A necessary step in establishing a new business is setting up new payroll. If you’re a small business owner it is likely you’re forced to perform multiple tasks yourself, so it is crucial to emphasize the details during this process to ensure that everything is done correctly the first time. Making a mistake when setting up payroll can be detrimental to your organization, so below are some tips which will ensure it is done the right way.
Verify Local And State Laws
Some states require an identification number so that taxes can be processed. Do your research and speak with a local tax professional to find out what applies to you.
Your Employee’s Paperwork Is Critical
Whether you’re hiring employees to work part-time or full-time, they have to complete the W-4, which is a form for federal income withholding. This form confirms that as the employer you are withholding the correct income tax for every payment period.
Get Your Employer Identification Number
This number is also referred to as the EIN. You will need to speak with the Internal Revenue Service to request it, as it will be needed for setting up payroll.
Select A Pay Period
There are many options available when it comes to the period in which you choose to pay your employees. You can pay them weekly, bi-weekly, monthly or bi-monthly. Each option has its advantages and disadvantages, so it is important to weigh them carefully before making a decision.
Choose A Provider For Payroll
Many employers, especially small business owners, are tempted to perform payroll on their own. This is not recommended, as there is a tremendous amount of work involved which requires a lot of knowledge and experience, and if mistakes are made your business could incur costly fines. Automated payroll systems are available which streamline the process and are in compliance with current laws and can be automatically updated to remain in compliance with new ones.
Additional Things To Consider
Hiring new workers can be exciting, but it can also be time consuming and even stressful. They will have a lot of questions about how things work, especially when it comes to when and how they are paid. Some business owners choose to perform payroll completely on their own while others outsource to an HR professional. The larger and more prosperous your business becomes the harder it will be to perform payroll manually.
New hires will want to know how you can arrange for their checks to be deposited directly into their accounts, how they can alter tax withholdings, and whether you handle the payment of local taxes. In particular, many new hires will want to know specifically what taxes will be deducted from their checks, and what these taxes are used for. You will also need to inform them of what they should do if their physical checks or lost or if their direct deposit doesn’t arrive into their account when it should. These are the standard questions that new hires have regarding pay, and you must be able to answer them.