Once your business begins hiring employees, it’s a good idea to set up a payroll. As a small business owner, you have to protect yourself and your business from untrue accusations. Setting up payroll ensures there’s always an accurate, verifiable record. Here are some tips of how and why to set up payroll for a small business.
When you are a small business owner you have first a responsibility to your customers. Of course that should always be your biggest concern. But when you begin employing other people, even if it is friends or family of yours, employing others certainly elevates your responsibility. Now you have people relying on you to be paid. Here are some steps to take when setting up small business payroll :
EIN : You should do this before you hire anyone or try to pay an employee anything. An EIN (employer-identification-number) is the number you use when dealing with the IRS.
Local EIN: You may also need a local EIN for local tax reporting purposes.
Define Employees : Are your employees “employees” or are they “independent contractors”? This matters from the standpoint of withholding for Social Security, Medicare, and unemployment.
Paperwork : Your employees need to fill out the proper Federal Income Tax Withholding Form W-4. Your employee’s answers on this form dictate how much taxes are withheld.
Terms : What are the terms of your employees working for you? Does overtime come into play? How about paid-time-off? Each employee that you have will have different variables in their payment terms; these need to be decided when you’re setting up payroll.
Payday : You need to decide if your pay period is going to be weekly, monthly or bi-monthly.
Accuracy : You have got to keep accurate records and make sure and document all changes in terms, rate, and anything else which could be verbally agreed upon.
You also need to decide which payroll system you’re going to use. Do your due diligence and figure your projected growth to decide if payroll is something you want to handle in-house or whether you’d like to outsource it to a payroll service/system.
Remembering all the variables which go into each employees pay is made far easier by enlisting payroll. Of course you’re going to pay a fee to outsource your payroll. Taking that burden from your shoulders allows you the freedom to make better decisions and invest time to build and grow your business.