You could be apprehensive about processing payroll if you’ve never done it before. But don’t be concerned. Payroll processing is simpler than you would assume. This step-by-step guide introduces you to the payroll process, so you’re confident and ready for payday.
You can also check out payrolling services if you wish to outsource this activity to professional payroll processors.
What is Payroll Processing?
The act of coordinating employee payments is known as payroll processing. It covers all from entering an employee’s information into the payroll software to paying them.
If you own a small business, chances are, you’re the one in charge of payroll. You might delegate payroll to an accountant or HR manager as your company grows and payroll processing becomes more time-consuming.
Payroll Processing: Step-by-step guideline
Utah payroll processing is considerably more than just remunerating your employees. It’s all part of complying with state and federal rules and the Fair Labor Standards Act (FLSA).
Following is the step-by-step process with useful tips:
1. Select a Payroll System
Manual, payroll software and outsourcing are the three fundamental payroll systems.
- Payroll is manually processed, usually on paper or on a spreadsheet.
- Payroll software varies by plan or product.
- Outsourced payroll is contracting someone else to handle everything from bookkeeping to payroll taxes. Most companies provide everything from simple payroll help to more advanced payroll services such as time monitoring and HR services.
Consider business growth, employee perks, and the intricacy of your state’s payroll taxes and requirements before committing to one system over another.
2. Establish a Payroll Policy.
Review your local labor regulations, state overtime rules, and federal labor laws before creating a payroll policy. Unpaid overtime is the most prevalent FLSA infraction, which can accidentally happen if you don’t know the regulations.
Some other items to consider including in your payroll policy are:
- Pay dates, the duration of each pay period, and when employees are paid after that.
- Whether employees will be paid by paper check or direct deposit.
- Payroll deductions and withholdings and the impact of the benefits you provide on the employee’s paycheck.
3. Collect Information from Employees
I-9s, W-4s, and state withholdings should all be on hand if you have employees. Each employee’s Social Security Number, personal information, and tax filing status will be provided in these documents.
You’ll need proof that the employee has approved additional deductions if you include retirement savings or employee health insurance in your payroll.
4. Get a Direct Deposit Account
Direct deposit isn’t free, but it’s popular since it’s handy for businesses and employees. You can establish direct deposit via your firm’s bank or through your payroll processor as a business owner.
If your employees choose direct deposit, they will be required to provide you with some information. After you’ve gathered all of this information, you’ll need to upload it to your bank or payroll software.
5. Set up a Timekeeping System
Employers are required under the FLSA to keep accurate records of all nonexempt employees’ working hours. In most circumstances, “nonexempt” refers to hourly workers.
Manually tracking hours and asking employees to enter clock in and out times is one way to keep track of that information. Otherwise, you might use time tracking software to keep track of employee timesheets.
6. Collect Timesheets from Employees
You’ve made it to the conclusion of the pay period, which is great news! It’s time to process the first payroll. This means employee time cards must be collected.
If you’re using paper time cards, you’ll have to spend some time totaling up the hours, double-checking for errors, and transferring the data to your payroll system. If you have digital time cards, import them into your payroll software now.
7. Authorize and Submit Payroll for Employees
Approval is the most critical step when it comes to conducting payroll for hourly employees. This is your time to double-check that all work hours make sense and that the payroll is correct. You’re ready to process payroll and distribute payments to employees once you’ve authorized all employee time cards.
8. Report and Update Payroll Information
Once the checks have been issued, update the payroll records. These records must prove that Social Security, Federal Income, and Medicare taxes were withheld from employee earnings. You must also produce proof of your tax contributions.
Payroll processing is really not too complicated. The steps and tips discussed can help make it easier for you. We hope you maintain the best practices and can process payroll successfully regardless of the method you use.