Hiring people to help run your business means that you must set up a payroll. Government regulations and sound bookkeeping practices require that you track every bit of information that affects each of your employees, making the job of setting up your payroll more complicated than it first seemed. Payroll management will add to your overhead and might require the creation of a new position for your organization. The following four tips will help you create an efficient payroll system that will meet the needs of your company and employees.
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Your business instantly becomes more complicated than it was when you worked by yourself when you decide to hire employees. Dozens of laws and regulations at the federal, state and local level apply that might apply to your firm. Rules might vary depending on the number of workers you hire and the nature of your business. Learn about these rules first. Get started by requesting your Employer Identification Number (EIN) from the IRS. Many businesses must also carry workers compensation insurance and pay into state unemployment insurance funds. You can do the research yourself or consult an attorney or HR firm for expert advice about other actions you must take before hiring your first worker.
Use Legal Hiring Practices
Avoid becoming liable for discriminatory hiring practices by complying with Equal Employment Opportunity laws and the Americans with Disabilities Act. You must also define your jobs and applicant requirements in ways that reflect knowledge, skills, abilities and other characteristics that comply with existing standards. Document every encounter with every candidate to protect your business against charges of unfair hiring practices. Similarly, you must document employee performance, performance appraisals, and disciplinary or corrective actions taken during employment, so you can satisfy regulators and litigators when they examine your HR practices.
Establish Pay Scales and Schedules
Employees need to know how much and when they will receive their paychecks. You must document all tax and FICA withholdings as well as other deductions. You must also record the wages you pay to prove that you pay everyone doing the same work equally. Most workers expect to have their salaries deposited directly into their checking accounts, so make sure you either have accounting software that can perform such a function or hire a third-party payroll processor. You can also look online for pay stub templates from a check stub maker to make things easier.
Comply with IRS Requirements
You must pay your half of your employees’ social security contributions. Often referred to as payroll taxes, you must periodically send the money to the IRS. Businesses that get in financial trouble make the wrong decision to postpone the payment of their payroll taxes. If your company pays late or stops paying payroll taxes, you could face penalties including interest fees and fines.
Setting up your business’s payroll takes much planning and ongoing effort. If you lack the expertise for establishing sound pay practices, you might need to retain the services of an HR management firm or payroll processor. Such companies handle your payroll for you, so you and your team can focus on your business.