Payroll is a term many employees are familiar with, but probably don’t know the real meaning of it. So what is payroll anyway?
Payroll is considered the total of all compensation that your business must pay to its employees over a set period of time or a given date. This also includes wages, bonuses, salaries, deductions, and net pay.
This may seem like it’s a lot and even more to manage. However, if you want to make your business grow, you must know how to do payroll. Here are the steps you need to find success.
Employees Should Complete the W-4
The Employee’s Withholding Allowance Certificate, known as the W-4, should be completed by your employees. This form gives your employees the ability to keep track of their personal allowances.
A general rule of thumb is the more allowances and dependents they have, the less they will pay in payroll taxes for every pay period.
Get the EIN for your Business
Your business must have an Employer Identification Number or EIN. This nine-digit number acts as your company’s social security number to help the IRS identify your business tax purposes.
If you have employees other than yourself, this EIN is mandatory, and you can apply for it on the IRS website. If you don’t, you cannot pay taxes for your business or get proper tax identification.
How to do Payroll Schedules
Now it’s time to decide on when you want to pay your employees. There are four schedules you can choose from depending on what you are aiming for. There are weekly, biweekly, semiweekly and monthly schedules that many businesses use, but most companies opt for the use of a biweekly schedule.
However, this can be subject to state laws about wages. It is important to research your local laws concerning this.
Calculate the Pay and Deductions
Calculating the net pay of your employees is the easy part. This is calculated by subtracting deductions from their gross pay. Gross pay is considered the total amount of hours an employee works during a period of time multiplied by the proposed hourly rate.
Deductions are considered to be things that are deducted from your income when you do taxes as well as things outside of the formal deduction category such as 401(k) and various insurance policies.
If you need help with making paystubs for your employees you can find it here.
How to do Your Own Payroll the Right Way
With doing payroll, you must set deadlines for these things to take place, otherwise, you might run into issues with taxes. However, if done correctly, your business will be able to grow properly.
As an entrepreneur and owner of your business, you must know how to do payroll. Otherwise, your business won’t succeed for very long. There may be problems along the way, but for your business to grow, payroll is something you must pay attention to.
Don’t let your business flounder because you don’t know how to do payroll right. Make your business great. For other great articles like this one, be sure to visit the rest of our blog.