Big businesses have complete departments dedicated to their business’s payroll accounting. However, small businesses face the huge task of facing all sorts of responsibilities for payroll accounting. From managing overtime pay to managing taxes and fringe benefits, all of the payrolls accounting tasks need to be managed meticulously in order for their employees to receive salaries at the prescribed time every month.
Here are few easy steps for managing payroll accounting:
Step # 1
The first step in managing your business’s payroll accounting is collecting records of time and work done by each employee. You can use electronic time clocks or time cards to ensure that all work done and time spent are recorded accurately. Keeping track of all records from the beginning is an excellent idea to avoid overload of work and any confusion at the time of calculation and payment.
Step # 2
Next step is to compute the pay for each employee. Computation may be different of each employee depending on his or her terms of employment contract. Some employees are independent workers, some may be working on an hourly rate and some may have fixed salaries. Each and every point of contract must be kept in mind to ensure that the salaries are calculated accurately.
There are many businesses which account for some of their regular employees as independent workers. This is done in order to avoid responsibilities like payment of payroll taxes and insurance premiums. It might be acceptable in some situations but if the definition of your employee falls under the terms of regular employment, you should not opt for such methods in order to avoid any penalties if caught.
Step # 3
The next step, tax computation, is not only very important but it is also critical to do it right. The employers are responsible for filing the employee’s tax return and paying payroll taxes. Once the tax calculation for all employees is done according to the rules set by IRS, the business must deduct the relevant amount of taxes from each employee’s computed salary and pay it to the IRS on time.
Step # 4
After the deduction of taxes from the employee’s payroll, you should take into account the benefits offered to the employee as part of their employment contract. These benefits can be anything from paid vacation leaves to investment in retirement plans. Since each employee’s terms of contract differ, it is very difficult to do this step of payroll accounting. You should make sure that you have checked thoroughly what you have agreed on and calculate the benefits, in terms of salary payments, accurately.
Some employees have agreed on payments to investment plans through their employers. If this is the case, then it is your responsibility to calculate, deduct and pay the set amount in investment accounts on behalf of your employee.
Step # 5
Once all taxes have been deducted, benefits paid and benefits accrued, the net amount of salary should be given to the employee through any of the methods preferred including paying in cash, depositing in accounts or loading debit cards.
Managing payroll accounting can be difficult for small business owners on their own. If this is the case with you, you can use payroll accounting software available online or hire someone from a reliable agency, like SK Financial, to help you out.