About 40% of business owners say that processing payroll is one of the worst things about owning a business.
It’s time-consuming and expensive to process payroll. You want to avoid feeling that way when you process payroll for the first time.
How can you set up payroll and still keep your sanity?
Keep reading to find out how to set up a payroll system that works for your business.
1. Get Your Documentation in Order
The first thing is that you need to get your documentation in order to process payroll. As soon as you hire employees, you need to get an EIN from the IRS. This is your Employer Identification Number, which is how the IRS identifies your business.
You’ll also need to have the proper forms filled out by employees when you hire them. You’ll need Form W-4 from them, which tells you how much you should withhold from their taxes.
Finally, you’ll need to collect timesheets from employees if you pay them hourly.
2. Choose a Pay Period Structure
Your pay period structure can go a long way to retain employees. Many employees live paycheck to paycheck. If you can pay your employees frequently, their cash flow and job satisfaction would improve.
However, you need to balance that with your time. You can set up a bi-weekly pay period, where employees still have cash flow throughout the month, and you don’t have to spend hours every week processing payroll.
3. Find a Payroll System
Payroll systems help you save time and reduce errors. These are computer-based systems that help you calculate federal and state withholdings and generate pay stubs for your employees.
When you look at payroll systems, be sure to look at the ease of use, cost, and the various features of each system.
4. Process Payroll and Distribute Pay Stubs
Your next step in setting up payroll is to actually process payroll. With the first steps in place already, this part should be easy.
You may want to take an extra step to ensure that your payroll is accurate. You don’t want to get into trouble with the IRS by making a mistake on tax withholdings.
Take a look at the tax withholding tables from the IRS and your state, then compare them to your payroll system. Once you confirm everything is correct, you can distribute checks and pay stubs to your employees.
5. Pay Payroll Taxes
The final step in setting up payroll is to pay your payroll taxes. This is done on a monthly basis.
You take your employee’s tax withholdings for federal income taxes and FICA and send them to the IRS. You also have to match your employee’s contribution to FICA.
Easily Set up Payroll In a Few Steps
When you have to pay your employees, processing payroll can be intimidating. It doesn’t need to be when you set up payroll in a way that works for your business.
Just remember to keep your documentation nearby and have good systems in place to make payroll processing a breeze.
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