One of the advantages of working with a payroll service provider is that you simply write a check and it is the provider’s responsibility to pay taxes. If you decide to hire employees however then you are required by the federal government, most state governments, and some local governments to withhold taxes from their paycheck and remit those funds to the appropriate tax authorities. So today we are going to be looking at how to use a payroll service provider.
Functions of a Payroll Service Provider
Your payroll service provider would help to calculate employee gross pay, calculate employee take-home pay after income, and deductions for things like health insurance, retirement and child support, pay employees by printing out checks, and submit required paperwork for federal, state, and local income taxes.
How to Use a Payroll Service Provider
Keeping Track of the Hours Employees Work
In many instances you will need a way to keep track of the hours that your employees work in order to calculate gross pay, if you have a few employees with little variation and hours from week to week you might use a Google or Excel spreadsheet for tracking hours. If you have lots of employees or the hours they work vary, there are a number of free and paid software solutions available that offers the ability for employees to check in and out of work from assigned computers which might be very useful if you are dealing with lots of new employees that might not always be punctual about showing up at their assigned hours. See this: https://www.forbes.com/sites/thesba/2018/03/04/looking-for-payroll-services-here-are-5-things-to-consider/#1b2eec1b53cd.
Dealing With Over Time
Depending on how many hours and employee works per week or per day you may owe them overtime pay. For companies covered by federal labor laws which are companies with over 500 k and sales or that are involved in interstate commerce, you will need to pay most employees 1.5 times their hourly rate for every hour per week over 40. For example, a worker that gets paid twenty dollars per hour would receive thirty dollars per hour for each additional hour exceeding 40.
Dealing with Vacation and Sick Days
Employers have a great deal of discretion and providing paid vacation time and paid sick days for their employees however you should have a company-wide policy and a system for recording the accrual and use of both vacation and sick days into it, your payroll service provider should offer the ability to record the accrual and use of both vacation and sick days.
In some cases, employers may need to also provide employees the ability to have certain things deducted from their paycheck, these include things like contributions to an IRA or 401k plan, health insurance premiums, and job related expenses. These deductions can be made on a pre or post tax basis depending on what the deduction is for and can easily be handled by your payroll service provider.
Requirements and Payments
Once you have calculated your payroll you will need to complete the necessary reporting requirements and submit payment in the required timeframe although unemployment insurance payments are not included in payroll because they are based on payroll you will use your payroll calculations to pay unemployment insurance as well. The benefits of a payroll service provider can help you figure out the amount you need to pay and thereafter send the necessary forms or make payments to the tax authorities on your behalf.
It is important you consider having a payroll service provider for your business even if you have only one employee because a fine or penalty you might incur for a missed payment might be more than a whole year’s worth of service.