Payroll Systems: How to Start Paying Your EmployeesLinda Jenkins, August 28 2015
Online vs. In-House Processing
Payroll processing can range from complicated to simple; the number of employees and the type of system you use are the main determining factors. If you’re paying workers for the first time, you must perform specific tasks to ensure they are paid appropriately and that your payroll tax obligations are fully met. Here are some key considerations when deciding whether to process payroll in-house or use an online payroll service:
Processing Payroll In-House
1. Perform the necessary legal tasks prior to hiring employees. In the US, this includes obtaining a federal employer identification number from the IRS, registering with the state/local revenue agency and the state labor division, obtaining worker’s compensation if applicable, and posting compliance posters that the federal and most state governments require.
2. Give all new hires a W-4 form and the applicable state and local tax withholding forms to complete. The Internal Revenue Service requires you to withhold federal income tax from all employees’ paychecks, unless an exemption applies. Most states require state income tax withholding and some local governments require local income tax withholding. The W-4 and state and local tax forms that employees complete helps you to figure out the amount of income tax to withhold from their paychecks.
3. Establish a regular payday, such as weekly, biweekly, semimonthly or monthly. Most states have minimum payday laws, which require employers to pay employees by a certain time; check with your state labor department for minimum paydays that apply to you. You may pay employees more frequently than the required time frame, but not less. If the state does not have minimum payday laws, federal law applies.
4. Invest in software if you are processing in-house. Payroll-processing tasks may include paying hourly and salaried workers, and calculating voluntary and involuntary deductions, such as payroll taxes, wage garnishments, and health and retirement benefits. This is often a time-consuming process, which is prone to errors if done manually; software greatly reduces this risk, but still requires vigilance to avoid steep tax penalties from the IRS and/or the state revenue agency. Choose a software package that matches the size of your payroll and has accounting features for W-2 purposes. Examples include Xero, Paysoft, and ZPAY.
Using an Online Payroll Service
This is by far the most efficient and cost-effective solution for your business. You can avoid the hassle of keeping up with ever-changing regulations, adhering to unforgiving tax reporting schedules and dealing with complicated software simply by outsourcing the entire task to an online payroll service...
Over 500,000 businesses trust Paychex for payroll services, HR, and benefits outsourcing, making them one of the top payroll providers and 401(k) record keepers in the nation:
To Get This Offer Call Paychex Now: 800-379-3147
If you choose to outsource your payroll, designate an onsite person that will be responsible for ensuring that all employees hours are reported accurately and on-time.
Working with a provider such as Paychex can also help fulfill industry-specific needs, such as in the case of restaurant and construction payroll, allow you to easily add to your workforce, avoid steep tax penalties and mail out special forms like 1099s. Gold Alliance Group is an authorized affiliate of Paychex.
Improve your knowledge of payroll requirements...
Consult with a Certified Public Accountant for instructions on withholding, paying and reporting federal payroll taxes.
Familiarize yourself with US Employment Laws.
Check with your state revenue agency for guidance on withholding, paying and reporting state income tax. The agency can also advise you on other state requirements and tell you what department to contact for further guidance, such as state unemployment tax, disability insurance and local income tax.
Consult with the U.S. Department of Labor, Wage and Hour Division, and the state labor department for wage and hour information, such as minimum wage, overtime, child labor, record-keeping and break policies.
Compensate employees via a payment method that is acceptable by law. Most states are specific about acceptable forms of wage payment, such as check or direct deposit. Check with the state labor department for pay stub rules that may also apply.