If you are trying to figure out how to do payroll, you are in luck! Check out our guide right here on the different steps to take.
With over 30 million small businesses in the United States, it’s no wonder why online searches like “how to do payroll” have become so hot in recent years. That tends to be particularly true during April which is synonymous with filing taxes.
If you’re looking to save yourself money this year by processing payroll yourself, know that doing so can be tricky if you’ve never done payroll before. Still, even inexperienced people can manage payroll so long as they’re willing to carefully follow steps.
Below, we share with you the 5-step process you’ll need to go through to get your employees paid the right way.
Gather Tax Information
To pay your employees and log their tax withholdings, you’ll need to collect information from them and your business.
For starters, employees will have to fill out a W2 which will give you information like their social security number and how much should be withheld from their paychecks. After you have a completed W2 in hand, you’ll need to pull up your EIN (employer identification number) to log W2 data.
If you don’t have an EIN, you can get one for free on the IRS website.
Accurately Track Employee Time
To pay your employees accurately, you’ll have to know how much time they’ve worked for you. While that may seem as simple as having them clock in and out and multiplying their time by their hourly rate, things can get a lot stickier depending on where you live.
For example, most states have laws that require you to pay your employees more after they’ve worked certain amounts of hours or on certain holidays.
With your employee’s hours and an understanding of when those hours were worked in-hand, you should be able to run your payment calculations.
Multiply the number of hours your employees worked during regular hours by their standard rate. Then, organize the hours they worked overtime and/or on days they’re entitled to more compensation and multiply those figures by the larger rate you’re required to pay.
Once done, add together all of your totals to come up with a final figure.
Take Out Deductions
Based on how your employees filled out their W2, you’ll need to take deductions out of their paycheck and hand that money over to the government. The IRS has tax withholding calculators which may help determine withheld amounts.
Pay Your Employees
The final how to do payroll step can also be the most rewarding since, with all your calculations done, all that’s left to do is compensate your team!
Create a pay stub, write your employees their checks, and hand both items to them on their scheduled payday. Be sure to let your team know that if they notice any discrepancies, they’re welcome to bring them to your attention.
Just Because You Know How to Do Payroll Doesn’t Mean You Have To
Knowing how to do payroll is great because it can save you money and makes you a fuller business owner. Still, payroll can be tricky and mistakes might cost you a lot of time or even legal trouble. That’s why, even with your newfound education, you may want to leave payroll processing to a pro.
The choice is yours!
If you’d like more information on running your business, feel free to check out the newest content on our blog.