A lot of new business owners will focus on the business end of their companies, such as marketing and sales. However, one extremely important facet that shouldn’t be overlooked is your payroll. Your employees need to be paid in full and on time for their work, after all. Mistakes in your payroll can leave employees disgruntled, thereby hurting their productivity. You could even lose fed up employees to other companies if you don’t implement an effective payroll system.
Keeping that in mind, the following are a few payroll basics that every business owner should know:
- Your pay schedule – You will need to set up a payment schedule. The beginning and end dates of your payment schedule are the pay period, which is the period of time in which your employees earned their wages. Pay periods can be set up to be weekly, bi-weekly or semi-monthly. The payday is a fixed number days right at the end of the pay period on which employees are paid and which determines the period in which you have to pay and file your payroll taxes.
- Your payroll taxes – You will be responsible for collecting federal income tax, Medicare tax and Social Security tax from the paychecks of your employees based on what they’ve filled out on their Form W-4s. You will also have to match their Social Security and Medicare tax as well as FUTA (Federal Unemployment Tax). You will also need to pay business taxes, which include federal and state income taxes. These are typically paid once a month. FUTA taxes are paid quarterly.
- Filing forms – You will have to file a Federal Form 941, which is your quarterly federal tax return, every quarter. You will need to file a Form 940, which is the FUTA tax return, once a year. Additionally, you will need to send W-3 and W-2 forms to the Social Security Administration on a yearly basis.
- Tracking employee hours – You will need to track the hours worked of your hourly, nonexempt employees. This ensures that they are paid for the time that they’ve worked and that they are paid overtime if required.
These are just a few of the basics that you should know about payroll as a business owner. Because payroll can get complicated and because it’s so important, you should contact us at Valezar & Associates to inquire about the different payroll solutions that we have to offer.