How to Do Payroll: The Complete Business Guide

Employment payroll isn’t as difficult as many people make it out to be.

Although payroll is an important part of a business, it can be easily be done providing that you take the necessary steps. Payroll is nothing more than a system used to track employee hours and provide them with payments for their work.

Understanding how to do payroll is necessary if you’d like to run a business because you can get into legal trouble if you don’t pay employees what they’re owed. Fortunately, we’ve put together a quick list of the steps you need to take to start doing payroll for employees.

Keep on reading to learn how to do payroll the right way!

Obtain an EIN

The first thing you’ll want to do before running employment payroll is to obtain an Employer Identification Number (EIN). This is crucial because it acts as a Social Security Number, but for businesses. It’s used to identify your business and makes it easier to file taxes.

You’ll need an EIN to prevent getting into legal trouble and you can apply for one through the IRS’s website. You’ll use this number whenever filling out tax-related forms, such as the W2 form.

Gather Employee Tax Info

After obtaining an EIN, you’ll need to gather employee tax info. You can have them fill out W-4 forms which can be used to find out the employee’s marital status, tax allowances, and whether they want you to withhold money for taxes.

Keep in mind that if an employee’s marital status changes, they’ll need to file a new W-4 form. This is important because people typically have to pay different percentages in taxes depending on their marital status.

You’ll also need them to submit I-9 forms, which verify their eligibility to work in the United States. Any time you hire someone, you’ll need to report them to the new hire bureau in your state.

If you plan on offering a direct deposit, you’ll need to know their routing number so you can connect with their bank. If an employee doesn’t want a direct deposit, you can stick with physical checks.

Set a Payment Schedule

Properly doing payroll for employees will require you to set up a payment schedule so that they know when they’re getting paid. This is a mistake many new business owners make, but it’s unprofessional and can prevent people from working for you.

Setting up a payment schedule is as simple as deciding how often you want to pay employees. Most businesses use a bi-weekly payment schedule, meaning employees get paid every two weeks. However, you can opt for a monthly payment schedule if you’d like to avoid sending out payments as often.

Most employees will prefer a bi-weekly payment schedule, especially if they earn hourly wages. Those with defined salaries are more accepting of monthly payments because they always know how much they’re getting with each check.

Aside from figuring out how often you want to pay employees, you need to decide which day you want to pay them. It’s normal to see businesses pay on Mondays and Fridays, but you can use whatever you’d like. Just choose a day that’s more convenient for you to get the money out.

Implement a Clock-In System

Although employment payroll isn’t that difficult of a process, it can be hard to keep track of employee hours if you don’t have a clock-in system. When employee clocks in, it means that they’ve just started their shift.

Implementing a clock-in system will prevent you from overpaying or underpaying employees because you’ll know exactly how long they’ve worked.

You can do this by having a manager keep track of when an employee comes in and leaves. However, it may be optimal to set up a digital clock-in system that employees can use. With this, they can sign into a computer or swipe a card to let the system know they’ve started working.

If you decide to use a digital system, continue to have a manager keep track of employee hours in case something goes wrong with the system.

Provide Paychecks and Pay Stubs

Now that you know how to run payroll, all you’ll need to do is start distributing checks and pay stubs. If you’re doing a direct deposit, you won’t need to worry about writing or printing checks. However, you should always provide your employees with pay stubs.

Pay stubs will give your employees a better idea of where their money came from. They can see how many hours they’ve worked for and how much was deducted from their check.

Creating a pay stub can be done within minutes with a pay stub creator. After choosing a template, you’ll fill out the required information and the pay stub can be printed.

Pay stubs will show the gross pay, net pay, and deductions of an employee’s wages. They’ll also have employer information, giving employees a way to prove their income if they want to get a loan.

Now You Know How to Do Payroll

Employee payroll is one of the most important things to take care of as a business owner, so you can’t afford to get it wrong. After reading this article, you know how to do payroll as effectively as possible. All you need to do is get started by getting an EIN.

Keep in mind that you’ll need to provide your employees with accurate pay stubs, so get their tax info and start properly filling out the checks. If you fail to run payroll, you’ll risk getting fined or sued by employees.

Browse our articles to learn more about running a business.




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