How To Run Payroll?
How is Payroll Processed?
You are now ready to process payroll. What does that involve?
- All timesheets and hours must be collected, hourly/salaried pay calculated and deductions for 401(k), health benefits and taxes totaled.
- Double and triple-check the work, generate payroll reports and compare and contrast each check against your reports to ensure correct quarterly reports and W2s.
- Close payroll and determine if any errors occurred, and if so, can you correct immediately or wait until the next pay period.
How is Payroll Calculated?
Calculating payroll requires extreme attention to detail, accuracy and timeliness and a lot of calculations.
- First you must first calculate gross earnings by annualizing the pay of each employee. Multiply monthly pay by 12, divide by 52 for gross weekly pay, then divide by hours worked during a pay period for gross hourly pay.
- On determining hourly pay, overtime, double time, vacation time, sick time and any other schedule adjustments must be factored.
- Withholding allowances such as Dependants and Social Security are determined according to the Federal Income Tax table.
- Subtract the above deductions from gross pay and you have net pay. This is the final amount paid to each employee during each pay period.
How to Run Payroll?
Calculating and processing payroll and payroll taxes for small business is an extremely involved process, varying greatly by state. As a small business owner, you must carefully evaluate your organizational payroll needs and find the payroll calculation and processing option that guarantees accuracy and timeliness with maximum cost-effectiveness.