Business is doing well, your employees are happy, and you’re growing a loyal customer base. But there may still be a piece of the puzzle missing in your small business operations: figuring out how to make payroll less overwhelming.
But paying staff, keeping records and managing taxes doesn’t have to create extra hours of work for you every week. With the right process and tools in place, you’ll spend more time face-to-face with employees and customers and avoid paying payroll in your spare time.
That’s why we’ve created this guide to payroll for small businesses. We cover everything from payroll design to what you need to know when it comes time to file your taxes, as well as the software you can use to streamline payroll and everything that comes with it.
Step #1: Understand payroll laws and regulations
Oftentimes, it’s not just the physical act of doing payroll, but the complex rules and regulations that go along with the process that take up so much time.
Complying with payroll laws and regulations is important to avoid serious legal and financial consequences, so it’s important to get things right. And that can mean tracking a lot of moving parts. think about local, state, and federal tax regulations, as well as wage and hour laws.
For example, each state has a unique one payday requirementsand failure to follow them can mean fines or even legal action.
You must also correctly classify staff members as exempt or non-exempt, which will determine whether they are eligible for overtime pay and other benefits. Fair Labor Standards Act (FLSA) protection.
That’s not to say that accurately determining whether workers are present independent contractors or employees. Up to a third of employers misclassifying staff as independent contractors, a mistake that can cost hundreds, even thousands, in fines.
Learning and staying current with all these regulations can seem like a job in itself. That’s why we recommend using a tool like Homebase HR and Compliancethat can track all of your employees’ hours in one place and help you comply with wage and hour laws, especially when it comes to breaks and overtime.
Our platform can also notify you when labor laws change at the state or federal level, and our team of HR professionals is always ready to review your procedures and provide advice when you’re feeling lost.
Step #2: Creating payroll systems
Once you have an overview of the laws and regulations you need to follow, it’s time to register your business with the government. That means registering your business name with local and state governments and applying for your tax ID, or employer identification number (EIN).
But one of the most important steps when getting paid for your small business is choosing and setting up your payroll system. And choosing a manual process can be tricky because it can mean hours of extra work and costly mistakes.
So look for it payroll software it makes your job easier while helping you maintain accurate and efficient billing systems. Some features to look for include:
- Instant conversion of schedules in hours and wages so that they are ready for wages
- Automatic filing and issuance of W-2s and 1099s
- Automatic provision of payments to employees, state and RA Internal Revenue Service (IRS)
- Self-distribution and electronic signing of documents for employees
- Maintaining time card records to comply with FLSA recordkeeping rules
Basically, you want a payroll system that allows you to pay employees and file taxes with the click of a button. The system should also be smooth to implement and easy for the crew to use on autopilot.
And ideally choose a tool that offers other HR features, e.g recruitment and hiring and: team communicationso you can keep all your core internal processes under one roof.
Step #3: Calculate the salary
Now that you know how to set up payroll, it’s time to continue with your calculations. It means to decide gross paycalculating taxes and taking pre-tax deductions for things like 401(k) plans and health insurance.
Figuring out payroll taxes can be complicated, but when you use software like Homebase, a tool can automatically calculate, pay and file for you. Our platform is designed for hourly teams with unique pay rates and exemptions, and is suitable for businesses in almost any industry.
Title: Homebase can give you a clear picture of what each employee makes and how much of your total salary goes to taxes.
Home base salary also lets you define roles, salaries and employee classifications for each member of your team and lets you run payroll for your entire team in just a few clicks.
Title: Homebase allows you to define unique salaries, roles and salary classifications for each employee.
Plus, using a comprehensive tool like Homebase takes the stress out of making sure you’re in compliance with laws and regulations and helps you avoid overpaying or underpaying your employees.
Step #4: Pay the employees
Now, it’s time for your team’s favorite part of this entire process: payday. And back 50% workers who report they would consider leaving their jobs as a result of repeated payroll errors, making sure people have the right amount in their bank accounts is critical.
Payroll accuracy is important not only to maintain team morale, but also to stay compliant with laws and regulations and protect your business.
But paying team members isn’t just about handing over a check. You need to track preferred payment methods, pay people on time via payroll or direct deposit, and distribute the correct tax forms.
Again, automating these processes helps minimize errors and reduce your workload.
Title: The Homebase app notifies employees when they’re paid, making it easy for them to view their pay slips and see exactly how much they’ve earned.
Step #5. Keep accurate records
Even if you send your payments, your work isn’t done yet. The FLSA requires employers to maintain key notes for all of their non-exempt employees, consisting of the correct data on the employee, their hours and wages.
Keeping accurate records is also important for making informed salary decisions. Finally, payroll costs can add up as much as half of all your business expenses depending on the industry you are in.
And when profit margins are tight, it’s important to know exactly where your revenue is going. Having detailed payroll records helps you determine if you are running your business sustainably.
So maintain in-depth documentation of employee hours and wages, and be sure to keep payroll data secure to protect your team members and your business. You don’t want people to worry about their privacy, and you certainly can’t risk that information falling into the wrong hands.
This is another reason why using a comprehensive payroll tool that generates and stores reports, you won’t have to do the extra work of creating them yourself and you’ll know they’re stored in a safe place.
Title: Homebase accurately creates and stores payroll reports for you, from comprehensive summaries to W-2 previews.
Step #6. Manage payroll taxes
This is a fact of life. “Nothing is certain but death and taxes.” We’re sure you already know how important it is to stay on top of your payroll taxes to comply with laws and regulations and avoid penalties and late fees.
And while no one can be exempt from taxes, Benjamin Franklin should not have been so morbid about the subject. When properly managed, payroll taxes shouldn’t be such a hassle.
Managing your payroll taxes means:
- Determine who your taxable employees are
- Determine which wages are taxable
- Determine which payroll taxes apply to you
- Getting familiar with tax filing forms and procedures
- Submission of quarterly and annual tax reports
Again, we recommend automating this process with a specialized tool that can calculate, pay and file your taxes for you. Because, let’s face it, unless you’re a certified public accountant (CPA), doing taxes can be like trying to read a foreign language.
And keep in mind that different states have different payroll laws and tax rates, which can be difficult to avoid on your own. This is where a specialized tool can help you.
Perfect payroll to send payments on time and keep your business thriving
Now that you’ve read and understood these tips on how to do payroll for a small business, it’s time to put your knowledge into practice. Follow the steps above to set up payroll, pay your employees, keep records, and file your taxes to keep your people happy and your business running smoothly.
And remember, you don’t have to worry about payroll alone. Consider using a tool like Home base salary simplify and automate the process and manage all your HR duties in one place.