Small or big, payroll does pay a very important role in every prospect of business. It goes without saying that having a systematized method of payroll is actually quite beneficial in clearing out tax grievances and the associated issues concerning the same. If you are here wondering what can be done to streamline the process of payroll in small businesses, there is a very extensive process that does go behind the same. Irrespective of what you do, it is important to manage proper payroll facilities for the company for overall better growth and development. Whatever the process be, make sure to stick to the common norms of the payroll process to not just release the payroll on time but to also ensure a proper record of the expenditure the company is partaking in.
If you run a small business and need an overview of the involved process in how to do payroll manually, we have a rundown of the entire thing. The process of payroll management even for the small businesses is not necessarily that complicated. Even this does include a rundown of the common prospects of steps involved in successfully getting payroll done and ready.
Collect the information
With the consistent rise and the current status of the HR tech in India, it goes without saying that the payroll has become a must for every organization – big or small. Handling a payroll process mainly starts off with the collection of the essential payroll information. In order to start with it, you need to know how to set up a payroll successfully. In order to do so, you need to collect the information from both the employee as well as the employer to get the process in a roll.
Before successfully hiring an employee, make sure you apply for an employee identification number from the IRS. This is predominantly necessary because you need it to send the documents to the IRS as well as the state agencies like that of the tax returns and such. Having this information sorted helps the businesses sort out their tax payment options efficiently. Following that, you need to assess the pay frequency for the employee, whether you will pay them on a weekly, biweekly or even on a monthly basis. There are a number of modes via which you can make the payments. If you are making direct payments, it is mandatory for you to have knowledge of their bank account details.
While the prior is done completely by the employer, there are a few responsibilities that the employee also needs to indulge in. The employee needs to fill out the necessary forms and fill in the necessary details in the same as well. The Form W-4 is mandatory to be filled out by the employee if they wish to include in the payroll system of the business. Apart from that, the employees also need to fill out the details concerning the benefits and decide how much from their account they want to contribute to the same.
Select a payroll system
Once you have designated all the necessary information, the next thing you need to look into is to select the payroll system for your business. There are a number of ways in which you can manage the payroll – either by hand, outsourcing or even using the payroll software which is all part of the evolving HRMS tech in India.
The option of payroll by hand is predominantly the most cost-effective of them all. This doesn’t necessarily require any kind of excess expenditure but it does come with its fair share of cons too. Owing to the fact that everything is done manually, you subject the business to possible mistakes and faults as well. This is also often a responsibility of a headache and might not bring forth accurate results.
Outsourcing payroll can dig a bit into your expenses but is an amazing way to manage this process without any an additional headache. It not just saves you time but also ensures accuracy given the fact that a consolidated and dedicated team is working to manage the overall payroll efficiently. It is also often best to hire a payroll consultant who will look after your taxes and other payments. Other than that, you can also opt for the professional employer organization services to opt out of this altogether.
Payroll software is what the best possible option for small businesses is. Not only is this cost-effective, but they are also effective as well. If you want to leave behind no room for mistakes but still want to get everything on time and on a budget, this is actually a good enough option.
Run the payroll
Once with the collected information and choosing the payroll system, the next and possibly one of the most crucial stages in this process is to finally run the payroll. Running the payroll is what pays your employees with their wages on time. It is always very important to very diligently run the payrolls to ensure that the employees are satisfied with the timely issuing of the paychecks. Irrespective of what you do, make sure that running the payroll on time is done every single month.
Running the payroll doesn’t necessarily depend on the kind of payroll system you have opted for. For the most part, the process is the same for every single one of them. The process of running the payroll predominantly depends on the number of hours the employees have worked followed by the kind of benefits and exempts they have included after which the payment is done in the selected category without fail.
While running the payroll, it is very important to ensure that you run it in accordance and cross check the amounts to be paid to ensure that you are not paying more or less to any of the employees. It is actually quite critical and does encounter for an important part in the payroll process.
Once everything is done and finalized, the final process is to finally issue and run the payroll for the month.
Handle the taxes
One of the most important parts of the overall payroll system is to ensure that you are paying the taxes accordingly. Taxes do play a very quintessential role in this process and exempting from the same is not going to do you any good. Make sure that you are not just paying the taxes for the business but also from the paychecks you are issuing your employees with. Some of the predominant forms of tax that one definitely needs to pay off include:
- Income tax
- State and local income taxes
- Social security and Medicare taxes
Apart from these, if you are an employer, you also need to deduct money from your employee’s wage to pay off the taxes too. The combination of the federal unemployment, as well as the state unemployment taxes, need to be paid off by the employer themselves. It is very important to pay the taxes on time to avoid any kind of liability and other issues that could bring the business down.
If you are a small business, start off with doing these tax handling manually to get a knack of the process following which you can engage with a professional to get the job done in a better way.
Keep records
Yet another one of the most important things to do is to ensure that you keep records of every aspect of the process involved. Expenditure, budget and the tax returns are what shape up a business. If you are a small business, chances are that you will feel overwhelmed in the beginning, but it is important to be active through every single part of the process.
Having payroll records for each of the employees is a must. This helps you understand the kind of money you are investing in an employee and also helps you manage the process in a much more efficient way altogether. This is one of the most important parts of understanding the payroll process. If you want the payroll system to stay transparent throughout, it is mandatory that you keep a good record of the same without any further issue whatsoever.
Some of the common factors that need to be included in the payroll record include the W-4 form, the pre, and the post-tax wages as well as the total hours worked by the employee in a weekly or even a monthly basis. It is important to keep the payroll records of the paid wages for at least three years. If required, tally the same with the department of labor and get your priorities sorted.
Managing the payroll process for a small business is nothing different than what you do for a bigger business. If you are here trying to maintain a balanced payroll sheet for your business, make sure that you have all the necessary records sorted out to prevent any kind of drawbacks and setbacks in the process of the same.
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