There are a few steps you need to take before your startup can begin hiring. One of the most important things you must attend to is setting up a payroll system.
So what is payroll? In general terms, payroll is the process of paying your employees. The term refers not only to the distribution of paychecks but also to processes like financial bookkeeping and calculating relevant payroll taxes. With a well-functioning payroll system in place, you can track employee hours, issue paychecks on time, and pay payroll taxes. A good payroll system will also help your startup stay in compliance with regulatory laws by making necessary deductions for things like Social Security and Medicare.
In this article, we’ll take a closer look at what payroll services are and how they can help your startup. Read on for a general overview of payroll services for startups or click on any of these links to skip to the section you’re most interested in:
- How to set up payroll for a startup
- Why should you use a payroll service for your startup?
- How to choose a payroll service
How to set up payroll for a startup
If you’re not sure how to set up payroll, you’re not alone. Many first time employers and small business owners initially have no idea how to establish and operate a payroll system for their startup. Although it takes some time and effort to get a payroll system going, it’s not as difficult as you may think.
To get your small business payroll system up and running, you’ll have to take a few basic steps:
- Set a payroll schedule to determine how often you’ll pay employees (i.e. weekly, twice a month, or monthly).
- Provide new hires with Form W-4 to determine withholdings so you can deduct the proper amount of income tax from their paychecks.
- Stay on top of IRS deadlines to avoid penalties.
- Compile your employee payroll information and keep it for your records.
Why should you use a payroll service for your startup?
For most small business owners, the idea of running payroll themselves every pay period isn’t exactly exciting. That’s because running payroll can be a tedious and time-consuming process. Additionally, to run payroll the right way, you must possess knowledge of tax laws and regulations at the local, state, and federal levels.
Making payroll processing mistakes can have serious consequences, such as unnecessary fees and fines from the IRS. Additionally, if you pay your employees the incorrect amount or issue paychecks late, it can contribute to employee dissatisfaction. In fact, 24% of workers report that they’d begin searching for a new job after experiencing a single paycheck error.
As a small business owner, you have a few different payroll options to choose from. There are three main ways to handle payroll:
- In-house: Either you, one of your employees, or an in-house bookkeeper is responsible for running payroll for the company.
- Outsource: Payroll is handled by a third party, such as an independent contractor or accounting firm.
- Payroll service: Payroll providers and payroll software can handle all of the basic aspects of payroll management for your company. Many payroll providers and accounting software programs also offer add-on services like time tracking, tax filing, and processing tax forms.
Many small businesses choose to use a payroll service because it’s a convenient and often affordable option. Using a payroll service can save time and money by streamlining the payroll process, which reduces the amount of time you spend running payroll and minimizes mistakes.
Full-service payroll programs also include a number of helpful features that make setting up and managing payroll a breeze. Some of the most common features include: – Read more
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