Business is doing well, employees are happy, and a loyal customer base is growing. But running a small business may still be missing his one piece of the puzzle.
But you don’t have to put in extra hours each week to pay your employees, keep records, and manage your taxes. With the right processes and tools, you can spend more time face-to-face with your employees and customers and keep payroll from taking up your free time.
That’s why we created this guide to payroll for small businesses. We cover everything from how to set up your payroll, to what you need to know when filing your taxes, to software you can use to simplify your payroll, and everything that comes with it.
Step #1: Understand Salary Laws and Regulations
Often, it’s not just the physical act of running payroll that eats up your day. Understanding the complex rules and regulations behind the process can be very time consuming.
Complying with payroll laws and regulations is essential to avoid significant legal and financial repercussions. So it’s important to do the right thing. And that can mean lots of moving parts to keep track of. Think local, state, and federal tax laws, as well as wage and hour laws.
For example, each state has its own payday requirementsand failure to comply with them could even mean dealing with fines or legal action.
Additionally, staff members must be correctly classified as exempt or non-exempt. This will determine if you are eligible for overtime pay or anything else. Fair Labor Standards Act (FLSA) protection.
It goes without saying that workers independent contractor or employee. Up to one-third of employers Misclassifying staff as independent contractors can result in hundreds and thousands of fines.
Learning and keeping up to date with all these regulations can feel like a whole job in itself. That’s why I recommend using a tool like Homebase Human Resources and Complianceallows you to track hours worked for all your employees in one place and helps you stay on top of wage and hour laws, especially when it comes to breaks and overtime.
Our platform can also notify you when labor laws change at the state or federal level. A team of HR personnel is always there to check your procedures and offer advice when you get lost.
Step #2: Set up your payroll system
Once you have a general understanding of the laws and regulations that must be followed, it’s time to record your business with the government. This means registering a business name and applying for a tax identification number with local and state governments. or, employer identification number (EIN).
But one of the most important steps in small business payroll is choosing and setting up a payroll system. And choosing a manual process can mean hours of extra work and costly mistakes, so be careful.
so looking for payroll software This makes your job easier while maintaining an accurate and efficient payment system. Some features to look for are:
- Instant conversion of time sheet Convert hours and wages to be ready for payroll
- Automatic Tax Return and W-2 and 1099 Issuance
- Automatic issuance of payments to employees, states, and governments Internal Revenue Service (National Tax Agency)
- Employee self-onboarding and e-signing of documents
- Timecard record keeping to comply with FLSA record keeping regulations
Basically, I want a payroll system that allows me to pay my employees and file taxes with the click of a button. The system should also be smooth to implement and easy for staff to use on autopilot.
And ideally, choose a tool that offers other HR capabilities such as: Recruitment and onboarding and team communicationall major internal processes can be under one roof.
Step #3: Calculate Your Salary
Now that you know how to set up payroll, it’s time to start calculating.is to decide total salarytax estimates, and pre-tax deductions such as 401(k) plans and health insurance.
Calculating payroll taxes can be complicated, but with software like Homebase, this tool can automatically calculate, pay, and file your tax return. Our platform is designed for hourly teams with unique salary rates and exemptions, making it suitable for companies in nearly every industry.
![](https://joinhomebase.com/wp-content/uploads/2023/02/c8ds9c7sd98c7ds9.jpg)
caption: Homebase gives you a clear overview of what each employee is earning and what portion of their gross pay goes to taxes.
base salary You can also set roles, wages and employee classifications for each team member and run payroll for the entire team with just a few clicks.
![](https://joinhomebase.com/wp-content/uploads/2023/02/cd89s7c89sc7sd9.jpg)
caption: Home Base allows each employee to have their own wage, role, and pay classification.
Plus, with a comprehensive tool like Homebase, you can avoid overpaying or underpaying your employees by taking the stress out of making sure you’re complying with laws and regulations.
Step #4: Pay Employees
Now for the team’s favorite part of the whole process: payday.and 50% of workers report considering quitting their jobs as a result of repeated payroll errors, making sure people’s bank accounts show the correct amount is critical.
Payroll accuracy is critical not only to maintain team morale, but also to comply with laws and regulations and protect your business.
But paying a team member is more than just handing over a check. You need to track preferred payment methods, issue people’s payments on time by paycheck or direct debit, and distribute correct tax returns.
Again, automating these processes minimizes mistakes and reduces workload.
![](https://joinhomebase.com/wp-content/uploads/2023/02/cd89c7s98c7ds9.jpg)
caption: The Homebase app notifies employees when a paycheck is due, so they can easily view payslips to see the exact amount.
Step #5: Keep Accurate Records
After submitting the payment, the work is not yet completed. FLSA to Employers Basic record For all non-exempt employees consisting of correct data on workers, working hours and wages.
Keeping accurate records is also important for making informed decisions about payroll.After all, labor costs can be compensated about half of all business costs, depending on industry
And when margins are tight, knowing exactly where your revenue is going is essential. Having detailed payroll records can help you determine if your business is running sustainably.
So keep detailed documentation of employee hours and wages, and store payroll data securely to protect your team members and your business. I don’t want people to worry about their privacy, and I definitely can’t risk that information falling into the wrong hands.
This is another reason why having a comprehensive payroll tool that generates and saves reports is essential. You don’t have to go through the extra work of creating the report yourself and know that the report is stored in a safe place.
![](https://joinhomebase.com/wp-content/uploads/2023/02/cds89c7sd98c7ds89.jpg)
caption: Homebase accurately generates and stores payroll reports, from comprehensive summaries to W-2 previews.
Step #6: Manage Payroll Tax
It’s a fact of life: “Nothing is certain except death and taxes.” You already know how important it is to know your payroll tax to comply with laws and regulations and avoid fines and late fees.
And while no one can get away with taxes, Benjamin Franklin didn’t have to be so morbid about the topic.
Managing payroll taxes means:
- Identify taxable employees
- Identification of taxable wages
- Determining Applicable Payroll Tax
- Familiarize yourself with the forms and procedures for filing your taxes
- Submit quarterly and annual tax reports
Again, we recommend automating this process with a dedicated tool that allows you to calculate, pay, and file your taxes. Let’s be honest, unless you’re a Certified Public Accountant (CPA), paying taxes can feel like reading a foreign language.
Also, remember that each state has different salary laws and tax rates, so it can be difficult to figure out for yourself. This is where a dedicated tool can help.
Perfect payroll to send payroll on time and keep your business thriving
Now that you’ve read and understood these tips on how to run payroll for your small business, it’s time to put what you’ve learned into practice. Follow the steps above to set up your payroll, pay your employees, and keep records. , file your taxes, keep your employees happy and your business running smoothly.
Remember, you don’t have to do payroll alone.Consider using tools like base salary Simplify and automate processes and manage all your HR operations in one place.