannabis industry as well, despite the fact that cannabis is still illegal under the federal Controlled Substances Act (CSA).
This means dispensary employees are entitled to overtime pay for hours worked over 40 hours per work week, at a rate not less than one and one-half times the regular rate of pay. The FLSA also makes special provisions for tipped employees, who are employees who earn more than $30 a month in tips.
With all these strict provisions to keep in mind, calculating overtime pay, tips, and hourly wages can be a big hassle. Some managers, especially those overseeing smaller enterprises, choose to do these calculations manually to cut costs. However, manual calculations are time-consuming and prone to error, eventually making them more costly.
When you select a compliant dispensary payroll software solution, these calculations are done for you.
Beyond the calculation, opt for a compliant solution that’ll automatically remit your cannabis payroll deductions and ensure your payroll taxes are accurate. Payroll deductions involve the manager or business owner withholding money from an employee’s paycheck, usually for employee benefits.
When it comes to cannabis businesses, payroll deductions are not as straightforward as they are for other industries. Dispensary managers and owners have to take into account the IRS Tax Code 280E, which states that “no deduction or credit shall be allowed in running a business that consists of trafficking a controlled substance.”
Although the IRS Tax Code 280E was formulated primarily to prevent illegal drug dealers from claiming tax deductions for their business expenses, it also impacts state-legal cannabis businesses negatively.
Need help with 280E?
What Dispensaries Can Deduct According to 280E Tax
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