Payroll processing is the method you use to compensate your employees for the work they perform. It includes calculating wages, withholding taxes and benefit premiums, and delivering payment—often through direct deposit.
Depending on the size of your business, this process can be quite time consuming, which is why organizations, both large and small, invest in processing software to automate the steps covered below.
Payroll processing is important for a variety of reasons一not least is that late or inaccurate payments are serious morale-killers.
To keep your employees happy, you need a solid payroll system to pay people what they've earned when they expect it. This isn’t only about being a good employer. Paid workers tend to be more productive!
In addition, if you don't pay your employees reliably, they may start to question your company’s financial stability. This could lead them to become less engaged and less motivated to perform.
Finally, a good payroll system ensures you fulfill your employer tax obligations at the federal, state, and even local level. It’s critical to stay compliant with employment laws. You'll not only avoid costly fines, but also maintain your reputation with employees.
The payroll process involves several steps. First, you need to apply for a federal employer identification number (FEIN), a state tax identification number, and possibly a local identification number for your business. These allow you to file and pay payroll taxes.
Next, you need to collect and retain certain information and documents from your employees to have on file for their paychecks. This includes their:
How long it takes to process payroll depends on whether you’re using manual or automated processes and how many employees you have. Businesses with payroll processing solutions typically finish internal processes in one to two days.
After payroll is submitted to the bank, it takes two to three days for wages to be deposited into employee bank accounts. So, employees receive their paychecks, on average, within five days of the pay period end date.
When you hire employees, you’ll need to determine how often to pay them. The most common payroll cycles are weekly, bi-weekly, semi-monthly, and monthly:
Payroll doesn’t have to be complicated. Ensure compliance and accurate employee data with automated payroll software.
