Even when running a small business with just a few employees, it's important to have a reliable, accurate payroll system in place. This way, you can keep your employees happy by making sure they're paid on time and in the proper amounts. If you're new to small business ownership, there are a few things you'll need to know about setting up your payroll.
What Are Your Responsibilities?
Paying your employees for their work isn't your only responsibility as a small business owner. You'll also be responsible for deducting required taxes from their paychecks; this may include Federal and state taxes, Medicare and Social Security taxes, and any wage garnishments that may be dictated for certain employees (for back taxes, past-due child support, etc).
In addition to deducting your employees' taxes, you'll also be responsible for paying half of each employee's Social Security and Medicare tax, which is currently 6.2%.
Which Payroll System is Best?
You have a few options you'll want to consider when it comes time to choose a payroll system for your small business.
The cheapest method is to do your own payroll by hand. This may be the best method for small businesses that are just starting out, have very few employees, and don't necessarily have the funding to hire a payroll specialist just yet. However, doing payroll yourself can be time-consuming and may also be prone to error, so be sure to check your work.
Another viable option for small businesses is to use payroll software; with this method, you'll still be doing the work manually, but you'll have the help of a software program to ensure that your calculations are correct. Still, payroll software allows you to generate paychecks instantly and also saves employees' information, which can save you time when it comes time to file taxes.
A more expensive but less time consuming option for small businesses is to hire an accountant; this gives business owners the peace of mind in knowing that payroll will be done in an accurate and timely manner. Having an accountant also gives business owners more free time to focus on other aspects of running the company, though it does come with a loss of control that some business owners may not be comfortable with.
Now that you're aware of your responsibilities and options when it comes to employee payroll, you'll be in a better position to make choices that are right for your company.