Payroll processing is a critical function for any business with employees. It involves calculating wages and deductions, generating paychecks, paying taxes, and filing returns. Having an efficient payroll agency process ensures employees are paid accurately and on time. This article will provide a comprehensive checklist of steps involved in payroll processing.
Determine Payroll Frequency
The first step is deciding how often you want to run payroll. Expected payroll frequencies include:
- Weekly – Employees are paid every week. This works for hourly workers or small teams.
- Biweekly – Employees are paid every other week. This is a typical schedule for salaried employees.
- Semimonthly – Employees are paid twice monthly, usually on the 15th and last day.
- Monthly – Employees receive one paycheck per month. This works for contract or commission workers.
Select a payroll frequency that aligns with how your employees work and want to be paid. Processing payroll more frequently creates more work but gets employees paid faster.
Gather Employee Information
Before running payroll for the first time, you must collect pertinent details about each employee. Important information includes:
- Full legal name
- Home address
- Social security number
- Date of birth
- Marital status (for tax purposes)
- Number of allowances/dependents (for tax withholding calculations)
- Bank details for direct deposit
- Pay rates and schedules
- Deductions or benefits enrollment
Have employees fill out new hire packets to collect this data upfront. If employees get married, have children or change banks, update information as needed. Proper employee documentation prevents payroll errors.
Choose a Payroll Provider
Payroll processing service like famous payroll companies in, Dallas, involves complex tax calculations, reporting, and compliance requirements. Most businesses outsource payroll to a provider like ADP, Paychex, or Gusto. These companies automate payroll tasks and guarantee compliance.
Key factors to evaluate when selecting a payroll service include:
- Cost – Compare monthly and per-employee fees across providers. Consider any setup charges.
- Features – Assess capabilities like payroll software, direct deposit, tax filing, employee self-service, and mobile apps.
- Support – Look for provider phone and email support for payroll issues.
- Integration – Determine if the provider seamlessly syncs with your accounting software or HRIS.
Select an affordable payroll provider that offers robust features to simplify processing.
Set Up Tax Accounts
Payroll involves withholding income tax, Social Security tax, and Medicare tax from employee paychecks. Employers must then pay these taxes to federal and state agencies.
As a new business owner, you need to set up accounts with tax authorities, including:
- IRS – Obtain an Employer Identification Number (EIN) from the Internal Revenue Service to report payroll taxes.
- State – Register with your state revenue department for ID numbers for state tax withholding and unemployment insurance contributions.
- SSA – Apply for a Federal Employer Identification Number (FEIN) from the Social Security Administration to remit Social Security and Medicare taxes.
Contact these payroll services for small business in, Dallas TX, well in advance of your first payroll date to get accounts established.
Choose Deductions to Offer
Beyond taxes, you can offer additional voluntary deductions from employee paychecks, including:
- 401(k) plans – These retirement savings accounts allow employees to contribute pre-tax income. Employers often match contributions up to a percentage.
- Health insurance – Offer group health plans and allow employees to pay their share of premiums via payroll deductions.
- FSAs – Flexible spending accounts (FSAs) enable employees to set aside pre-tax money for healthcare or dependent care.
- Commuter benefits – Employees can purchase transit or parking passes with pre-tax dollars.
- Supplemental insurance – Employees can pay for disability, accident, critical illness, or life insurance premiums via payroll reduction.
- Garnishments – You may need to deduct court-ordered wage garnishments from an employee’s check to repay debt collectors.
Determine which voluntary deductions to make available that provide the most value to your team.
Deduct Voluntary Benefits
In addition to taxes, subtract any employee-elected deductions, such as:
- 401(k) contributions – Deduct pre-tax deferrals or after-tax Roth contributions
- Health insurance premiums – Subtract employee portion of monthly health plan premiums
- FSAs – Withhold pre-tax FSA contributions per employee selection
- Commuter benefits – Deduct transit pass or parking fees
- Garnishments – Court-ordered deductions like child support or IRS back taxes
Track voluntary deductions in payroll software to ensure accurate withholding each pay period.
Provide Employee Self-Service
Offering employee self-service provides convenience and transparency in payroll. Options include:
- Online portal – Let employees log into a secure site to change contact info, tax forms, deductions, and direct deposit details.
- Mobile access – Provide a payroll app employees can use to view earnings statements and W-2s, monitor paid time off, and more.
- Pay stubs – Furnish electronic pay stubs each payday, allowing employees to view all compensation and deductions.
Employee self-service reduces payroll errors from outdated information and saves your team time handling simple inquiries.
Effective payroll agency processing requires multiple steps, from collecting employee information, calculating pay and deductions, paying workers, remitting taxes, filing returns, and retaining proper documentation. Payroll is the backbone of the employer-employee relationship. Investing time to implement accurate processes upholds fiduciary duties and keeps workers satisfied, productive, and focused.