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Payroll 101 for Startup Businesses


So, you are in the process of starting a business? Congratulations! This is a big step in your life. Of course, you are going to be faced with more work than you could ever imagine.

From the get-go, it is essential to have a firm grasp on the payroll process. After all, labor costs are going to make up a large portion of your expenses. It is essential that you maintain accurate records, keep your documents in order, and of course, pay everybody the proper amount without delay.

Below are several areas to consider as you learn more about payroll and how it will affect life as a startup owner.

Collect Employee Information

This is easy enough if you have a full-time human resources manager on staff. However, this is not typically an "early" hire for most start-ups.

You must make sure the records of each employee are accurate. This includes everything from basic contact information to marital status to tax withholding details. Without this information, processing payroll every month will be impossible.

Time Tracking

Are you paying employees by the hour? Is every employee salaried? Is there a mix of the two? You must require hourly workers to document their hours. Typically, this is not required for salaried employees.

In the past, "punching a time card" was the best option for hourly employees to track their hours worked. However, there are now online systems that make this process much easier.

Time to Get Paid

Your employees expect to get paid the agreed upon amount based on a regular pay schedule. Generally speaking, payment is made via direct deposit or paper check.

While this sounds simple enough, without the proper knowledge of the payroll process you may find yourself lost. Remember, you are not simply writing somebody a check. You must base this on their hourly wage/salary. Along with this, you are responsible for tax withholding.

Payroll and Labor Reporting

As an employer, you must keep all payroll records for a minimum of three years. But before you ever get to this, you must follow the proper protocol upon hiring a new employee. This starts with collecting the appropriate tax forms. With this information, you are able to withhold the correct amount of taxes for each employee on your payroll.

Are You Confused?

Trying to get a new business up and running can be a challenge in its own right. When you add in payroll difficulties, you may find yourself bogged down and losing precious work time.

Although hiring an HR professional is an option, it is also going to cost you a lot of money in salary, benefits, workspace, etc. Fortunately, other options do exist. For example, you could setup your company with an online payroll service that can handle all related tasks for you. With this type of help, you can save time while ensuring that your organization stays compliant with all state and federal regulations.

Don't let your fear of the payroll process stop you from starting a business.