No matter if you have a single employee, or hundreds of them, every business has to set up a payroll system. A payroll service should be able to take care of employee compensation, pay off all payroll tax rates, and keep a record of all money that goes out of the company in the form of employee paychecks. If you’re looking to start a new business, here are the steps you should take to create a payroll program that will take the stress of employee compensations off your shoulders.
Apply for an Employer Identification Number (EIN)
If you’re planning on hiring employees, you’ll need to obtain an EIN from the IRS. These are also known as an Employer Tax ID, or Form SS-4. This document allows you to report taxes, and is necessary for reporting information about your employees.
To be legally employed, all employees must fill out a Federal Income Tax Withholding Form, also known as a W-4 before you are able to pay them. This form will allow you to withhold the proper amount of federal income taxes from your employees’ paychecks. There may also be other state or county-required paperwork that needs to be completed before you can set up a payroll program.
Decide a Payment Schedule
Before choosing what type of payment methods you want to provide your employees with their wages, consider how often you plan to pay your employees. Establish a payroll period, or how often your employees will get paid. You also want to consider other factors, like how your business will deal with time off, or what to do about employee overtime.
Choosing a System
Before choosing a payroll program, make sure you’ve done extensive research on the different services you are considering. Payroll systems can either be set up in-house, or outsourced to a payroll service provided. For companies looking for an in-house service, there are many commercial accounting payroll programs. You can also hire an accountant to do your payroll work.
Keep a Record
In order to ensure that your payroll system runs smoothly, make sure to keep a record of all the information needed. Keep track of all employee forms, copies of tax forms, and all tax deposits. This will help keep your payroll system free of snags, keeping your employees happy and your business booming.