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Our tips are specifically designed to help new startups grasp the intricacies of payroll accounting, a crucial aspect of managing your employees’ compensation.
May 1, 2024
So, you’ve embarked on your entrepreneurial journey and welcomed your first batch of employees. While setting up a payroll system for your startup might appear straightforward, it’s riddled with complexities that can trip up even the most seasoned bookkeepers.
Read on for our comprehensive guide to what startups need to know about payroll accounting to ensure it’s done accurately and on time.
Your first step as an employer is to set up your payroll process. It’s a safe bet that your employees want to know when their paycheck is coming, and these affordable payroll solutions will help you reassure them.
When it comes to setting up your payroll process, you have several choices: weekly, bi-weekly, or semi-monthly. Choosing the right one that suits your style of work and sticking with it can bring stability and confidence to your startup. As your business grows, considering outsourced payroll services to payroll outsourcing companies can further streamline the process.
In addition, you need to decide how you’ll set up your payroll. Will you issue checks or offer automatic deposit? When is payday? Is it the first and the fifteenth or another combination of days?
It’s a wise choice to know the answers to these questions before onboarding anyone.
Paying your employees includes much more than just paying for their invaluable hours and regular salaries; so many other things go into it. It may also include all of the following:
Keep in mind that some of the aspects mentioned above are location-specific, underscoring the importance of staying abreast of the ever-changing rules and regulations.
Another thing to note is what constitutes an employee. Why? It’s because you’ll need to know this before paying the taxes. You need to know who is paid hourly and, therefore, eligible for overtime for hours worked over the standard 40-hour work week. You also need to know who is salaried even though they are exempt from the Fair Labor Standards Act.Knowing who might be an independent contractor or freelance employee is also important. You certainly don’t want to misclassify an employee, as this can land you in hot water with the IRS. Knowing your employees’ classifications, such as overtime and unemployment insurance, is vital to their benefits.
Both you and your employees must pay taxes on their wages to the federal, state, and often local government.
You, not your employee, are responsible for making the actual payments. So, you must calculate and withhold income tax, Social Security, Medicare, and Federal Unemployment Tax each pay period.
You must then make the employees’ payments and contributions to each agency.
The bottom line is that payroll tax filing and reporting are your responsibility, not that of your staff. So, use one of the several payroll tax services that are ready to help you with this daunting task.
Another essential thing to remember is that you must have money in the bank for online payroll processing to pay your employees and the associated tax payments.
Using the money set aside for payroll taxes can be tempting because it may sit in your account for several months before it’s due. Still, you can’t spend it on operating expenses. If you manage your payroll, set the funds aside until you can make the tax payments on your employees’ behalf.
Payroll accounting and record keeping ensure that the payment compliance services you provide your employees stay on track and continue without hiccups.
You must set up a payroll account in your chart of accounts list. You may also consult some small business payroll services to assist you as you set up your brand-new startup.
This ultimately helps you print reports and manage your money better.
While you may have the best intentions regarding your payroll setup, maintenance, reporting, and accounting, it’s usually best left to people who handle it daily.Why? These professionals stay current on the latest local, state, and federal regulations to ensure your legal compliance.
Be sure to research your options regarding payroll accounting, as mistakes can be costly. The average entrepreneur isn’t a payroll expert, and outsourcing is often a good option.
Feeling overwhelmed with payroll accounting? Don’t worry, Escalon has helped over 5,000 companies across a range of industries to optimize routine business functions, like HR and payroll, and operate more efficiently. We’re here to support you. Talk to an expert today.
Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.
Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.
Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.
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