Nine Essential Beginner Payroll Tips
Taking care of your payroll is incredibly important, but it can be very stressful and time consuming. Taking care of it in house is not always ideal, but whether you manage your own payroll or use a firm like Xero Accountants to manage all your accounts and payroll needs, you need to understand how payroll works.
- Decide whether to pay salaries or by the hour. As an employer, salaries are generally easier to manage, as you pay the same amount every month and won’t have to calculate what your staff are owed. If you do pay by the hour, get a system in place to accurately track hours worked and wages owed.
- Decide how often your employees will be paid. You could choose a pay period that is weekly, bi-weekly or monthly. Will you pay on a set date each month, the last working day or the last Friday of the month if you choose monthly Having a set period helps you to keep payroll organised, letting it run more smoothly.
- Classify your staff. An easy way to manage payroll is to properly classify your staff. Group up full-time employees, part-time employees, contractors and interns. Having them separate makes it easier to handle different pay scales or pay periods.
- Choose accounting software. Payroll software makes managing paying your team much easier. Choose software that hosts payroll details on the cloud. This means you can access the information from anywhere, whenever you need to, and everything is backed up. If you’re using an accounting firm, they should be able to integrate your payroll into the software they use and manage it all for you.
- Simplify the process to save you time and money. Hours can be spent on payroll, which is time you could be spending on growing your business. Payroll can also be costly if you’re using outside help or expensive software. Over complicating the process can make it cost more and take longer. You could use an HR task manager to help you make the process much simpler.
- Keep good records. Keep all your records and documents in one easy to access place and keep them properly organized. Take digital copies of anything important in case the originals are damaged. In some areas, you are required to store certain records for a particular period of time, such as tax forms or benefits paperwork.
- Factor in employee raises and benefits. You could offer staff benefits like childcare vouchers, computer equipment or health insurance. These are tax free benefits that you can offer employees to keep them happy, which all makes your tax paperwork easier to handle.
- Check if you need employee ID numbers. Some states need employers to allocate ID numbers to staff in order to process tax. Most businesses will already have one, but if you don’t, contact the IRS to apply for one.
- Budget. When you’re setting up payroll, make sure you budget for wages and taxes. As an employer, you will be required to pay social security and medicare taxes, so don’t forget to factor those in so your tax bill isn’t a nasty surprise.
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