A Beginner's Guide to Payroll:
The 6 Things You Need to Know
Starting a business is something memorable and exciting. Over time, you'll add more employees as the business expands and the tasks increase. With this expansion, you'll not only need more resources but also to increase your payroll handling prowess.
As a beginner, you need to keep yourself in an ever-learning mode since you’ll be open to more tips and tricks. The gradual increase in your skills will edge you closer to being a master of payroll management. This article examines six aspects of payroll that you should seek to understand.
1. Understand the Forms
Before anything else, understand the different forms required and the information you will need for each employee. There will be specific documents that contain relevant information on your human capital, such as your employees’ name, address, date of birth, social security / national insurance number, salary, etc., as this will be essential when managing your payroll.
You should also understand the forms that hold information on tax and deductions for each employee as you will need these details when creating the payroll.
You should also consider gathering documentation proving each employee's citizenship status as this could be essential if your business expands into the international field later on.
You should definitely consider setting up a system for proper and secure document management.
2. The Compliance Aspect
As a business owner, the myriad of government regulatory measures may at first feel overwhelming, especially the human resource laws.
As a business startup, you need to take time and learn as much as you can about the different employment laws at state, federal and local level. This is where you will learn about the acts relevant to your industry.
You should also be familiar with the relevant government agencies in your region. For example, if you are in the US, keep checking the Department of Labor (DOL) and the Internal Revenue Service (IRS) rules and regulations so that you notice when there are changes you need to comply with.
On the other hand, policies and procedures may require you to include the payroll procedure in every employee's official handbook.
3. You Should Issue Paychecks (Paystubs) to Your Employees
A pay stub is an essential document in work settings and acts as proof of income. Its benefits go beyond this as it is the perfect tool for tracking salary information, taxes paid, and other benefits.
These days, many companies are investing more in producing paystubs due to their advantages in payroll processing. Since they safely record every worker's information, they become excellent tools in deriving valuable information, especially when using payroll software.
These days, employees have an easy time obtaining pay stubs as there are online platforms that help. It's a hassle-free procedure, and it can take you as little as two minutes to complete the whole process.
An online paystub generator is always available, meaning you can create your e-file any time you wish. This is something which brings much time convenience, especially in the modern world where time is limited.
What is essential is accurately filling in your information before downloading the form for printing. Even when you make self-induced mistakes, most online platforms have support teams ready to guide you.
4. Understanding Payroll Tax
As a business, you'll find yourself paying different types of tax, such as sales tax and income tax. Another significant type is the payroll tax. As a beginner, you may easily not understand this type of tax hence end up being non-compliant.
State, federal and local authorities usually impose payroll tax. The employee and employer wage withholdings are what attract payroll taxes.
There are generally specific types of payroll taxes that you ought to understand. In the US, these include the Federal Insurance Contribution Act (FICA), State Unemployment Tax Act (SUTA), Federal Unemployment Tax Act (FUTA).
Depending on the business environment you're in, the FICA taxes need payment every month or semi-weekly. In most cases, you'll find companies paying the FUTA taxes quarterly.
Since your business is small, you may be tempted to do the calculations independently, as everything seems straightforward. However, you need to get this right to comply with the authorities. Therefore, to be on the safe side, consider using the relevant tools such as GUSTO.
Such software can automate the calculations and filing of payroll taxes. Therefore, regardless of the complexity of your payroll, you'll always be compliant. Similar tools include Paychex, ADP Payroll, QuickBook Payrolls, and OnPay.
5. Set up a Payroll Schedule
Another significant issue to consider is to decide on the pay interval. Dependent on the nature of your business, you could consider going monthly, weekly, after two weeks, or any other option.
However, be mindful to not leave large gaps between paydays as this can be discouraging to workers.
Before setting up any schedule, it's critical to look into aspects such as your state or region’s laws. Different states offer flexibility on which dates you can consider paying your workers, but specifically, they put limits as a way of catering to the employee's interests. Another consideration when deciding your payroll interval is the timing of your cash-flow variance and direct deposits.
6. Keep Good Payroll Records
For the health of your business, consider keeping your payroll records well-organized. This is possible as all you need is to create a business policy on the documentation.
Train your employees in payroll processing and other related tasks as this creates efficiency and accuracy in your team. Proper planning helps avoid making mistakes when preparing payroll.
Mistakes are sometimes bound to happen due to human error. What tidy records do at such moments is to make it easy to back-trace where the problem is. This means that you will not be at the risk of employees filing complaints with an employment tribunal.
This also makes it easier to include all important information on tax liability that, if omitted, could cause problems for your company.
As a business startup, you'll hopefully experience an increase in payroll needs over time as your business expands. The best thing to do at such moments is to learn the tricks that ensure efficient payroll management, and this will also help you to always be compliant with tax and employment laws.
Further Reading from Skills You Need
If you are thinking about running your own business, or already do so, but feel that you need some guidance, then this eBook is for you. It takes you through self-employment in easy steps, helping you to ensure that your business has more chance of success.
The Skills You Need Guide to Self-Employment and Running Your Own Business is the guide no new or aspiring entrepreneur can afford to be without!
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About the Author
Cristina Par is a content specialist with a passion for writing articles that bridge the gap between brands and their audiences. She believes that high-quality content plus the right link building strategies can turn the tables for businesses small and large.