A Complete Guide to Setting Up a Payroll System for the First Time
For many new entrepreneurs, setting up payroll is one of the most daunting things about starting a business.
The rules are strict, with taxes and labor laws to consider.
You don’t need to be an HR expert to make it work. In this post, we’ve broken down the process so you can set it up all by yourself.
Read on to find out how.
Everything You Need to Know About Setting Up a Payroll
Follow these seven steps to start hiring and paying employees the right way.
Get an Employer ID Number
Before you can get started, you’ll need to get an assigned employer ID number.
This is a unique number that you’ll use to file all your tax documentation for your business. You can apply online directly with the IRS to get this number for free.
Identify the Types of Workers You Have
Are you employing workers in permanent positions or hiring contractors? Are they working full-time or part-time?
The answers to these questions will define your tax and payroll processes, so make sure you know them.
Collect Employee Information
Each time you hire a new employee, you’ll have to get them to fill out a W-4 form. The information they provide on these forms will define how much tax you need to deduct from their paychecks.
You’ll also need to fill out an I-9 form for the Department of Homeland Security.
Choose Your Payroll Schedule
The next step is to decide how often you pay your employees.
Most employers pay their employees’ salaries on a monthly basis, but you can also choose to do it on a weekly or bi-weekly process if you prefer.
Define Your Payment Terms and Conditions
You need to clearly define the rules for how and when you’ll pay your employees.
These should explain how you’ll calculate their salaries or wages. They should also explain whether or not you’ll pay them for sick leave or any other time off work, and if so, at what rates.
Make sure you include details of any deductions you’ll make from their paychecks, including social security, insurance or pension schemes.
Select Your Payroll Service Provider
You don’t have to handle the ins and outs of payroll by yourself every month.
To make things easier, you can outsource these tasks to a third-party company like payroll services Australia. They’ll handle all the calculations and the paperwork, so all you have to do is approve it.
That way, you don’t have to worry about missing a payment or getting your calculations wrong.
Run an Audit
You can’t afford to make mistakes in your payroll process, so run an audit to make sure everything is working as it should.
You can hire an accountant or an attorney to do this for you
Invest in Your Business
Once you’re done setting up a payroll system, you can stop worrying about paperwork, red tape, and calculations, and start making payments.
You can also look into other ways of managing your money in your business, too. We can help you do that.
See our stocks news for news and tips on how to improve your company’s finances.