Managing payroll – it’s a necessary part of every small business owner’s role, but very few people’s favorite. It includes running payroll, making sure you remit payroll taxes and storing documents as required by law.
We hear you – isn’t there an app for that? There sure is, and finding the best paystub generator out there is part of the battle. But there are some basics to managing payroll every small business owner needs to know.
Read on for a quick guide to managing payroll for small business owners.
Gather the Information You Need
To manage payroll for a small business, you’ll first need an Employee Identification Number (EIN). You’ll also need an employee handbook that sets out your business’s policies, including employee rights.
There may also be state registrations for businesses that you need to comply with. This is where you may need specialist help.
Always consult with an accountant or specialist lawyer first. That way, you know your obligations before you start paying your employees.
From your employees, you need to gather:
- Form I-9 (employee eligibility verification)
- Form W-4 (federal withholdings)
- State income tax withholding forms, if any
- Bank account information
You will also need to agree on salaries with all your employees or set an hourly rate for those paid by the hour. You will need to implement a tracking system to accurately record the hours of hourly-paid employees.
You can enter all this information into payroll software.
Setting a Payroll Schedule
Now you have the information you need to hand, you can decide on a payroll schedule.
This will usually be weekly, bi-weekly, or monthly.
Pay Calculations
Begin by calculating gross pay for all employees. Look to automate this wherever possible, even for hourly-paid staff. Look at using time clocking software to simplify this process and avoid manually entering employee hours.
Calculate Deductions
There are three types of deductions: pre-tax, withholdings, and post-tax.
Pre-tax deductions include health insurance and some retirement savings. These reduce the level of taxable wages you pay.
Tax withholdings include federal income tax, state and local taxes, and half of Medicare and Social Security taxes (FICA). There may be additional taxes depending on the state and the employee.
Post-tax deductions could include things like life insurance and Roth 401 (k) contributions.
Once all these calculations have been made, run a payroll reconciliation. This will help you to spot and correct any errors before the checks are cut and paid.
Generate Paystubs
Now you’re ready to cut employees checks. Along with this, you also need to use a paystub creator. You can use an online paystub generator to do this.
A checkstub maker for small business owners takes the hassle out of this process. It provides a detailed breakdown of pay and all deductions. Employers are required to provide these for employees and keep these records on file.
The Bottom Line: Managing Payroll for Small Business Owners
Modern payroll software and a digital paystub generator can make the process of managing payroll much easier than before. The key is gathering and inputting accurate information.
Make sure that you are compliant with all federal and state tax laws before you run payroll. Keeping it ticking over will just be a matter of updating your records as needed.
Enjoyed this article? Check out our Business and Finance sections for more helpful hints and tips for small business owners.
