Running a business is as much about treating your employees well as it is about turning a profit.
Beyond finding an appropriate wage and establishing a good work environment, there are a number of things about how to pay an employee that are more tedious but just as important. You may love your boss, for example, but it’s difficult to stay at a workplace if they consistently pay you late.
We’re going to talk about some of the ins and outs of how to pay employees in this article, giving you some insight into what you can do to ensure you’re doing your part.
The Basics of How to Pay Employees
While your business model might be excellent and you have a staff waiting to work, you should seriously consider taking care of all payroll logistics before you start running the clock.
Not only will preparation help you avoid issues, but you could get into some pretty deep, hot water with the Fair Labor and Standards Act if you don’t have proper payment practices.
Finances can get tricky, especially on large scales. Many businesses request audits to ensure that their payments are going out correctly and according to legal standards.
We’ll briefly discuss planning, running, and managing payroll below.
Preparing for the Process
Before you get started, you have to have a few things established. Understand how much you’re going to pay each of your employees and whether or not they are on salary.
You should also know how frequently you will pay them and how you will pay them. More specifically, will you be using checks, direct deposit, or some other form?
Further, you need to know whether the employee is tax-exempt, and how much to take from their check for state, federal, social security, and Medicare deductions. You should also understand how you will handle other deductions, like health insurance, before you start your first payroll.
Handling Payroll
When things are in order, you can start to run the numbers. Start out by multiplying an employee’s hourly wage by the number of hours they worked in the pay period.
Next, withhold all necessary deductions. A lot of payroll services have software that handles these figures for you, skipping the need to calculate the math on your own.
You’re able to pay your employees after those figures are in order. You may also need to generate a pay stub for employees if you’re paying by check or your payroll software doesn’t offer stubs.
The process of creating pay stubs is simple, and there are many online generators that are quick and easy to manage.
Managing Records
Intend to keep all of your payroll records on-file for 3 years. That means carefully managing your payroll activity and documenting all files. This is important both for you and your employees, as issues could arise in the future.
Additionally, remember to file a 941 or 944 Form at tax time, consulting with a tax agent or researching your state’s requirements beforehand.
On a final note, remember to claim all of the state and federal taxes that you withheld from employees to present to them on their W-2 forms which can lead to large refunds.
Need More Help?
There’s a lot that goes into running a business, as you know. Whether you’re figuring out how to pay employees or how to install a point of sale system, there are a lot of moving parts.
Explore our site for more information you can use to improve your business.