Payroll processing can provoke no shortage of headaches for those new to small-business ownership. Setting up your company’s payroll — from computing employee taxes to establishing routine pay periods — can be a daunting task, but it doesn’t have to leave you perpetually frazzled and frustrated.
As outlined in a new infographic from Intuit, there are four essential (and surprisingly simple) steps involved in handling your company’s payroll.
1. Understand what’s involved. Familiarizing yourself with the basic concepts and legal requirements of employee payroll is the first step. “Payroll” simply refers to the total amount of money paid by an employer to his or her employees on a recurring basis. More complex, however, are payroll taxes. Every employer must meet specific payroll responsibilities, according to federal, state, and local laws. Paying employees means you must simultaneously withhold portions of their compensation to meet applicable income tax, social security, Medicare, and other requirements. As a result, it’s critical to report and deposit payroll taxes to the appropriate agency on time, every time.
2. Find what works for you. There’s more than one way to handle employee payroll. In fact, the options at your fingertips are plentiful:
- Do it yourself (a time-consuming process that, although cost-effective, could expose your business to the risk of expensive rookie mistakes);
- Invest in commercial payroll software (a reliable and commonly preferred method);
- Hire an accountant (a means to obtain quality professional assistance, often at a fairly high price); or
- Outsource your payroll (a convenient choice, but one that brings a loss of control and flexibility).
Choose the method that makes the best sense for your business — and that’s easy on your nerves, your schedule, and your budget.
3. Know what you need from employees. Time and again, employers make the mistake of getting their own ducks in a row while failing to organize employee information in a similarly efficient manner. Ask your employees to complete the appropriate forms that verify their legal status and specify their tax withholding. Once this information is entered into your payroll system, paycheck calculations can be generated with the applicable taxes withheld.
4. Proceed to pay. The final step in the payroll process is to disperse funds and corresponding filings to the appropriate tax agencies. Once you’ve paid your employees and all outstanding payroll taxes, you will have successfully completed the payroll process — a process that will continue, but in a substantially less nerve-wracking way.
To learn more about setting up your small-business payroll, check out Intuit’s comprehensive new infographic.