How to Manage Payroll for Your Small Business

Employers need to file wages paid to employees, taxes withheld, Social Security and Medicare deductions and employer’s contributions to Social Security and Medicare. Employees must be sent a Form W-2 by January 31 of the year following their paid wages. This form lists the employer’s information, the employee’s information and tallies total earnings, taxes and deductions made in the year.

However, if employees hand you a printed form, you’ll need to manually update the records. Before you commit to one system over another, consider factors like business growth, employee benefits, and the complexity of your state’s payroll taxes and laws. The FLSA has several requirements that fit into your payroll process—from tracking employee time at work to recordkeeping. You’ll want to remember those regulations when figuring out how to process payroll. If you’re a small business owner, chances are good you’re the one handling payroll.

Working with a payroll specialist relieves some of the burden on your shoulders, allowing you to focus on tasks that you’re passionate about or need your assistance. Many payroll professionals can handle anything from collecting employee tax withholding information and setting up direct deposit to distributing pay stubs and filing taxes. Payroll software, like QuickBooks payroll, cash vs accrual profit and loss is designed to accurately calculate the amount you owe each employee and the government.

How to do payroll with software in three steps

Treating an employee as a contractor or vice versa will cause serious problems down the line. Apart from different payroll policies, there are a lot of other aspects that differentiate independent contractors from employees. For one, employees get their contributions withheld from their salaries, which is not the case for contractors.

Implement a Dedicated Payroll Software Solution

Onboarding documents are important to complete when new employees start working for you, and they’re crucial to ensuring you manage payroll correctly. It’s best to create an onboarding schedule that will help you complete these forms on time so you avoid errors in the future. Maintain accurate and organized payroll records, including time cards, pay stubs, tax forms, and documentation of any deductions. If an audit does occur, cooperate fully with the auditors and provide all requested information promptly.

Misclassifying employees as independent contractors or vice versa

1. The basic payroll processing steps involve collecting employee information, and setting up a schedule, and issuing payments, all while keeping accurate records.
2. The size of a company and the number of employees also play a role in determining processing times.
3. It can take a few days for direct deposits to fully transfer to employee accounts and for checks to be printed and distributed.
4. After reconciling it, you’re ready to run payroll, which means approving direct deposits and the preparation of checks.
5. You must be sure Social Security numbers, bank accounts and other secure data cannot be accessed, stolen or misused.

When you have more than a few employees, the payroll process becomes very difficult to manage on your own. We recommend using payroll software if you are processing payroll for anyone other than yourself. Review your payroll records to ensure they are accurate and complete. Most payroll software and payroll services will calculate, file and pay federal and state payroll taxes on your company’s behalf. If you are making federal tax deposits on your own, you must use the free Electronic Federal Tax Payment System. How often you deposit federal taxes is based on the total tax liability you report projecting income statement line items for your quarterly federal tax return.

Keep in mind this refers to candidates with glowing credentials and also someone who can learn quickly and adapt to your work culture. To improve your business’ payroll management process, however, consider organizing payroll training sessions for your HR staff. Although the HR and payroll departments have distinct roles in an organization, they share functions crucial for a business’ success. While processing payroll is part of a human resource (HR) professional’s training, their expertise is more focused on what is cost insurance and freight cif for shipping recruitment and employee records management.

It is also a good idea to discuss payroll as part of onboarding new employees, so they know what to expect and who they can talk to if they have questions. The Equal Pay Act requires employers to pay all genders similar wages for similar work. The jobs need not be identical, but they must be substantially equal in skill, effort, responsibility, and working conditions. Communication will help identify areas of misunderstanding such as improper time sheet submission or issues in the use of timecards. Inviting suggestions on improvement will encourage support from your staff after changes are implemented. Check out our guide to creating a payroll budget for a deeper look into this process.