Learn about the basics of payroll processing and your obligations as an employer. There are three main things you need to do that are related to payroll:
We break down the payroll process for you. And answer some frequently asked questions from new employers.
For each employee, be sure to have them complete each of the following forms:
You'll need to set the hourly rate for each employee. Most employers set an hourly rate by assessing the state and federal minimum wage limits, the average market rate for the job/role, and experience and education of an employee.
Salary wages are set amounts. The employee receives the same amount each paycheck. As a rule of thumb, determine the annual salary first, then divide by the number of pay periods in the year to determine the salary amount for each paycheck.
Salaried employee hours typically fluctuate. So there's no real way to determine their hours unless you're keeping track of their time through a time management system. If for any reason you need to determine their hourly rate, divide their annual salary by 2,080 (this amount is the average hours a person works in a year; 40 hours a week x 52 weeks = 2,080 hours).
Commission employees are paid by performance. Most often, these employees receive a percentage of their sales. Or they're paid by the number of products or services sold. Federal and state laws require the employee to get paid at least the minimum wage.
The minimum wage for tipped employees is much less than the minimum wage for hourly employees. Tips can either be collected through the paycheck if the tip is paid by a credit card. Or can be collected directly from the employee if the tip is cash.
There are a variety of other ways to pay your employees. Be sure to work with your state, business, and/or accountant to determine what types of compensation are needed.
Pay your taxes
Payroll taxes include the taxes withheld from your employees' paychecks and the taxes you pay as an employer. These taxes include the following:
|Event||AFTER EVERY PAYROLL||EVERY MONTH||EVERY QUARTER||AT YEAR-END|
|Pay federal income tax, Medicare, and social security||If you're a semi-weekly depositor, these taxes are due after every payroll||If you're a monthly depositor, these taxes are due by the 15th of the following month|
|Pay state income tax||If you're a semi-weekly depositor, these taxes are due after every payroll||If you're a monthly depositor, these taxes are due by the 15th of the following month|
|Pay state unemployment||State unemployment (SUI) taxes are due at the end of every quarter|
|Pay federal unemployment||Federal unemployment (FUTA) taxes must be paid at the end of the quarter once the liability for the year exceeds $500. If this threshold is never met, these taxes are due at the end of the year.||Federal unemployment (FUTA) taxes are due at the end of the year if the liability never reaches $500|
|File Form 941||File Form 941 at the end of every to reconcile your employee wages and federal taxes|
|File Form 944||If you are not a 941 filer, file Form 944 at the end of every to reconcile your employee wages and federal taxes|
|File state unemployment forms||File your state unemployment form with your SUI payment|
|File quarterly state income tax forms||File quarterly state forms at the end of every to reconcile your employee wages and state taxes|
|File Form W-2||File Form W-2 on or before February 1, 2021.|
|File annual state income tax forms||Refer to Year-end annual form agency due dates (Tax year 2020) for state annual due dates|
|File Form 940||File Form 940 at the end of the year to reconcile FUTA|
|El Cerro Inc, Online Payroll||Payroll Software||Traditional Payroll Service|
|Access||You can run payroll from any computer with Internet access (OR we can do everything for you once you send us hours).||You must use the computer where your accounting/payroll software is installed.||You must make yourself available to submit hours by phone or online.|
|Setup||We do the set up for you, there is nothing to install on your end.||Software and tax table updates required. No help with new hire reporting, W-4s, I-9s.||Paper intensive manual process.|
|Email Reminders||Timely email reminders remind you of all important deadlines.||Online reminders exist, but they are not automated.||No reminders available.|
|Paycheck calculations||Instant and guaranteed accurate.||Instant and guaranteed accurate (but requires ongoing tax table updates).||Paycheck calculations are delayed from the time you report hours.|
|Direct Deposit||Free||Extra charges apply.||Extra charges apply.|
|Paychecks||Print instantly on blank or pre-printed check stock – either at our office or yours.||No blank check printing option.||Delivered to your office for an extra fee.|
|Tax Impounding||No tax impounding- funds stay in your bank account until the payment is due.||Depends on service selected.||Taxes are withdrawn on each payday, typically several weeks before they are due.|
|Electronic tax payments and filings||Electronic 940s, 941s, 944s, W-2s, and e-file for most states (or we provide signature-ready forms).||Depends on service selected. Electronic functionality available for 941s, and very few states.||The service takes care of taxes for you, for an extra fee.|
|Customer Support||As your trusted advisor, we are here to help you whenever you have a question.||Extra charges apply.||Included|
|Export||Easy data download to QuickBooks®, QuickBooks Online, QuickBooks® for Mac, Microsoft Money®, Peachtree® and Quicken®.||Works only with the accounting software you use.||Downloads data to accounting software, but as journal lump-sum. There are no split level details available.|
|Price||$75 per month + $4 per employee||Pricing can vary greatly by service selected. Additional fees for direct deposit.||Pricing varies by no. of employees and payroll runs. Additional fees for direct deposit, quarterly filings, delivery fees, W-2s etc.|