If you’re thinking about hiring employees, you need a plan for payroll.
You can learn how to do payroll yourself. There are several payroll options to choose from. Depending on which option you choose, there are different tasks, time commitments, and costs involved.
Below are three ways you can do your own payroll.
1. Manually do calculations
If you’re willing to learn payroll and tax laws, you will be able to manually do payroll for small business.
Doing your payroll by hand is the least expensive payroll option. You don’t have to pay a professional or purchase a program.
When you manually run payroll, you have full control over your payroll. You know when and how your payroll is completed. But doing payroll yourself likely means you don’t have someone to check your calculations. Doing payroll manually has an increased chance of errors—and errors are often followed by fines.
Doing payroll by hand also takes a lot of time. You have to do all the calculations, distribute wages, and file taxes. You could spend a lot of time working on payroll instead of working on your business.
Cons: Learning curve, time-consuming, increased errors
There are many steps to follow for manual payroll:
- Gather information
- Find all business information related to payroll, such as your EIN and tax rates.
- Collect employee information, such as pay rate and withholding allowances.
- Track time
- Use an attendance management method to track employee time. Or, you could have employees track their own time.
- Calculate payroll
- At the end of each pay period, use employee time cards and the rate of pay to calculate wages.
- Make sure you include all types of compensation, including any tips and overtime for the pay period.
- Subtract deductions
- Begin by subtracting pre-tax deductions.
- Then, deduct employment taxes.
- Finally, withhold post-tax deductions.
- Pay employees
- Distribute paychecks to employees using your designated method. You can pay employees with checks, direct deposits, or pay cards.
- Pay taxes
- You will periodically have to file and remit employment taxes. How often you do this depends on your depositing schedule and form due dates.
2. Purchase payroll software
Payroll software is a great middle-ground option for doing your own payroll. Online payroll software is relatively inexpensive. The minimal cost is worth it for the accuracy you receive. With online payroll software, you don’t have to worry about making mathematical errors. The software will do all calculations for you.
With payroll software, you remain in control while processing payroll. You get to be in charge, and you know exactly when payroll is done.
Depending on your previous payroll and technological knowledge, there might be a slight learning curve for you to learn payroll software. But, you can contact customer support for help.
Payroll software requires a small time commitment. The time commitment is less than what you would spend on manual calculations. If you purchase a tax filing service, such as Patriot’s Full Service Payroll software, the software will take care of all tax obligations for you. You won’t have to worry about withholding, filing, and remitting taxes—saving you even more time.
Cons: Possible learning curve
Here are the steps to use payroll software:
- Purchase payroll software.
- Enter your business and employee information.
- Have employees track their time worked each pay period. Employees can track their time when you use online time and attendance software.
- Run payroll and distribute wages.
- File and remit taxes. (If you use full-service payroll software, you will skip this step because the software company will do this for you.)
3. Hire an accountant
Accountants are trained professionals who can run payroll for you. Because accountants have extensive training, your payroll should be accurate.
Hiring an accountant is a good option for you if you have absolutely no time to run payroll yourself. You will spend minimal time on payroll. You simply need to give employee information and time cards to the accountant, and the accountant will handle the rest.
When you hire an accountant, expertise comes with a cost. Hiring an accountant is the most expensive out of all your payroll processing options.
You should be careful when searching for an accountant for your small business. You want to make sure you trust the accountant and that they’re a good fit for your business. There are steps you can take to find the right accountant.
Learning how to do payroll yourself
You now know how to do payroll yourself. Weigh the pros and cons carefully so you can choose the payroll option that is the best fit for you and your business.
Payroll software is an inexpensive and time-saving option for doing your own payroll. Find out if it’s the right fit for your business. Get a free trial of Patriot’s online payroll software today!