Note that employees are typically paid several days after a pay period ends to allow time to calculate hours and withholdings. If you prefer handling payroll on your own, payroll software can help you save time, automate certain processes and reduce the chance of mistakes. Many products can handle payroll tax filing and payments on your behalf, but you’re still ultimately on the hook for meeting those obligations.
Some states have additional rules about how and where the records can be kept. For paper records, you can typically store them yourself or at a storage site. For electronic records provided by payroll software, back up the files on a separate device or platform.
Your team’s pay stub, time tracking hub
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Figure out your pay schedule (and how wages get paid)
Typical pay schedules are weekly, biweekly or semimonthly.Have a process for tracking work time. You may have a time clock or use a computer program to log time. Whatever you choose, train your employees on tracking their work time properly to get paid correctly. The next step is to calculate net pay by taking the gross pay amount and subtracting deductions. If you’ve received court orders for wage garnishments, consider using payroll software with garnishment management services to stay in compliance and avoid penalties.
- This means that you need to keep time cards, spreadsheets and copies of checks and deposits for this period of time should an audit or a discrepancy arise.
- Direct deposits are electronic transfers made directly from the business account to the employee’s account, which is an efficient process with low risk of fraud and low fees for employees.
- The Medicare rate is 1.45% for the employer and 1.45% for the employee.
Set up and track employee paid time off and manage paid, unpaid, sick, and vacation time. Managing payroll covers a lot of territory, but here are the minimum main tenets that most employers have in place. You’ll also need to make sure that you have an employer identification number (EIN). The IRS issues the primary EIN and you can apply online for free. You will also most likely need a state tax number from the state’s tax assessor. Wave PayrollPlans start at $20 per month (base) and $6 per person per month.
Step one: Determine employee classification
Use the IRS Withholding Estimator to responsibility center definition determine how much in federal taxes you must withhold for each employee. Check with your state tax assessor’s office to determine the right amount to withhold for state taxes. Taxes are usually paid monthly, so collect them, set them aside and make payments as required. If you are running payroll manually, the process will be important to ensure that you don’t overlook any critical detail when processing payroll. When setting up the process, determine a pay schedule that you will stick to.
Do-it-yourself payroll software
If you do not want to outsource payroll, consider using a software to process your employees’ payments and taxes. The Internal Revenue Service requires businesses to keep employment tax records for at least four years and the U.S. Department of Labor requires companies to keep payroll tax data for at least three years. You’ll need to figure out how wages get distributed to your employees. The most common methods to pick from are direct deposit or distributing paper checks.
Then, stay on top of your payroll by regularly updating records and tracking employee hours so that when it comes time to run payroll it can be a smooth, accurate process. When it comes to general employee benefits, over half provide workers’ compensation insurance, followed by a third of SMBs offering a retirement savings plan. In larger companies, payroll is typically managed by the HR department or a dedicated payroll administrator.
