Despite conflicting information urging small businesses to try to take on payroll themselves or to outsource it, most businesses start by trying it on their own. If you’re trying to juggle employee payroll for a huge window cleaning service while managing your outreach and marketing, you can get overwhelmed. However, if you know the basics, you can manage like a pro.
Here are four steps to managing payroll on your own.
1. Get W-4s From All Employees
The first thing you need to get started with payroll is to have information from all of your employees. You need to know the deductions they’re looking for, their tax information, and how they want to have their finances handled.
In order to get their first paycheck and so you know how much to withhold, get a W-4 from each one of your employees. Have them as part of your onboarding paperwork to make life easier. If you’ve already hired someone without their W-4 filled out, they’ll want to do what they can to get paid so just remind them that it’s a requirement.
The more allowances or dependents they choose to have considered as part of their deductions, the fewer payroll taxes will be taken out of their paychecks. For your employees with several dependents, they will need you to adjust their payroll taxes accordingly. Since you can’t pick one number and apply it to everyone, you need to manage their pay based on their situation.
Every time you hire a new employee, you need to file a new hire report for them. This will create adjustments to the amount of taxes that you pay at the end of the year and what is expected of you by federal and state governments.
2. Get Your EINs
Every business needs to get an Employer Identification Number or set of numbers for their business. Before you start working on payroll, you need to have access to your numbers.
In shorthand, your Employer Identification Number is basically like a Social Security Number. It’s used to register you with the IRS and to identify your business as a known business entity. If you pay employees, you’ll need to have an Employer Identification Number.
They’re simple and easy to get from the IRS, simply by registering on their website. Most every state also requires that you get an EIN related to their own state tax system. Once you have both, you’ll be legally able to hire and to pay employees.
This will make tax filing much easier for both you and your employees at the end of the year as well. Most states have resources to help employers understand this process online. Check out the IRS website for the list of states and how to get the information that applies to you and your business.
3. Pick A Payroll Schedule
Your payroll schedule will be one of the most important pieces of information for your employees. Everyone wants to know the date that they’re getting paid. People often schedule their lives around it and use that information to figure out their bill paying and life management schedules.
A predictable paycheck is essential to employee happiness and their feeling of security in the workplace.
Following your EIN, you need to get insured to protect yourself and your employees. Workers’ compensation insurance will allow you to take care of employees who are injured by other employees or on your site. Put up workplace posters so that all employees know what their rights are, how they’re protected, and who to contact in case of issues.
After that, you can start putting employee pay dates on your calendar. While some companies like to save money on the payroll by paying employees every two weeks, this isn’t always ideal for employees. If you find your employees are unhappy with your pay schedule, calculate what it would cost to pay them every week.
You also need to write down when your tax payment due dates are. There can be massive fines for missing tax filing and could stifle your business growth if you don’t adhere to them. On top of that, pull out every stop to ensure that you always file your taxes on time.
4. Calculate Your Income Taxes and Withholdings
Before you pay your employees, you need to do a few deductions. Your employees need to get paid on time but you need to ensure that you’ve deducted federal and state withholdings in advance. This amount needs to be sent to state and federal offices on time, every month.
You need the people you work with to pay you on time, and the government expects the same from you. Take the time to learn more about what you should be giving to your customers to maintain a perfect balance with everyone you do business with.
You can use the IRS’s own Withholding Calculator tool to ensure that you’re always calculating paychecks correctly. Every state provides resources as well, to ensure you’re always sending in the right amount of taxes to your local offices.
It’s your responsibility as an employer to keep track of your employee and employer portions of taxes as your pay schedule marches on. Then once a month, you’ll be required to submit it all to the correct agencies. Call ahead and make a contact at every agency who you can rely on in case any issues arise.
They’ll be much happier to help you in advance than to have to track you down when there are issues because of mistakes made.
Employee Payroll Can Be a Headache or a Breeze
Depending on how busy you are and how good you are at managing money, employee payroll can be simple and easy. If your business is growing and thriving, you might find that it’s easier to get someone to do it for you. Starting it out on your own is never a bad thought.
For free tools to get your payroll started, check out what we have to offer.