Reconciling is a good practice to do every pay period, before filing quarterly taxes and before sending out W-2s to employees. Many payroll products offer integrations with time-tracking apps or include time-tracking features, sometimes at an additional cost. Start by ensuring employees know how to update their information, whether via an employee portal or paper form. If your software features an employee portal, you’ll likely be notified of the change automatically.

For all other deductions, determine how much needs to be pulled from the gross wages and where it needs to be sent, such as health insurance provider. Always factor in what you pay as an employer as a separate line item than what comes out of the employee’s gross pay. Note that the current percentages for Social Security is 6.2% for the employer and 6.2% for the employee. The Medicare rate is 1.45% for the employer and 1.45% for the employee. Make sure you set aside the right amount from the employee’s gross wages and from your own business account to pay these required taxes. The only way to know if you’ve set everything up correctly is to put your payroll plan in motion.

Employers need to file wages paid to employees, taxes withheld, Social Security and Medicare deductions and employer’s contributions to Social Security and Medicare. Choosing a payroll system is critical for setting up payroll, because it’s the method that will guide your process each pay period. Determining which one to use may come down to convenience, budget, and necessary features. As a business owner, you’re responsible for making sure your payroll is accurate, but that doesn’t mean you need to manage all aspects of the process yourself. In fact, 45% of small businesses use a payroll service, according to a 2021 report by the National Small Business Association. Our partners cannot pay us to guarantee favorable reviews of their products or services.

Payroll records are important

In addition, some PEOs can also help with benefits administration for employers who want to set up an employee plan. The first thing to consider when choosing a payroll system is what you need for your business. Larger companies may need HR add-ons but smaller businesses will usually be more suited to a simpler payroll solution.

Keep up-to-date employee records

1. That means you’ll also need to pay the employer portion of FICA payroll taxes to match your employees’ contributions.
2. Record the tally of hours worked on a spreadsheet, noting any PTO that should be paid as well.
3. To establish what kind of system you need, think about the size of your business and how many employees you have.
4. The most common methods to pick from are direct deposit or distributing paper checks.
5. It automates many of the most labor-intensive processes, such as calculations, deductions and payments, and in some cases, includes tax reporting services and compliance support.

This is a number issued by the IRS for tax purposes, which will be used to identify your business in any filings. An EIN is essential for ensuring accurate and compliant tax payments for each employee. This needs to be in place for each employee on the payroll system.

Balance benefits and deductions

Using time tracking can also come in handy for correctly calculating wages. There are many standalone platforms that employers can use to manage this process, while companies like OnPay have integrations so you can set this up in one place. Time tracking can also help you collect data so that you can find potential scheduling inefficiencies. For example, you may find your weekend shifts are overstaffed after reviewing the data. When bringing on new hires, it’s common for employees to want to know when payday is.

Review employee pay rates and look into anything that is higher or lower than expected. Check overtime hours and tips, especially for employees who work shifts. (In some states, tips count toward hourly pay.) Look for errors in withholdings or deductions, calculated hours and total pay for the period. Payroll software will generally flag some potential inaccuracies automatically, but other mistakes may be subtle and harder to catch. Reconciling payroll essentially means checking your work and making sure your expected payroll matches your actual payroll. Comparing the current payroll to the prior period can also help you spot anything out of the ordinary.

Trusted payroll from payday to tax time

If you have hourly employees, you must track the time they spend on the job. You can use whatever method works best for this, as long as it shows a complete record. We will help you transfer any existing payroll information to QuickBooks. QuickBooks Payroll has what you need to stay compliant, from labor law posters to expert support. He has over 15 years of experience writing for small and growing businesses. Here are some of the what is the difference between operating and non most common periods that companies adopt.