Have you just set up a business? Or maybe you’ve bought your very first company. If so, congratulations. The 2020s is an exciting time to go into business. New technology like digital banks and the ever-growing number of apps that increase out productivity make making money easier than ever before.
But to get started with your new business, you’ll want to make sure you are legal and have a payroll system sorted.
Here’s all you need to know about paying employees in your new business.
Get Your Employer Tax ID
The first step you need to undertake is to get your employer’s tax ID. It can also be referred to as an EIN or Employer Identification Number. This is a unique number that every business is issued with by the IRS.
You can register to get yours online or you can fill out the necessary paperwork and post if off.
It’s very important that you get this number so that the IRS can identify what your business is and does for tax purposes and so that it can start registering your new employees as quickly as possible. A delay in setting this up could mean a delay in being able to pay your new customers.
Register Your Business
Your next step is to register your business. Your Employer Tax ID is often a number used by the IRS. The IRS keeps much of its information confidential from other government organizations to protect individuals. This is why President Trump has been able to conceal his tax documents from the public.
You may also need a further Tax ID from your local state. Every state is different and may have different rules. Check your local government website or ring them up and explain that you have just set up a business.
Don’t get stressed over having to do a task twice. Do it as soon as you can to get it out of the way.
Buy Payroll System Software
Your next step, after making sure your business is legal and registered, is to start to set your payroll. Long gone are the days where you have to do payroll by hand or manage a complex system yourself.
Instead, there is now software for arranging payroll. It can be connected to your main accountancy software to ensure that your payroll and your overall budget are managed together. Try this fillable pay stub free to get you started to see how you can generate paystubs.
Your employees can access their own payroll stubs online and can see their tax deductions, without fear of losing them. It’s more accurate than getting your employees to clock in themselves and trying to keeping track of it. Instead, your employees working hours are determined by a computer.
Errors do happen but they can be overridden where there is a dispute or a complaint. During the first payroll, there might be a few teething problems so be sure to listen to your employees and encourage them to come forward if they think there has been a mistake on their paystub.
Setting up payroll is one of the three basic steps of beginning to employ people.
Hire an Accountant or Payroll Manager
Payroll software takes away a lot of the stress that payroll managers or accountants used to be under. But payroll software is not a replacement for payroll managers.
It’s designed to enhance their jobs and free up their time so that they can focus on other aspects of the business: like hiring talented new employees to move the business forward and generate higher profits.
An accountant or in-house payroll manager can avoid scenarios where a private contractor handles the payroll and leaves employees without pay for weeks because of their payroll upgrade.
Decide If You Want to Hire Freelancers, Contractors or Full-Time Employees
Another decision you have to make quite early on is the relationship you want to have with your employees. Hiring them on a traditional 9-5 arrangement can be quite old-fashioned and unnecessary.
Many younger employers would prefer to have a more flexible arrangement where they can take on as much or as little work as they need to. You could give them short term contracts or long term contracts if they want them. This also makes remote work a lot easier – one of the main perks of many jobs in the twenty-first century.
Alternatively, you might want to retain some workers as full-time 9-5s if you need someone to be present in the office to deal with tasks as they come and go.
Remember that if you employ workers on a more casual basis than a 9-5 you need to be clear on what your responsibilities are to them in terms of their sick pay, holiday entitlement and other benefits.
This is not always clear cut and has recently caused controversy in the state of California. It’s one of the key issues of employee payment.
Paying Employees: Be Sure To Play It Safe and Tick All the Boxes
Paying employees is so important. Employees who are paid well and legally will be happy to commit to working hard for your business and making it work from the get-go.
However, paying employees takes a lot of commitment and paperwork. You need to ensure that your business is properly registered both with the IRS and your individual state so that you have the right tax ID numbers.
Next, you need to purchase some payroll software to enable you to run your payroll efficiently and smoothly without fear of paying your employees the wrong amount or putting them in the wrong tax bracket.
Be sure to decide early on whether you want to employ people on a normal 9-5 basis or it would work better for your business to employ people more casually and be sure to follow the rules in terms of sick pay and entitlements as the case may be.
If you are interested in reading more about paying employees or employee payment be sure to check out the rest of our site.