managing payroll for small business

Now you can start issuing payments on schedule via check or, more commonly, via direct deposit. Employees will have to share their bank account information to have checks automatically deposited into their bank account. As long as you are following employment laws, you can also pay in cash or on payroll cards. It is important to determine upfront whether your workers will be classified as independent contractors or employees. This classification will determine your responsibility when it comes to paying payroll taxes.

You’ll need to withhold and pay taxes according to the laws of the state where the employee works, not where your business is located. Consider using a payroll service that specializes in multi-state payroll to help manage these complexities, like Rippling. Onboarding documents are important to complete when new employees start working for you, and they’re crucial to ensuring you manage payroll correctly. It’s best to create an onboarding schedule that will help you complete these forms on time so you avoid errors in the future. In running a business, poor decisions like this can easily be overlooked until it’s time to process your payroll tax payment.

managing payroll for small business

A good rule of thumb is to check your work at least two days before you run payroll. Be mindful of simple updates — like new addresses — and watch for adjustments that affect pay rates, deductions or taxes. A recent pay raise could affect the pay rate, for example, while benefit elections could affect deductions and an updated W-4 could affect an employee’s tax withholdings. Access Xero features for 30 days, then decide which plan best suits your business.

Refer to the FLSA fact sheet for a list of the 14 required payroll records. At the start of every year, you’re required to send both your employees and the IRS forms about the previous year’s earnings, such as Form W-2, Form 1099-MISC or 1099-NEC, and Form W-3. A reconciliation adds comfort that your payroll software is running correctly. Let’s say you own a small hardware store, where employee Christina worked 45 hours last week. One of the policies you’ll want to design is how your business manages paid time off, overtime and other types of non-mandatory leave. Take your business to new heights with faster cash flow and clear financial insights —all with a free Novo account.

Solicit Feedback About Payroll Procedures From Employees

Keep in mind this refers to candidates with glowing credentials and also someone who can learn quickly and adapt to your work culture. Your HR team’s deeper understanding of payroll policies will help diffuse some of the payroll staff’s pressure when communicating with employees. This eventually improves working relationships and boosts the overall mood inside the office. Learn more about the payroll process and how to efficiently approach this in our how to do payroll guide.

  1. Alternatively, you could manually back up your data to an external hard drive or another secure location.
  2. Using payroll software can save you time by ensuring you get all the details correct.
  3. That’s why it’s important that businesses learn how to manage payroll effectively, as it directly affects their financial health.
  4. The term is also sometimes used to refer to payroll outsourcing services.

Maintain accurate and organized payroll records, including time cards, pay stubs, tax forms, and documentation of any deductions. If an audit does occur, cooperate fully with the auditors and provide all requested information promptly. By being proactive and prepared, you can navigate payroll audits with confidence and ease. A big reason payroll staff turnover is painful is that all companies have their own unique payroll processing intricacies; these small details can take significant time for new hires to learn.

Parallel Testing Your Payroll Software in 8 Steps

With limited HR and payroll staff, payroll processing can become a challenge. Automating your payroll process is the easiest way to keep up with time-consuming tasks. Make adjustments based on factors like planned hiring or potential wage increases.

managing payroll for small business

Ensuring compliance is not just about avoiding legal trouble—it also contributes to a fair and transparent workplace. Here are 27 of the best payroll tips to keep in mind, broken down into the segments of the payroll process for efficient management. You’ll also want to make sure all of your employee information is secure so it can’t be accessed by employees or outsiders. The last thing you want is to allow secure employee information, such as salary amounts, into the hands of employees who then get frustrated with what they see.

Many businesses decide to process payroll manually on their own when first starting out. While this doesn’t incur third-party costs, it can be difficult as your business must keep track of many different types of employment records when you start paying employees. These records include income tax withholding, Social Security tax and federal unemployment tax.

You’re not alone in managing your payroll

Using a payroll service may take HR out of almost everything related to payroll while using software might place HR in charge of all payrolls. Whether you’re processing payroll manually or you’ve decided to manage it with the help of software, there are things you can do to improve your overall payroll management process. The right payroll software or service for you depends on a number of factors from how much you have to spend to how many employees you have and which states you operate in. If cash is tight but you know you want to manage your payroll with software, check out our best free payroll software.

Why use QuickBooks Online Payroll software?

We found that the best overall payroll software for small businesses is Gusto. Gusto offers many payroll services that small businesses need, such as automatic tax calculations and tax filing, direct deposit, multi-state payroll and even time-tracking integrations. For growing small businesses, Gusto tops our list of payroll companies.

Start by ensuring employees know how to update their information, whether via an employee portal or paper form. If your software features an employee portal, you’ll likely be notified of the change automatically. However, if employees hand you a printed form, you’ll need to manually update the records. As an employer, you will collect taxes from your employees for the tax office.

It can take a few days for direct deposits to fully transfer to employee accounts and for checks to be printed and distributed. Some payroll products offer same-day or next-day direct deposit, but others may need longer than that. Until you’re sure how long it will take to complete payroll by payday, it may be helpful to allow some extra time for processing. You withheld taxes and contributions from employee pay in step 3, and you calculated employer payroll taxes in step 4.

Regularly Review and Update Payroll Procedures

No matter how many employees are on your payroll, you can choose the level of technology to adapt to your needs and add services as you see fit. OnPay offers HR solutions, making it an ideal solution for small businesses looking for a home-based software for all of your business’s essential functions. Collect time cards or timesheets from your hourly, non-exempt employees. Take note of overtime during the pay period, because you may owe time and a half. Also called an EIN or federal EIN, this is a number issued by the IRS for tax administration purposes. The EIN will be used in your business filings to identify your company.