Processing payroll is an unavoidable part of running a business and if you’re going it alone it’ll be a time-consuming and frustrating experience. It’s not just about doing the hard sums and keeping careful records. You’ll also need to keep up to date with the latest tax rules and regulations.
Ultimately, paying your people accurately and on time is too big a burden to be shouldered alone. That’s why companies rely on a HR and online payroll partner to provide technology and expertise that can simplify the complex process.
If you’re wondering what that process looks like, here’s an overview. We’ll also discuss why finding the right partner can help free up your day and prevent costly fines from impacting your business.
Here’s what’s included:
Step 1 – Employee Information Gathering
Human resource managers start by collecting some or all the following employee information:
- Applicable state withholding certificates (many states require a form in addition to the federal W-4)
- W-9 (if hiring independent contractors)
- Form I-9
- Complete job application
- Bank information (if direct deposit is an option)
- Medical insurance forms
- Retirement plan documents
Step 2 – Employee Timekeeping
Employees are then informed about their paycheck schedule and how the company expects work hours recorded. Typically, most employers choose to pay employees every two weeks.
Step 3 – Approvals for Payroll
At the end of the pay period, the payroll administrator verifies hours worked and secures approval for payment, including any supplemental income from bonuses or overtime.
Step 4 – Taxes and Withholding
Net pay is calculated based on gross earnings minus the total amount of deductions and withholdings (federal, state, and local taxes, retirement contributions, medical insurance, additional deductions such as child support, etc). When administrators calculate wages, they need to know which deductions to take before or after taxes have been assessed. For more information on tax withholdings, the IRS offers this comprehensive tax guide. States often have different rules than the IRS, and state specific guides should be consulted to determine employer withholding requirements.
Step 5 – Submitting Payments
Paychecks are delivered to employees and the amounts withheld submitted to the appropriate entity. Employers are responsible for a share of payroll taxes. Calculating and submitting to taxing authorities on time avoids hefty fines and penalties.
Step 6 – Payroll Recording and Reporting
Federal and state payroll reports are generated and sent as often as quarterly. Payroll departments are responsible for a lot of data and paperwork, much of which is sensitive in nature. It can be challenging to develop an adequate filing system where all that data and employee information can be maintained and accessed whenever necessary.
Why Companies Adopt Technology to Manage Payroll
Payroll is a vital, but complex function of a business. Because of the strict compliance regulations and potential for employee lawsuits, most businesses utilize payroll technology that reduces the risk of errors, ensures compliance and saves time. Payroll software companies offer solutions that handle many of the tedious administrative payroll details and streamline the ever-complicated tax filing process so businesses can focus on accomplishing their goals.
Companies that don’t leverage the benefits of modern technology because “this is the way we’ve always done it” are at a huge disadvantage. Late adopters risk falling so far behind it will be difficult to ever catch up to the competition.
When to Make the Leap
When it comes to managing payroll, there is little upside if you get it right and major downside if you get it wrong. Your people, and federal and local tax agencies, expect to be paid accurately and on time, and there are consequences when they aren’t. With a laundry list of regulations to maintain, staying in compliance is no easy feat. So, if you’re struggling with any of the challenges below, it’s time to consider making the leap.
- Constantly changing regulations and payroll tax laws
- New state and local requirements for employee benefits and wage/hour reporting
- More time needed to address employee questions or concerns
- Inefficient onboarding experience
- Errors due to manual calculations and entries
- Missed deadlines
- Difficulty accessing specific information when it’s needed
- Limited reporting options
- Data that isn’t unified or integrated
- Existing technology that’s outdated
- Current system or process that can’t support company growth
- Poor engagement with employees
- No access offered via mobile devices
- Data isn’t secure
Partnering with an HR & payroll provider gives you the freedom to spend more time focusing on your business. Customer service is important in every industry and it’s no different in the field of payroll processing. You’ll get peace of mind working with a company that provides instant access to expert support when you need it.
Think about how much easier it would be if your payroll system could:
- Integrate employee time tracking using mobile apps
- Automate employee vacation and sick time requests
- Customize files and itemize journal entries that import directly into your accounting system
Once you move to automated payroll, many providers offer the ability to scale services as your business grows. You can add integrations that streamline and consolidate all human resource activities into one cloud-based solution. When you’re ready, expanding your system makes it possible for you to:
- Optimize your recruiting process and onboard employees with ease
- Search your database of previous candidates to help fill current positions
- Manage employee information all in one place
- Utilize powerful reporting tools to help your company grow
Technology has transformed how we live and do business. Automating your payroll processing system streamlines tasks and improves efficiency, which translates into valuable time and money you’ll be able to apply elsewhere.
Selecting the Right HR & Payroll Provider is Critical
HR & payroll technology alone isn’t enough because technology alone fails to address your challenges. To achieve your goals now and in the future, you need technology plus expertise. Download this buyer’s guide and we’ll show you how to make the best decision for your organization.
More than 30,000 medium-sized and small businesses trust Paycor to help them manage their most valuable asset – their people. Paycor is known for delivering modern, intuitive recruiting, HR and payroll software, but what distinguishes us is our singular focus on helping business leaders, entrepreneurs and HR professionals make a real difference in their organizations. Contact our team today to learn how we can help you make an impact in your organization.
NOTE: This information is only intended to provide an overview of the payroll process. If you have specific questions, we recommend that you contact your payroll provider.