Most business owners hate the entire process of handling payroll as it can be rather complex and complicated. That said, if you have only a few employees working for you, it is better to handle it yourself than to use a third-party to take care of it for you. To help simplify things for you, this article will help you understand the entire process of payroll in a step-by-step manner. Remember that payroll, as well as payroll taxes, are crucial decisions, as are their due dates. Hence, you must set up your payroll after carefully considering all these aspects and making your decisions accordingly.
The fundamental steps involved in the payroll process are as follows:
1. Preparation – Prior to hiring employees, you must prepare yourself for payroll processing and calculation as well as for deciding who will take care of the various payroll tasks for you.
2. Paying All The Employees – Then, it is vital to set up a payroll system in order to calculate the payment of your employees. This system must also clearly mention how to write paychecks as well as distribute them to the employees.
3. Post-Payment – Once you have paid all the employees, you must set some money aside for your taxes. You must also complete a payroll register and make tax payments accordingly. The payroll reports must be sent to the IRS at the stipulated time.
Prior To Hiring Employees – Before hiring employees, it is important to:
- Understand all your legal responsibilities and rights as an employer
- Create a checklist to ensure that you complete all the employer pre-employment tasks
- Decide on when and how to pay the employees. This includes more questions that you must consider, such as:
- Which of your employees will be salaried and which ones will be hourly?
- How often will you be paying your employees? Will it be weekly, every other week, monthly or twice a month?
- When and how will you be paying overtime?
- How will you track the time of the hourly employees?
- How many paid leaves will you offer to the hourly employees? (Remember that legally, you are not obliged to pay your employees for any leaves or time off they take. Still, most businesses pay their employees for vacations, holidays, personal days and/or sick days).
4. Choose An Accounting System – The majority of small businesses make use of an online accounting system that comes with an option of payroll processing. You can also check out Nomisma Payroll Online and Android Small Business Payroll Apps. They will definitely make your life easier, where payroll processing is concerned.
5. Complete The Paperwork To Be Signed By The New Hires – Every new employee is required to complete some paperwork. This constitutes a part of their onboarding. As the employer, you must be certain that all the applications and new hire forms are filled adequately.
6. Establish Direct Deposit – This is another crucial role for employee paychecks. As an employer, you will be required to get in touch with your bank to set up a system of direct deposit. You’ll also have to understand how the bank’s direct deposit system functions. In addition to that, you will require authorisation from all the employees, including their checking account details.
7. Establish A Different Payroll Bank Account – You must set up a different payroll bank account with your bank that you will use to write paychecks as well as pay your employees through direct deposit. Remember that a completely separate payroll bank account instead of using your personal bank account will also assist you in keeping track of all the transactions. Furthermore, you will not have to worry about mixing up these transactions with your other business or personal bank account.
Paying Your Employees – You must pay your employees as per their pay periods that have been set up by you previously.
1. Calculate The Payment Of Employees – To begin with; you must calculate the amount of gross pay for each employee of your business. Gross pay is essentially the total amount you need to pay to the employees according to the hours worked by them and the total or rate of the pay period for all salaried workers.
2. Calculate The Deductions And Withholding – Then, use the amount of gross pay to calculate the income taxes of each employee.
3. Write Paychecks – Write the paychecks or send them via direct deposit.
4. Get The Totals For Tax Deposits Of The Payroll – Once you are done with the entire payroll process, get the totals for tax deposits of the payroll of each employee.
Today, there are several payroll processing software you can invest in. However, if things still feel tricky, you can employ the services of a good accountancy firm such as the Target Accounting to handle your payroll and taxes in a hassle-free manner.