A payroll service is a company’s list of its employees, but the term is commonly used to refer to the total amount of money that a company pays to its employees a company’s records of its employees’ salaries and wages, bonuses, and withheld taxes the company’s department that calculates and pays these. Payroll in the sense of “money paid to employees” plays a major role in a company for several reasons. 

From an accounting perspective,  payroll service is crucial because payroll taxes considerably affect the net income of most companies and because they are subject to laws and regulations (e.g. in the US, payroll is subject to federal, state, and local regulations). 

From a human resources viewpoint, the payroll department is critical because employees are sensitive to payroll errors and irregularities: Good employee morale requires payroll to be paid timely and accurately. After recruiting your first employees and reviewing basic payroll requirements, you need to fish out how to get them paid. There are a number of ways to approach payroll service processing. We will consider the alternative below and walk you step by step through what it entails. 

Doing it Yourself 

  1. Low cost but time consuming and prone to errors.

To get started: 

  •  Have all employees complete a W-4. To get paid, employees need to complete Form W-4 to document their filing status and keep track of personal allowances.  
  • Find or sign up for Employer Identification Numbers 
  • Choose your payroll schedule.  Step 4: Calculate and withhold income taxes.  

Pay taxes.  

  • File tax forms & employee W-2s.   

Using the payroll service 

  • Choose a full-service payroll provider. If you’re not sure how to do payroll yourself, use payroll software that reduces the risk of errors or fines. Many payroll processing services, like Square Payroll, handle your payroll taxes, filings, and new hire reporting for you. Sign up takes minutes — so you can quickly start doing your own payroll the same day you sign up. 
  • Add your employees. You need to set up your employees before you process their payroll. Adding employees you’re paying for the first time is generally quicker; if you’re switching to a new  payroll service provider, then you also need to add your current employees’ year-to-date payroll information. Either way, you generally need to enter employee names, addresses, Social Security numbers, and tax withholding information. If you’re using Square Payroll and would like to pay employees using direct deposit, you can just enter your employees’ names and email addresses so they can enter their personal information themselves. 
  • Track hours worked and import them. The U.S. Department of Labour requires employers to keep track of wage records such as timecards for up to two years. Certain states may have longer retention requirements; be sure to check the specific requirements in your state. You can track time using your Square Register and import the timecards to payroll. 
  • Process your first payroll run. Click Send and you’re done! 
  • Keep track of your tax payments and filings. The IRS requires tax forms to be kept for three years. Certain states may have longer retention requirements; be sure to check the specific requirements in your state. Read more.


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