What You Need to Know about Payroll Management
Payroll management is one of the most basic components of business accounting, yet it’s surprisingly complex. There are a lot of different parts to keep track of. Here’s what you need to know about managing your payroll.
==> Tracking Hours
If you’re paying your employees by the hour, payroll management begins with having a good system for tracking time worked. Having a reliable log in or punch in system of some sort is essential.
==> Taxes and Withholding
As an employer, you’re responsible for withholding the appropriate amount of taxes. That includes but isn’t limited to a 6.2% social security withholding, a 1.45% withholding for Medicare, income tax withholding and more.
You also need to put in your employer tax matches, including the same amount in Medicare and social security, as well as unemployment taxes.
==> Benefits and Deductions
Employee benefits like dental plans and health insurance plans often come with a premium payment that the employee needs to pay. The company picks up part of the tab, but the employee has to chip in as well.
This premium needs to be deducted from their paycheck in the form of deductions.
==> Tracking Payment Due Dates
Another somewhat confusing aspect of payroll management is tracking when you need to pay various dues, taxes and fees. Different government organizations need to be paid at different times. Furthermore, the date of your company’s fiscal year end can shift these dates around.
You need to develop a system for tracking when you need to pay what. Payment dates should be recorded on your calendar. Being late on paying your fees can result in penalties.
==> Logistics of Paying Employees
Then you have the nitty-gritty stuff: setting up direct deposits, printing and mailing checks, etc.
You also need to print pay stubs which detail your employees’ compensation, withholdings and deductions. These are important for your employees’ records. They’re also essential records in case a dispute ever arises.
==> Tax Forms
You need to make sure you get tax forms from your employees every year. These forms need to be completely filled out by all employees and postmarked by January 31st. These forms include 1099s for contractors and W-2s for employees.
==> Balancing Your Books
The amount of hours worked and the salary pay owed must be balanced against the amount of money actually paid out. Balancing should be done both quarterly and annually. Balancing your books helps avoid accounting mistakes and oversight.
As you can tell, managing employee payroll can be quite a complex endeavor. Having someone experienced in house or having a trustworthy accounting firm work with you can make the whole payroll process much easier. The most complicated part is getting started. Once your payroll systems are in place, keeping things running is relatively simple.