Except for in a few states, SUI taxes are not deducted from an employee’s wages. Before you can calculate your employees’ wages, it’s essential to understand the different types of pay so you can mitigate payroll errors. To help prevent this from happening at your company, read this overview on how payroll works, how to run and manage payroll, and what your options are for completing the process. The payroll process can vary for each business, but there are some core functions that need to be completed with each payroll run. While employee information is typically collected during the onboarding process, employees also need to let you know when their information changes.
Before you commit to one system over another, consider factors like business growth, employee benefits, and the complexity of your state’s payroll taxes and laws. If you’re a small business owner, chances are good you’re the one handling payroll. Figuring out how to process payroll can be intimidating, but don’t worry.
Gather Required Business Information
An essential piece of the payroll puzzle is maintaining accurate and organized records. At some point, the IRS may audit you and investigate to ensure that all of your employees are working legally and that you’re adhering to labor and payroll laws. Technically, a manual payroll is done by hand with calculations performed on paper. With the use of computers, most people consider manual payroll as any payroll you process without the help of a payroll processing provider.
Problem #1: Not keeping payroll records for at least 3 years
Aside from time tracking, all of this information goes directly into work in progress or work in process your payroll software. This guide is intended to be used as a starting point in analyzing an employer’s payroll obligations and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services. Throughout her career, Heather has worked to help hundreds of small business owners in managing many aspects of their business, from bookkeeping to accounting to HR.
Many businesses appreciate the touchpoint with their employees of managing the process and making sure they are the ones that deal with any issues that come up. Having a third party handle that could impact your business culture in a way you may not intend. The largest benefit of manual processing is the cost, as you don’t have to buy any software or pay someone else to run payroll. However, if you calculate what your own time is worth and how long it takes to process payroll, you may find that you aren’t saving money. Payroll management encompasses the entire process of calculating employee hours, paying employees, withholding taxes and maintaining the financial documentation for your business. So, while you can certainly figure out the process, doing payroll yourself can be difficult.
Report and update payroll records
Creating a standard payroll process will improve your payroll team’s productivity. It can also lower your risk of making payroll mistakes, making your payroll department more reliable. Meanwhile, experience, adaptability, and integrity are also important qualities.
Managing payroll
- Quickbooks Online Payroll creates a to-do list that takes you through the onboarding process.
- It’s important to forecast these expenses accurately to prevent any unexpected shortfalls.
- Failure to pay employer- and employee-withheld taxes accurately can result in penalties.
- Many payroll issues such as underpaid taxes or employee misclassifications (contractor vs employee) can be corrected by instituting a wholly transparent payroll policy.
- Pay management generally means the process by which businesses pay their employees and file payroll taxes with government agencies.
Marshall Hargrave is a financial writer with over 15 years of expertise spanning the finance and investing fields. He has experience as an editor for Investopedia and has worked with the likes of the Consumer Bankers Association and National Venture Capital Association. Marshall is a former Securities & Exchange Commission-registered investment adviser and holds a Bachelor’s degree in finance from Appalachian State University. Sign up to receive more well-researched small business articles and topics what is a personal accountant 10 things they do for you in your inbox, personalized for you. Put the policy in writing, display it prominently throughout the workplace, and ensure each employee has a copy. Payroll audits can be conducted internally or externally, by entities like the IRS or DOL.
In running a business, poor decisions like this can omission easily be overlooked until it’s time to process your payroll tax payment. You could end up not having enough money to replace the borrowed funds and risk not being able to pay the IRS. Staying updated on these laws, especially when managing a geographically dispersed team, can be challenging, but it’s essential. Use resources like the Department of Labor’s website, webinars, or consult with a labor law expert to ensure you’re compliant. By thoroughly understanding labor laws, you can navigate the complexities of payroll in a remote work era, safeguarding your business and treating your employees fairly. Ultimately, any software you use needs to complete accurate calculations, understand tax guidelines, and increase efficiency within your company.
For paper records, you can typically store them yourself or at a storage site. For electronic records provided by payroll software, back up the files on a separate device or platform. The Internal Revenue Service requires businesses to keep employment tax records for at least four years and the U.S.