So you’ve made your first hire and started building your team. Congratulations! This is a huge moment for business owners. It’s also time to get ready for your first payday. While it’s usually a day of joy and celebration for employees, it can be a stressful occasion for employers. Running payroll can sometimes involve late nights and fire drills. In this article, we’ll cover payroll basics and provide some tools and information to make payday run smoothly for your business.
As you build your team, you’ll need a payroll system in place to ensure everyone gets paid accurately, on time, and in a way that complies with local, state, and federal laws.
The first step is to apply for an Employer Identification Number, or EIN, from the IRS, which you’ll use to report your taxes. (Depending on where you live and what’s required of businesses by your state and/or city, you may also need to register for an additional state and/or local tax identification number.)
Once you have your EIN, you’ll need to collect all the necessary payroll information from your employees. This includes their:
Next, categorize them as an employee or independent contractor, and have them fill out a few forms:
From there, all that’s left to do is determine your pay periods (for example, are you going to pay your employees weekly or bi-weekly?), pick a payroll system, and voilà! You’re ready to run payroll for the first time.
You have several options when to pay your team—and the optimal schedule may vary depending on your team and business needs.
Generally, employers choose among four different pay periods:
Which one you choose will depend on how you pay your employees (are the hourly or salaried?), your payroll processing time and costs, as well as implications to your accounting and benefits. You’ll want to carefully consider these before settling on your team’s pay schedule.
For an in-depth look at each pay period option and who they’re best suited for, check out Gusto’s guide to finding the best pay schedule for your team.
At this point of the process—and especially when you have multiple employees—you’ll start to realize that doing payroll yourself is a process. It involves knowing all your federal and local laws so you can stay compliant with your tax withholdings, as well as overtime and benefits calculations.
As your team grows, you may ask yourself if payroll software is right for your business. If you need to pay yourself, employees, and contractors and want to simplify taxes, save time, and stay compliant, automated payroll is an option you’ll want to consider.
Check out Gusto’s article that walks through a few common considerations as you decide whether you need payroll software.
Say you do decide to partner with a payroll service. How do you pick the best one for your team and business needs? There are four main things you’ll want to ask yourself:
Each of these factors can help ensure that you can find a solution that meets the needs of your employees today as well as tomorrow, as your business scales and grows.
For a more in-depth look at how to find the right payroll provider, check out this Gusto guide.
Bringing together and paying a team is no small feat. It’s one of the biggest ways small business owners can make a positive impact on their communities. And the good news is, it no longer has to be a headache with integrated solutions like Gusto and Clover. All Clover merchants receive their first 3 months free. Learn more here.