Doing payroll can be time-consuming and overwhelming, especially if you are doing it manually and without any help. However, it is mandatory for any business because you must pay your employees. If you have a lot of employees, it will be even more time-consuming and you will be prone to making errors. Some businesses might outsource this task to someone else or hire a payroll manager. Others find that investing in automated payroll streamlines the process.
Whatever method you choose, here are a few basic steps to follow to guarantee your process goes a bit more smoothly as you do payroll:
Apply for an EIN
Every business must have an EIN. An EIN (or Employee Identification Number) is a unique set of numbers used to identify your business, like how most people have an Social Security number. This is important when it comes to paying taxes. You can apply online, which would be the best option, or by fax, mail or phone, which may take longer to receive approval.
Collect Employee Information
Next, you will need to collect your employees’ information by having them fill out a W-4 form (employee’s withholding certificate) and an I-9 form to confirm their eligibility to work in the U.S. You will need this information to submit to the IRS, as they will provide legal information used later for processing payroll.
Create a Pay Schedule
A pay schedule is used to determine when and how often your employees get paid. You’ll need to decide if they get paid weekly, bi-weekly, semi-weekly or monthly. Be sure to check your state and federal laws to ensure you fall within payday guidelines and are not late on your payments!
Maintain a Payroll Record & Pay Payroll Taxes
It is important to keep and maintain a payroll record to ensure you have been keeping track of accurate information so that when you pay taxes, you are less likely to make mistakes. This will also be beneficial in case any issues pertaining to payroll arise. Regarding payroll taxes, keep in mind you may need to pay several taxes, such as Federal Unemployment Tax (FUTA), State Unemployment Tax Act (SUTA), State Unemployment Insurance (SUI) and Federal Insurance Contributions ACT (FICA). You will also need to file your federal business taxes annually.
These are only a few steps out of many regarding how to process payroll. Be sure to do research and confirm the information is accurate before jumping into the process. That way, you can make sure that you are adopting the best practices for smooth, secure payroll.
You can always outsource this kind of work, especially if you have many employees; otherwise, you may become quickly overwhelmed. Perhaps even more effective, you could also use programs to help you since everything can be done digitally nowadays. In any case, doing payroll may not be easy or stress-free, but you can prepare for it sooner rather than later.
In order to understand more about payroll solutions, we encourage you to read through Paycom’s reviews.