Your Step-by-Step Guide to Creating a Payroll System

Managing a business is already challenging by itself. With money and employees on the list of things to take care of, any entrepreneur would definitely feel overwhelmed. However, you have a responsibility to your employees. They are the keys to growing your business, and the last thing you want is to make them feel undervalued and unappreciated just because you lack a payroll system. Paying your people on time is their legal right, no matter the size of their role and salary. For a small business, however, creating a payroll system from scratch can be difficult.


If you can relate to this concern, this article will provide you with a step-by-step guide on creating a system that deals with your small business's payroll. Here are these simple steps:


Step 1: Secure an Employer Identification Number (EIN)

The majority of businesses need an EIN to pay their employees the right way. Applying for a number is free and can be done online. The EIN is like a social security number used solely for your business. The IRS uses the EIN to identify the tax accounts of all the taxpayers involved in the organization. In short, EIN makes it easier for your business to pay off federal and state taxes. It is also a requirement so the company can pay off their employees.


Step 2: Understand the Federal and State Laws About Wages 

Before establishing a payroll process, you need to understand all the related rules and laws. In some cases, the Federal and State have different regulations about wages. Read them thoroughly to remain compliant. Doing this step would also help you understand your obligations to your employees. 


Step 3: Determine a Pay Schedule 

Now, you need to decide what date you want to release your employees' pay. You have many options when it comes to the payment schedule. You could have a weekly payment, bi-weekly payment, or monthly payment. Once you decide on a date, make sure to stick to your word and pay on time. 


Step 4: Start a Payroll System

Having an organized system can help guarantee that all employees get the payment they worked hard for. You can choose from any of these existing methods: 

  • Manual Payroll System: This is the method that most small businesses prefer due to savings on expenses. However, since everything is done manually, this option is prone to human error. It can also be time-consuming.

  • Outsourced Payroll System: This option lets the experts do the work for you. You hire a third-party agency that processes your company's payroll on your organization's behalf. They usually provide a complete service, from preparing the checks to managing the payroll and employment taxes. 

  • Using Software: Instead of doing things the old school way, you can now use a payroll system to manage your business's payroll. If you want to be hands-on with your company's payroll but in a more manageable way, this option will allow you to do both.


Step 5: Formalize Everything


Before you implement the payroll system you choose, ensure that everyone in the company knows what to expect. You must create a detailed payroll policy and process for everyone's reference. This document should be thorough and include everything concerning payroll, such as the payment period, gross income, net income, and paid benefits.


Conclusion


Paying your employees consistently is your company's way of appreciating their contribution to your business. Doing this can make them feel valued both as a worker and a human being. When you treat your employees right, you can influence them into staying for a long time to do a good job. 


If you are looking for payroll companies for small businesses, you are on the right page. Totally Booked is a team of QuickBooks online certified pro-advisors based in New York. We offer payroll services to entrepreneurs like you. Call us at 718-218-4941 today to learn more about how we can help you.



Kelly Gonsalves