What Your Small Business Needs to Know About Payroll
You’ve hired your first worker, giving you a much-needed helping hand around the office. Congratulations! You can finally breathe again – once you figure out payroll.
That’s right: While a new employee essentially gives you more manpower to get things done, it also adds a fresh yoke around your neck: You need to learn the ins and outs of actually getting your hire paid.
That’s OK.
For one, there are several payroll apps and other software solutions that any small business can benefit from. However, you certainly need to know a lot more about payroll than simply how to use the App Store or Google Play … and we’re here to help you on that front, too.
Here are several facets of payroll that you’re going to need to learn or determine as you start to build your workforce.
What Every Small Business Employer Should Know About Payroll
Accounts: You’ll need to register for several things before you can ever run payroll. This includes (but is hardly limited to) an Electronic Federal Tax Payment System account for federal taxes, state tax and new-hire reporting accounts, and an Employer Identification Number.
What Type of Employee You’re Hiring:There are two primary differentiators you’ll need to know. One is exempt/non-exempt. Based on the Fair Labor Standards Act, some types of employees are “non-exempt,” which allows them to collect overtime pay if they work more than 40 hours in a week. “Exempt” employees, typically salaried, do not receive overtime. There also are employees vs. independent contractors. The rules governing the proper classification of an employee are complicated, but essentially involve a high level of oversight about what work will be done, how it will be done and even where a worker gets supplies. Independent contractors, as the name implies, work for themselves and typically have less stringent amounts of oversight from the business that hires them.
Labor Laws:There is a laundry list of employment-focused laws you’ll need to know as a small business employer. Most people are aware that there’s a federal minimum wage, but many states have higher wages that must be complied with. There also are laws governing overtime pay, and even how many hours younger employees (think: teenagers) can work.
Employee Information: You’ll also need some basic information from your employee, which will be garnered through one of two forms. If you’re hiring an actual part- or full-time employee, you’ll need the employee to fill out the W-4 personal allowances sheet. (Independent contractors must fill out form W-9, for what it’s worth, but they are not processed through payroll.)
Paying Taxes:Employers typically must collect federal income, Social Security and Medicare taxes from their employees, and often are responsible for collecting state taxes, too, which they in turn pay to the respective entities. Employers also must pay a Federal Unemployment Tax, as well as match employee payments of Social Security and Medicare taxes.
Pay Periods:The four basic payment periods are weekly, biweekly (every two weeks), semimonthly (twice a month) and monthly. Some states actually govern which pay periods you’re allowed to use, so make sure to check before determining.
Payment Method:At this point, Direct Deposit has become a ubiquitous method of payment – simply having the funds placed directly into a bank account of the employee’s choice. However, some companies still cut paper checks, others use payroll cards (essentially prepaid debt cards), and still others use good old-fashioned cash.
If that sounds complicated, you’re right – and that’s’ not even the whole story. Running payroll involves numerous other nuances and requires a specific knowledge set. It’s definitely not as easy as opening a payroll app and clicking a few buttons. But fear not: McManamon & Co. offers outsourced CFO duties, which include the essential payroll services that keep your employees paid and happy.
Payroll is the lifeblood of most normally functioning business, so make sure you get it right. Call McManamon & Co. at 440.892.9088 or contact us online for payroll services you can trust.
Tags: McManamon, outsourced CFO, payroll, small business | Posted in McManamon & Co., small business