When companies get to a certain size, it’s normal to have an employee or even an entire department dedicated to payroll. Small businesses don’t have this luxury. If it’s just you and a small group of employees, it’s likely that you’ll undertake this role.
It’s just another thing on the ever-growing list of things to do for a CEO, but if you take the time to learn the payroll basics, it can be quite easy. Today, we’re going to help you do that. With our help and a piece of software or two, your employees will be getting paid on time and in full.
Why It’s Important to Learn Payroll Basics
Aside from having to pay your employees for the work that they do, payroll is important because you need to keep your finances in order so you can do taxes. If you’re just starting your company, you need to make a few big decisions that’ll dictate how running payroll will work for you.
Decide whether you’ll pay employees hourly or by salary, how often (weekly, biweekly, monthly), and how overtime and time off works. Make each new employee fill out a W-4 form and an I-9 form, which are for tax purposes and proving work eligibility, respectively.
It’s always a good idea to set up a separate bank account that’s just for payroll so you don’t get it mixed up with other business funds.
The best way to pay your employees is with direct deposit and a pay stub. Set up a direct deposit system so the money goes right into your employees’ bank accounts. If you do this, you’ll also need to obtain banking information from each of them.
Paying your employees involves calculating their net pay for the pay period. To get this number, you take their gross pay (hours worked x hourly wage OR regular salary) and remove all deductions (federal, state, local tax, health plans, retirement contributions, etc).
An easy way of making and issuing pay stubs is with PayStubCreator. With these, you can create a template that you’ll use every time; you just have to punch in the numbers and you’ll get your paystubs. It makes doing payroll so much easier and you’ll have it done in a fraction of the time.
After You pay Your Employees
As a business, you’ll probably have to make regular deposits to the IRS for the money that you deduct from the employee for taxes, social security, medicare, as well as the amount that you as the employer owe for medicare and social security.
You’ll also have to send in your employer federal tax return on a quarterly basis, along with any state and local taxes. This is in addition to your year-end taxes and W-2’s.
The Basics Aren’t So Hard
Learning the payroll basics isn’t so hard, but as your company starts growing, you’ll probably prefer to rely on software to help you. Eventually, you’ll probably also want to hire someone to tackle payroll for you because running a business and performing these duties can be exhausting.
For now, use what you’ve learned here today to properly do payroll and get your employees paid.
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