What steps are involved in administering payroll?
Administering payroll is a must if you want to keep your employees happy and avoid penalties come tax time. You need to make sure you’re doing it correctly and consistently, and following a process can help. Here’s a sample process that can be used to make sure every step has been completed:
- Update for any changes in employee information. Make sure to update any employee information that could affect check payments including health care plan changes, deductions, or exemptions.
- Set the pay period. Make sure that you have the correct pay period set on your end, and check to make sure any employee time cards are for the correct time frame.
- Check the time worked. Review any submitted employee reports or time cards to validate time claims.
- Enter any manual payments or reimbursements. If you need to issue bonuses or reimburse your staff for a business expense, such as mileage, be sure to enter it.
- Calculate the pay. Calculate the final total owed to each employee.
- Preview reports. Before running the payroll, make sure to take a look at a preview of the reports. Check for any suspicious numbers that are too high or too low and ensure that any changes from Step 1 have been included in your calculations.
- Issue payments. Run payroll, issuing checks either manually, through your bank, or using a payroll specific software.
- Save a copy of data and timesheets. Back up your data to prevent any issues related to data loss, saving a copy of the payroll details as well as scanning in any hard copies of employee timesheets.
- Lock payroll. To prevent any issues and ensure the next payroll period is run on the proper time frame, lock the current payroll so no changes can be made.
- Pay taxes. While employees are responsible for making sure their taxes are paid, you are also liable for specific local, state, and federal taxes. Oftentimes it can be helpful to have your accountant assist with this part of the process, as there are a number of pieces to be addressed and forms to be filed and you don’t want to run into any problems with the IRS.
- Check for errors. Take one final look at the payroll to make sure there are no visible issues.
Doing all of the above steps manually can lead to errors, especially if you have more than a couple of employees. One miscalculation can lead to disgruntled employees and penalties. Payroll software can eliminate manual calculations and figure out total check amounts, taxes owed and remind you when you need to submit tax payments. Many of the more popular payroll software systems even let you file your taxes through their program.
Running payroll is one of the most important processes involved with having employees, so it likely makes sense to use a payroll program to assist you through these steps.