Payroll is an essential element for any business to be successful and for them to pay their employee for their jobs. However, most of us don’t really know what that entails, I’ll be completely honest here, and we’ll keep it one hundred; I have a master’s in Linguistics and queer study, but before I met my partner, I knew little to nothing about payroll.
Most of us have heard of this term before, primarily if you work, but most of us don’t really know what this entails. So, without further ado, let’s learn more about payrolls and the basic things that everyone ought to know.
What exactly is payroll?
In laypeople’s terms, it is the business process of a company paying their employees and running a payroll that consists of calculating an employee’s earnings. They also have to factor out federal and state payroll taxes. Sometimes, the term payroll also includes or refer to:
- Annual records of employees wages
- The business’ financial records of the employees
- The distraction of employees’ paychecks
Most of the time, the payroll can be a business’s most significant and greatest overhead expense. This is why it is a complicated process, and this is why we, none finance people, don’t really understand what goes on in a payroll. By understanding the basic payroll process, you are learning your rights as an employee, which helps ensure toy remain compliant with state and federal taxes alongside labor laws.
How to process payrolls?
- Calculate the gross pay: For the employees paid hourly, this means combining the regular hours and their overtime, which is then multiplied by standard and overtime pay rates. This processing period requires a massive amount of time, but this might not be necessary if you hire a professional firm or time-tracking software. If you use traditional timesheets, you need to submit that too, and errors must be checked before being approved.
- Calculate net pay: After the calculation of federal, state, and local taxes according to the employees’ individual withholding information, add insurance, retirement, and any other deductions, and this is subtracted from your gross pay.
- Reserve/distribute deductions: Taxes and other deductibles must be placed in trust for later payment to the appropriate entity or paid immediately according to the schedule.
- Issue payment: Either print checks or issue direct deposits to your employees
Why you might consider outsourcing your payroll duties and services.
Outsourcing payroll can be helpful as it assists with cutting costs and limiting risks. According to some studies, on average, some businesses are overpaying employees, which can be by about 4 percent— the differences between the employee’s accurate time record and time.
Then your company might have the potential penalties for violating reporting and other requirements. According to ATO, their latest figures show a significant percentage of small businesses pay an average penalty of $845 per year for late or incorrect filings.
Today there are outsourced solutions for businesses as small as one employee. Solutions are affordable, starting at less than $50 a month for small businesses, depending on needs.
Importance of having a payroll
Being paid for your work and labor is the bedrock and essence of employer-employee relations, and this is usually dictated by the contract you signed when you joined that workplace. Payroll is crucial for any company to function to its fullest degree but is also very complicated, never-ending, and complicated. Even the most minor errors can create tremendous headaches.
Large ones can land any organization in hot waters and deep legal and financial trouble with both employees and government. Despite its essential nature, every little of us knows about payroll and is relatively scarce outside the groups or individuals who handle it.
Are you in need of a payroll specialist? Then look no further because SBJ Bookkeeping is here to help you with all your bookkeeping and financial needs. They are based in Hampton Park and specialize in small business accounting and administration services. They provide a wide array of services, which includes anything from payroll, superannuation calculation, bookkeeping, recording, and even BAD lodgement. So what are you waiting for? Give them a call and let your business prosper with the help of SBJ Bookkeeping.