Small Business Payroll
Small business payroll can be a time-consuming and stressful task for a small business owner, especially if you run payroll in-house.
According to the National Business Association 2015 Small Business Taxation Survey, 1/3 of small businesses spend more than $6,000 per year on the administration of payroll and payroll taxes. Regardless of the size of the small business, it’s important to have a payroll system in place to protect you from IRS penalties and to ensure your employees are paid on time.
To help you with that, here are 8 tips to help you manage your small business payroll:
1. Determine how to pay your employees.
Having salaried employees is easier to manage and takes the stress out of determining how much your employees should be paid each month because it keeps everything consistent. However, if you have hourly employees, you should have a system in place to help you keep track of time and compensation.
2. Decide how often you’ll pay employees.
Every employer needs to decide on a pay period for their employees, whether it's weekly, bi-weekly, or monthly. This will keep you organized and help you run payroll more effectively.
3. Classify your workers.
Another great payroll tip to follow is to properly classify your workers. Whether you hire part-time or full-time employees, independent contractors, or interns, the person performing the work should be classified as an employee.
For more information on worker classifications, refer to the Employer’s Tax Guide.
4. Simplify your payroll process to save time and money.
According to the National Business Association survey, 27% of small business owners who don't use a payroll service report spending 3 to 5 hours per month on payroll, with 21% spending 6 or more hours per month.
To simplify your payroll process, consider investing in a payroll service to save time and money in the long run.
5. Keep track of EVERYTHING.
To streamline your payroll system, keep your records and documents all in one place. Why? Some federal and state laws require employers to hold onto some records for a certain period of time. For example, it’s a good idea to keep track of:
- W-4 and W-2 forms
- Tax forms
- Vacation time
- Tax deposits
6. Factor in Raises and Benefits
Want to make it easier to give your employees raises? Offer them additional benefits as a type of reward!
You could give your employees a stipend for childcare, a new laptop, or additional insurance. These are just a few of the tax-free options you can give your employees, which will simplify tax paperwork.
7. Find Out if You Need Employer ID Numbers
In order to process taxes, Minnesota requires for-profit employers to obtain employer ID numbers. Most businesses and entities already have ID numbers; however, if you don’t have one, you must contact the IRS to apply for one.
8. Create a Budget
When planning a small business payroll, be sure to budget for wages and taxes. Employers are required to pay Social Security and Medicare taxes, and most are required to pay unemployment taxes. These are expenses you need to keep in mind moving forward.
Managing payroll requires time, patience, organization, and great communication. By following these quick payroll tips, you’ll be able to streamline your payroll process and become more efficient.