Managing Payroll is all about paying your employees and keeping tax revenue agencies happy. Whether you decide to process payroll on your own or to use a payroll service, there are certain issues that you need to decide upon prior to processing payroll.

Who will be on the payroll?

You interviewed and hired your employees. You have already agreed on the wages and salaries. Now it is time to add them to your business’s payroll. Very straightforward, isn’t it? But wait, are employees the only ones that need to be added? What about contractors? Yes, you need to include professionals you hire as freelancers or contractors. Even though no taxes will be deducted from contractors as they are responsible for paying their own payroll taxes, they are still processed through your payroll system.

How often to process payroll?

When you hired your employees, did you agree with them whether they will be paid on a weekly, bi-weekly, semi-monthly, or monthly basis? This needs to be reflected in the payroll system. Keep in mind that the more frequently you process payroll (such as weekly), the more costly its whether you process payroll yourself or through a service provider.



What is the payment method?

Several ways are available to pay your employees. You can pay via manual paycheck. This way the employee does not have to have a bank account. However, if you have many employees, this could be cumbersome. You can pay employees via direct deposit. This method is the most common one, but it requires the employees to have bank accounts. You can also use payroll cards that act as pre-charged debit cards that can be filled on payday and then used by the employee for purchases or to draw cash. This also does not require the employee to have a bank account.


How to process payroll?

Now that you have your homework done. It is time to decide how to process payroll and make sure that your employees get paid as well as the taxing agencies.

You certainly can choose to process payroll manually, that is to do it yourself. To get this done, you will need to know what the tax rates are for federal and state taxes. Depending on where you are, you might need to consider local taxes. You can then calculate the taxes to be withheld from each employee based on the salaries and deductions specified by the employees when they completed their W4s. Do not forget to file the payroll taxes you withhold from employees as well as your share on regular basis with the IRS and your local tax agency. This method will save you the cost of a payroll service provider but can be hectic when you have many employees.

Another option is to process payroll through payroll software. All you have to do is provide the information and the platform will take care of paying your employees, withholding taxes, and filing your payroll taxes, of course depending on the plan you choose. Keep in mind that additional fees might be charged per payroll frequency. 

Yet a third option is outsourcing payroll processing to an accountant or payroll service agency. With this option, you will have the peace of mind that your payroll is handled by professionals. As with any other option, you need to weigh cost vs benefit.

For additional information or if you would like to discuss how we can help you, contact us and schedule a free 30-minute consultation session