ongoing salary Not exactly fun. But every business owner needs to do this if they want to keep employees happy (and paid!).
The payroll process covers everything that goes into paying employees while complying with labor and tax laws — such as registering for tax IDs, accurately tracking hours, calculating and withholding taxes, and sharing pay stubs.
It’s a lot, we get it. That’s why we’re going to help you learn what payroll is, how to do it right, and what steps to take to select the right software to set up your payroll process.
Homebase helps you create a great place to work.
What is the salary?
Basically, payroll is the process of paying your employees. This includes tasks such as figuring out taxes — including Social Security and Medicare taxes — and tracking work hours
Converting timesheets to hours, processing tax filings and issuing 1099s, W-2s, and W-4 forms, providing benefits, and actually distributing your employee’s paychecks—all fall under the payroll umbrella.
As a small business owner, you’re probably managing your own payroll. In larger organizations, this may be delegated to an HR professional or an accountant. Fortunately, smart tools like Homebase offer everything you need to get the job done right without hiring extra people.
How payroll works with small businesses
Payroll works differently for small businesses, mainly because their needs are different and they don’t need all the bells and whistles that a big company might have. These extras come with a steep learning curve (and price tag!).
The other key difference is that many small businesses prefer to pay their employees hourly. And since Hourly pay Unlike payroll, it requires different processes and tools.
Hourly pay is based on an hourly rate and employees are paid based on the number of hours they work. Salaried employees on the other hand get a fixed amount of salary every month. Hourly wages require careful calculation of each employee’s timesheet and overtime, therefore time clock And Employee Schedule Software is often a necessity.
Different components of salary
There’s a lot of process and work that goes into running payroll, and it’s not an easy task to undertake: you have to collect employee information, set up a payroll schedule, calculate tax withholding and deductions, and a whole bunch of other things. That can quickly feel quite overwhelming.
Remember that you’re not alone, and you don’t have to pay DIY for your entire business. Now, let’s break down some of the components of this salary.
For small businesses with hourly workers, a Pay schedule A pay period is a combination of the period employees work and a pay date (the day your employees receive their checks).
The most common pay schedules in the United States are weekly, fortnightly, semi-monthly, and monthly. Weekly schedules are best for small businesses because they make it easier to account for overtime payments, which are usually irregular. This way, employees also get paid as soon as possible, which gives them more control and flexibility over their finances.
Choosing the right schedule for your business is critical because it affects everything from payroll processing costs to employee morale to compliance with state and federal laws.
Calculating and withholding tax is an essential component of running payroll. Taxes and rates can also vary by state, which can make this whole process even more complicated.
The good news: There are only five federal and state State payroll tax To get started you need to know:
Once you have that down, check to see if your business is subject to any additional state or local taxes.
Health insurance contribution
Offering employee health insurance is a great benefit that can differentiate your business and attract top talent in a competitive labor market. But if you’re mainly running the show by yourself, find out how Health insurance contribution And payroll taxes can be difficult to interact with.
Basically, employer-sponsored health insurance premiums are pre-tax for both the employee and the employer. That means the money you spend on employee health insurance premiums can be exempt from federal taxable income and Payroll tax (Of course, you should always check with your Certified Public Accountant!)
So before you calculate and withhold tax, make sure to take into account any benefit contributions and deductions.
There can be several costs associated with running payroll smoothly. But it depends on the type of payroll system you use and whether or not you outsource these activities Salary expenses There can be drastic changes. If you use a payroll service solution, you will have costs such as:
- A base monthly fee and fees for each employee on your payroll
- 401k distribution
- Employee time tracking
- Compensation of employees
- Direct deposit, state, and federal tax filings
- Paid holidays and overtime pay
A Salary Summary Report Shows you an overview of all your payroll activities. It includes employee details such as net and gross pay and employer taxes. Maintaining and properly storing these documents is as important as you Required by the federal government To submit several payroll report forms, including Form 940, Form 941, W-2s, and W-3s.
You may also be responsible for local payroll reports, so check your local employment laws to cover your bases.
How to Choose the Perfect Payroll Software for Your Business
You can of course process your own payroll manually, but it’s a complicated process that can leave room for error. That’s where payroll software comes in. These tools help you reduce labor costs, stay compliant with federal and state laws, and reduce payroll errors.
There is a wide variety of payroll software, including solutions like Gusto, BambooHR, and OnPay But most of these platforms aren’t built specifically with hourly workers and small businesses in mind. This means they don’t offer an all-in-one solution with tools for scheduling, time tracking, automatic deduction calculations, and all the other functions that hourly payroll requires.
Also, they are often designed for large companies and not directed at businesses with fewer than 20 employees.
so when Choosing a payroll providerMake sure it’s not only secure and scalable but actually built for a business like yours!
How to set up and process your payroll
When it actually comes Set up your payroll systemThere are some important points to remember. Before you get into the nitty-gritty of it, decide what your payroll policies will be and how you’ll handle the process.
Do you manage everything in the house? Or would you prefer to outsource it to an accountant or online payroll service? And what about your salary schedule? Be sure to document your policies so that everything is publicly available and transparently communicated to your employees.
Then, register as a business with the IRS and get your Employer Identification Number (EIN). Make sure each member of your team fills out the correct tax forms, and then calculate how much federal and state tax you need to withhold from each of your employees’ earnings.
As an employer, you must file your federal tax return quarterly. Then, at the end of each year, you need to prepare your annual filing with your W-2 for each staff member.
Finally, calculate your salary and pay your employees. That may sound like a lot, but the process can be summarized in these ten steps:
- get your Employee’s EIN
- Register with the Electronic Federal Tax Payment System (EFTPS)
- Know your area Salary Act
- Determine your Pay schedule
- Report new employees to the state
- Prepare proper documents Like W-4s
- Find new rentals Payment of rates
- Calculate tax deductions and state taxes
- Spread the paycheck and maintaining records
- Use accounting software to help along the way
That’s right – it can be hard to run Small business payroll If you want to take that route yourself, it’s definitely possible with some patience and effort!
How Homebase streamlines hourly employee payroll
There are many steps involved in running your own payroll process, and they can be difficult and tedious to perform, especially if you don’t use an HR service to assist you.
Payroll software designed specifically for small businesses can help a lot. This saves you the headache of remembering every single payment step yourself and running the risk of falling out of compliance, even by accident. That’s why we’ve highlighted how Homebase can simplify your payroll and help you stay compliant.
This feature allows you to turn almost any device with an internet connection into one Employee time clock procedure. All you need to do is download the online time clock for employees and sign in Then, team members can clock in and out with the time clock using their personalized PIN
After that, you will be able to track hours, breaks, overtime and paid time. Homebase will instantly convert your timesheets into hours and wages. Timesheets and payroll, all in one place!
of home base schedule The solution helps you optimize employee schedules and ensures that you and your team are always on the same page.
Instantly share your schedule with your employees, use templates or auto-scheduling to optimize shifts, automatically remind employees of upcoming shifts via text, and get alerts to avoid overtime hours.
An optimized schedule makes it easy to track an employee’s total hours and figure out how much overtime you need to account for, which translates into easier pay calculations at the end of your payroll schedule.
Homebase offers several integrationSo if you’re already using a payroll solution like Quickbooks or Square, you don’t have to worry about manually entering and transferring data.
From Shopify and Paychex to Vend and Toast, we make sure your entire tech stack is automatically synced, saving you time and cutting out redundant data entry.
Last but definitely not least, us Salary The solution automates the entire payroll process so you can focus on what matters. Here’s what we do:
- Calculate wages and taxes and send accurate payments to employees, the state and the IRS.
- Automatically process your tax filings and issue 1099s and W-2s.
- Keep your time card records to help you comply with FLSA record keeping rules.
As an added benefit for your team, they will have the option to do so Access a portion of their wages before payroll. This gives employees more control when unexpected expenses hit and comes with zero cost or hassle for you.
Seamless payroll is just a click away
Running payroll as a small business owner is complicated because it involves more than just determining wages and transferring payments.
You must calculate and withhold taxes, comply with federal, state, and local laws, prepare payroll reports, and decide on a consistent payroll schedule. And you have to do all that while actually running your business.
If that sounds too time-consuming and confusing, we’ve got you covered! Homebase automates your payroll process and takes care of everything from converting your timesheets to hours and wages to automatically processing your tax filings. You just focus on growing your business and doing what you love!
Homebase helps you create a great place to work.