Did you just hire your first set of employees? That means your business is growing, but it also means you have to learn how to pay your employees.
Moving from a one-man startup to hiring your first employee is a thrilling moment in your business growth. But are you ready for it?
Small errors on paychecks could end up costing 70 times as much as the mistake. A tiny slip caused by human error will result in unhappy employees, huge court and state fines, and wasted time in correcting the mistake.
Knowing how to pay employees accurately and on time isn’t as difficult as it may seem. Avoid being daunted at setting up your first pay schedule by following this quick guide to small business payroll.
When Do You Need to Set Up Payroll for Your Small Business?
As soon as you pay someone else for their completed work, you need to have a payroll system in order. Even if you’re running a family business and pay your cousin for their ad-hoc hours in cash, you need to play it by the book and pay your payroll taxes.
Your business could be audited by state or federal tax organizations at any time: don’t think because you’re small you’ll be ignored.
Be prepared for audits and business growth: set up your payroll administration process as soon as you hire your first employee.
How to Pay Employees in Four Simple Steps
It’s easy to set up a simple payroll system. You don’t need to spend a lot of money or time to create an easy and scalable payroll system. Follow these steps to make every pay schedule seamless.
1- Complete Employee Paperwork
Have every employee and contractor fill out a W2 form. Make sure you classify them as an employee or a contractor, too – this will affect the taxes you pay.
Keep up-to-date employee records at all times to make sure you’re calculating all benefits, dependent benefits, and deductions accurately every month. It’s best to check with all employees every quarter that the information you hold for them, such as their address and phone number, is still correct.
2- Get an EIN
You’ll need an Employer Identification Number before you can complete your first payroll schedule. Apply for a federal EIN and make sure you find out if you need a state EIN, too.
This must go on all of your paystubs and information sent to employees about their financial details.
3- Find Payroll Software That Suits Your Needs
Simple pay stub generator apps are the best way to get started on creating professional and accurate paychecks.
A paystub maker does all the essential calculations for you, so you just need to make sure you pay the salary and taxes shown on each paystub. It’s that easy!
4- Withhold and Pay Employer Taxes
Check your generated pay stubs to determine how much tax you need to withhold from each employee to pay your state and federal taxes.
Arrange to make payments for your taxes when they’re due, too. Overdue tax filing will make your business accounts more complex to sort and also could cost you significant fines.
More Small Business Tips You Can’t-Miss
Knowing how to pay employees is just one small part of running a successful business. From marketing plans to product research and development, as a small business owner, you’re juggling all sorts of roles.
Simplifying every business process will give you more time to spend on business growth tasks instead of administration. Check our business blogs to discover more hacks that’ll streamline your business processes and supercharge your success!