What payroll service should I choose? When should I pay employees? Will I offer direct deposit? There are a number of questions that you will be asking yourself about payroll when you start a new business. Some of these questions may be easier than others, but there is still at least a small amount of thought that goes into these decisions. With that being the case, you may not know exactly you should start or what questions should be answered first.
Here are five tips to help you set up your company's payroll.
- Ensure You Have Compliant Foundation
Legally, you want to make sure you have all of your ducks in a row, so there is no chance of you being fined for anything. As soon as possible, you will want to get an Employer Identification Number for your business. Depending on the state, a region-specific tax ID may also be required.
- Identify Your Company's Needs
A lot of people make the mistake of hiring a payroll service that doesn't really fit their needs. Before you agree to hiring a company, you need to specify your company's needs and then look at companies that are able to meet these needs. Not all companies are the same, so you will want a payroll service that caters to your company's unique circumstances.
- Classify Your Workers
Businesses will either have employees or independent contractors. When you first hire someone, you will want to be sure to classify them as either of the two. The reason it is important for companies to do this is that they can be penalized for not withholding taxes or other benefits from a person's check. Independent contractors are responsible for paying their own taxes, so any confusion can create an issue. Generally, someone who the business has authority over in terms of how they perform their work duties and what they do is consider an employee. Someone who isn't an employee, but is an independent contractor, the business doesn't really have authority over.
- Stay Organized
All businesses will have important document that they will want to keep track of, but payroll documents are especially important. Because of this, business owners need to stay organized. You should know where your W-4s and W-2s, tax forms and more are located and how to find them. This will make a huge difference and prove helpful if there comes a time that you need to look up past information.
- Consider Small Business Payroll Services
When businesses first open, they will likely have a person or team to handle payroll. It is great that you have a team dedicated to working on payroll, but humans can easily make errors. Not only can dealing with payroll issues be time consuming, they can be stressful. The stacks of papers, the calculations, and everything else can be quite overwhelming. If you have electronic payroll services, you can be a little more sure that things are getting done properly and are more likely to avoid errors and the penalties that are often associated with not doing so.