Welcome to the big leagues. You have employees and they want to get paid. They need to get paid, and you need to make sure you can pay them if you want them to continue working for you. While setting up hiring employees and setting up payroll sounds overwhelming, it doesn’t have to be. When paying employees, there are a few key things a business must do first. This article is here to be a resource or guide. Don’t get overwhelmed with payroll setup. 

If you need employees for your business model to run successfully, or maybe you just recently decided some help would help. Here’s a PAYROLL CHECKLIST to get you started with paying your employees properly and lawfully.  

1. Get an EIN.

First and foremost get an EIN. Unless the business is brand new, this is something most business owners should have already. If you don’t, what are you waiting for? An EIN is a way for the government to identify businesses. The use of an EIN allows an individual taxpayer to easily identify their workplace and allows for easier record keeping. An EIN also allows you to open a bank account for your business in which you can use to write checks or make deposits to employees. 

It’s also smart to make sure you have the right business structure. This is one of the reasons we say don’t file a business as a sole proprietorship. The future is hard to predict and help is almost inevitable. Business structures can be changed but it's timely and costly. Start with the right business structure from the beginning. 

1. Check the Department of Labor website. 

Review the U.S. Department of Labor’s website before setting up payroll. Not adhering to both federal and local labor laws can costs you time, money, and possible jail time. Take the time to read the information on the website carefully. The Department of Labors is where you can find information and resources such as what’s an acceptable form of identification to receive from employees, tax forms, unemployment insurance, and other helpful information. It is strongly suggested that you consult with a CPA for this step.  

1. Get a payroll software. 

This is paramount. Payroll software makes it aside to keep track of all the little details involved in payroll. Payroll software can make your life easier by calculating hours, tax deductions, and so on. At Madison’s Tax and Accounting Services, we use Gusto. Gusto is full-service payroll software. Gusto works well with quick books and has the capabilities to run automatically. 

1. Decide on a wage. 

You can’t set up payroll if you don’t know what you’re paying your employees.  This is a trickier step because you have to determine how much the labor is worth, while still offering a fair wage. A wise business tip is to be “fair and consistent” when dealing with people. Depending on the type of business you have, different roles will call for different pay. Whether employees are hourly, tipped, make a commission, or any combination, follow the law and be fair and consistent.

1. Create a pay period schedule. 

Checks should go out the same day of the week every month. The pay period should be routine, for example, an employee should get paid either on the first and third week of every month or the second and fourth week. When creating a pay period. Consider whether your work week starts on Sunday or Monday. 

1. Consult a CPA.

Hire a CPA to double-check your systems and compliance with laws and regulations. The CPA doesn’t and shouldn’t have to manage your payroll beyond setup if done correctly. Working with a CPA to set up payroll for your business is simply a to ensure that you are adhering to any laws, and the process runs as smoothly as possible. 

Getting payroll set up and running is an essential piece of business operations. It’s another one of those tasks that’s should be carefully reviewed during the setup process, but can eventually run automatically. Once you’ve checked all the boxes on the list, you’re ready to pay your first employee. The average business owner who handles their won payroll spends an average of five hours per pay period, that’s assuming it is all done correctly the first time. To bypass the struggles of DIY payroll setup, or save time, check out our payroll services, created for growing businesses like yours.

*****

Thanks for reading. Madison’s Accounting and Tax Services is a financial service provider that specializes in helping beauty brands control and grows their financial power, while also passionately providing financial knowledge and resources to communities in local Midwest communities. If you enjoyed this blog please subscribe and share.

Connect With Us

Facebook: Madison’s Accounting and Tax Services, LLC

Instagram: @mats.llc

Web: www.madisonstax.com