Payroll For Small Business – Here’s What You Need To Know

Small Business Payroll

This post contains a collection of articles I have selected to give you an overview of dealing with small business payroll. Before you get to the resource section, let’s go over a few key issues and considerations.

Depending on your business’s size, keeping up with payroll can turn into a full-time job. Payroll processing must be accurate for your employee’s paychecks and tax filings.

In the payroll department, there is no room for errors or delays. Your payroll processing and administration might be performed weekly, bi-weekly, or even monthly, depending on how you pay your employees and schedule your tax payments.

A larger workforce will require daily maintenance because of adjustments such as an employee that had an issue with a punch clock, managing holiday pay, vacation pay, etc.

Another issue you need to focus on is being current with the law and tax codes. You don’t want to process your payroll using outdated regulations.

Payroll Tax Calculation Example

Payroll taxes use a percentage from both the employee and employer. The payroll manager will deduct the employee’s amount and pay the revenue service on their behalf.

Let’s look at an example:

The FICA tax (Federal Insurance Contributions Act” is mandatory and used for programs such as; Social Security, Disability Insurance, Old Age Pensions, Medicare, etc.

50% of the FICA tax is paid by the employer and 50% by the employee.

If the current FICA tax is 12.4%, the employee and employer each pay 6.2% of the employee’s gross pay.

The medicare tax is a total of 2.9% of the wage.

For example, the employee’s gross wage is $1,000 per week. The employee’s pay is deducted by $14.50, and the employer pays $14.50 for a total tax of $29, equaling 2.9% of the employee’s wages.

Total tax collected for a $1,000 wage example:

$124 FICA: $1,000 x 12.4% = $124 – Total $62 Employee, $62 Employer

$ 29 Medicare: $1,000 x 2.9% = $29 – Total $14.50 Employee $14.50 Employer

$153 Total Tax collected: $1,000 x 15.3% = $153

The above is just an example of how one payroll tax is calculated. For more details see, the articles I have included in the “How Payroll Taxes Are Calculated” section in the resources below.

When Are Payroll Taxes Due?

Depending on your country’s laws and how you pay your employees will determine when payroll taxes are due.

You may need to submit your payroll taxes weekly, bi-weekly, semi-monthly, or monthly.

I recommend you don’t fall behind on Payroll taxes. Once you fall behind, it won’t be easy to get caught up. Use your line of credit or other methods to make sure payroll taxes are submitted on time.

Look at it this way; it’s not my money!

I’m collecting the taxes from my employee’s wages, paying my part, and submitting it to the government.

When you focus on the mindset that it’s not your money, you will avoid using the funds for other expenses.

For more, see the resources below in the “When Payroll Taxes Are Due” section.

Outsourcing:

If your payroll gets too big for you to handle or you just don’t want to deal with it, you can hire someone full-time or outsource to a company specializing in payroll processing.

Whether you process your payroll in-house or you outsource it, you’ll want to keep an eye on the numbers. Wages are a significant expense in any business, and you want to keep them under observation.

The Pros and Cons of Outsourcing Payroll

Naturally, there are pros and cons to outsourcing your payroll.

When you have a competent company handling your payroll, some of the pros include:

• You can focus on running your business rather than spending time on payroll.

• You instantly gain experienced and knowledgeable people performing this task for you.

• Your cost may be lower than hiring staff and setting up a payroll department.

• You’ll be assured your payroll is accurate and completed by a professional.

• You’ll be update date with all the current laws.

• You can count on your payroll, and taxes are all up to date.

Some of the cons may include:

• Loss of control because you are outsourcing a delicate task.

• Security and data breaches are a risk, especially for companies that don’t have measures in place for security, privacy, and a data breach.

More pros and cons in the resource section below, plus see the section for companies that can handle your payroll for you.