A company’s payroll is the list of employees of that company that are entitled to receive pay and the amounts that each should receive. Along with the amounts that each employee should receive for time worked or tasks performed, payroll can also refer to a company’s records of payments that were previously made to employees, including salaries and wages, bonuses, and withheld taxes, or the company’s department that calculates and pays out these amounts. One way that payroll can be handled is in-house. This means that a company handles all aspects of the payroll process on its own, including timesheets, calculating wages, producing pay checks, sending the ACH, or Automated Clearing House, for any direct deposits, and remitting any tax payments necessary. Payroll can also be outsourced to a full-service payroll processing company. When a company chooses to outsource their payroll, timesheets, wage calculations, creating pay checks, direct deposits, and tax payments can be handled all, or in part, by the payroll company
Payroll plays a major role in the internal operations of a business for several reasons. From the perspective of accounting, payroll and payroll taxes are subject to laws and regulations. Payroll in the U.S. is subject to federal, state, and local regulations including employee exemptions, record keeping, and tax requirements. Payroll also plays a large role from the human resources point of view. Payroll errors, such as late or incorrect paychecks, are a sensitive topic that can cause tension between employees and their employer. One requirement to maintaining high employee morale is that payroll must be paid accurately and in a timely manner because employees are very sensitive to any payroll errors
Companies typically process payroll at regular intervals. This interval varies from company to company and will often differ within the company for different employees for larger companies. The four most common pay frequencies according to research conducted in February 2019 by the U.S. Department of Labor and the Bureau of Labor Statistics are weekly at 33.8%, biweekly at 42.2%, semimonthly at 18.6%, and monthly at 5.4%. The other, much less common payroll frequencies, include daily, four-weekly, bimonthly, quarterly, semiannually, and annually.
Weekly payrolls have 52 40-hour pay periods per year and includes one 40 hour work week for overtime calculations. Biweekly payrolls consist of 26 80-hour pay periods per year and consist of two 40 hour work weeks for overtime calculations. Weekly and biweekly payrolls are the most common for nonexempt employees because they are the two that allow for the easiest and most transparent overtime calculations
Semimonthly payrolls have 24 pay periods per year with two pay dates per month. These pay dates are commonly paid on either the 1st and the 15th day of the month or the 15th and the last day of the month and consist of 86.67 hours per pay period. Monthly payrolls have 12 pay periods per year with a monthly pay date. Each monthly payroll consists of 173.33 hours. Both semimonthly and monthly payrolls are more common for exempt employees that are earning a set salary each payroll. This is because overtime can be confusing and difficult to follow as it may be earned in one week but then falls under a different pay period.
things to know before running payroll
Many small business owners think payroll processing is simple. Well, it’s only simple if everything is set up properly at the beginning. And that’s a big if. Some of the largest financial risks entrepreneurs suffer are penalties and interest fees for incorrect payroll tax reporting. It’s definitely worthwhile to understand what’s involved before getting started.
What counts as payroll?
The most common forms of payroll are wages and salaries paid to employees for services performed in a business. Wages also include: tips, bonuses, commissions, and fringe benefits such as employer provided cell phones or automobiles.
Who are employees?
Improper classification of workers can cause substantial financial consequences and is one of the most important parts of payroll to understand.
Does it matter where employees live?
Absolutely! An employee’s permanent residence is considered his or her tax “home” and determines what taxes he or she has to pay in that state. Employers withhold the same amount of federal taxes no matter where the employee lives or works.
State income taxes are usually determined by considering the state, which state the employee works (business operates) and where the employee lives. In most cases, employers have a withholding responsibility in the state where their employee actually works, which can either be their resident or nonresident state.
Employee Payroll Tips for Small Business Owners
Payroll can be a challenging task for any small business but with the right tools, it can become easy and routine. There are a number of best practices for payroll management you can follow to keep you and your employees happy. We asked experts to share employee payroll tips for a healthy, sustainable small business.
As your business continues to grow, so will your payroll expenses. It is essential to determine what your approximate budget will be. As a business owner, you are required to match both Medicare and Social Security that is withheld from your employee’s pay. Depending on where your business operates, you may also be required to pay other employment taxes. In addition to fixed costs, you must take into consideration variable costs such as commissions and benefits that might be associated with your payroll, along with time and attendance software. Take the time to sit down with your accountant to determine your budget and make an effort to keep your expenses as low as possible. The lower your payroll expenses are, the higher your profit margin.
Small business owners who employ an hourly workforce depend on accurate, timely payroll to ensure their staff are engaged and retained. Having a seamlessly integrated system that automatically pushes worked hours into a central accounting system will make payroll management faster, accurate, and more efficient. One of the best investments you can make in your small business operations is in an integrated scheduling and payroll system that ensures staff are paid in a timely fashion. This, in turn, inspires your staff to trust and rely on their schedules and to treat your business like it was their own.
Paying your staff a salary can make your payroll much easier to manage, as they always get paid the same amount. However, it might not make sense for your business model or for the type of work your staff are doing. Paying by the hour is more complex, as you’ll need to keep track of how many hours each staff member has worked and then calculate their pay each period. There are plenty of time sheet solutions out there that can make this easier for you to manage, allowing your staff to clock in and out themselves. Many time sheet solutions can also integrate with your payroll software so everything’s kept up to date.
Small businesses have a lot of options when it comes to how often they pay their employees, and there are a lot of factors business owners must consider when deciding how often to run payroll. Will it be weekly, bi-weekly, bi-monthly, or monthly? That typically depends on the overall size of the company. Smaller businesses that employ fewer workers may be able to get away with a more frequent payroll schedule. However, as your business grows, your needs may change.
Tax Tips and SBA Payroll Options
Covid-19 has put the entire nation on the edge of its seat, as we wait for developments, scale back business, and try to weather the storm. Lake Mary businesses are feeling the pinch right now
Luckily, the government has come to the table with several options for managing, deferring, and lowering business tax and other expenses for the betterment of both businesses and their employees.
Not sure where your payroll is going to come from during a national lockdown? Worried about paying extended sick leave to employees who contract the virus? Join us today as we break down three ways you can mitigate these costs and take care of your employees with these Covid-19 tax tips for relief during this difficult time.
SBA-Guaranteed Low-Interest Loans
To call Covid-19 a stressful time for business owners isn’t saying anything new. You may not have enough income coming in, right now, to cover your most important expenses. Payroll, among many other things, has become a source of stress for many businesses. It’s for these reasons that bank loans have become such a talking point. Specifically, Small Business Administration (SBA) loans, or Economic Injury Disaster Loans
In response to the outbreak, President Trump recently announced that the American government would provide millions in funding for these federal disaster loans. These loans apply to qualifying businesses,
PAYROLL SERVICE IS DESIGNED FOR BUSINESSES OF ALL SIZES
Processing your own payroll can be complicated, time-consuming and fraught with risks. Among other things, payroll functions can include anything from determining employee wages and withholding taxes, to updating vacation and sick pay and deducting employee-contributed payments for benefits. Business of all sizes, from the smallest to the largest
The cost of an employee’s wages, plus benefits, adds up quickly. If you own of a small to medium size company and trying to process your own payroll in house, use, the cost of the time spent is even greater. If you outsource payroll, you don’t have to worry about your payroll processing company calling in sick, resigning, wanting to take a vacation, taking a day or for a kid’s field day or needing several months or maternity leave.
Mistakes lead to audits and penalties — situations no business wants or needs. Government rules and regulations are always changing and business owners can’t be expected to stay on top of these changes. Professional payroll providers, on the other hand, must stay current with rules, regulations and changes in tax rates. A good payroll-services provider is far less likely to make a serious error than your in-house staff.
Outsourced payroll providers calculate payroll taxes, manage filings and payments and will assume the cost of penalties due to incorrect calculations or late payments as long as you provide the necessary information and funds on time. Keeping abreast of state, federal, local and industry-specific regulation changes can be at best a real challenge. A reputable outsourced payroll provider has a staff dedicated to keeping up to date on all of the changes that could affect your payroll, ensuring that you stay in compliance.
Tension-free: When you own a business, you already have enough things on your mind and you catch every possibility to share the load. Giving the payroll responsibilities to a service provider can prove to be a great respite for you.