Small Business Payroll: 5 Steps to Success

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Your small business payroll can be manually processed in five simple steps. It can take a little time to get familiar with the steps, but once you know how to do it, it becomes a routine effort. We’ll walk you through the process starting with a new hire and finishing with a printed check.

  1. Collect Important Payroll Documents

    Mark Rowley, Owner
    RandR Payroll Services

Before your new employee can be paid, you’ll want to collect the appropriate tax and work authorization documents. The employee will need to fill them out and sign them. These documents should be stored in a personnel file, either in paper or electronic format.  Documents will include:

  • Federal W-4 – federal tax withholding document
  • State W-4 – state tax withholding document
  • I-9 form – verification of eligibility to work in the United States
  • State New Hire Report – required labor statistics reporting
  • Direct Deposit – if applicable to your business payroll process
  1. Calculate Employee Hours Worked

Time sheets are a simple way for most small businesses to track employee hours worked. As the business grows, you can transition to a time clock and attendance system. Depending on your state and the agreement with the employee pay for hours worked, will be calculated via straight time, overtime, salary, or some combination as appropriate.

  1. Calculate Employee Gross Pay

Gross pay is figured by multiplying the employees straight time hours by their hourly rate. You then need to add any overtime hours worked multiplied by employee’s overtime pay rate. The sum total of these numbers is the employee’s gross pay.

  1. Calculate Payroll Deductions and Net Pay

These include state and federal payroll taxes, and any benefits you offer employees such as health insurance and retirement accounts. Before processing, calculate total deductions and subtract the new employee’s gross pay total from step 3. You are left with the Net Pay Amount due to the employee.

  1. Pay Employee and Store Payroll Records

Pay employee via written or printed check, or direct deposit. For compliance with labor laws, keep good payroll records.

If you have questions, contact our experienced team at R&R Payroll & Bookkeeping Services: (951) 296-0412.