Payroll Services

By Dylan Mazeika

Processing payroll manually can be a daunting task and result in many human errors. Today staff working on payroll are required to be more diverse in their skills. This means that they must be multitasking during the day working at many different types of jobs and because of this there simply isn't the time left to focus entirely on how to do payroll to prevent human error.

How to do payroll - step by step guide

1. The W-4 form is the basis of the payroll process. All employees must complete this prior to beginning work. Then the information needs to be keyed into the payroll system or software.
2. The payroll specialist receives a hiring form which lists the employee's wages. This needs to be keyed into the system.
3. At predetermined payroll intervals the payroll specialist is given the number of hours each employee has worked and keys this info the system. Pre-tax deductions must then be calculated (also automatically) - such as health insurance premiums, 401(k) plans and so on.

The gross wages are then determined and the specialist may have to figure FICA, Federal and State taxes manually, or the system may figure them automatically. Finally, the employer then matches what the employee pays in Social Security and Medicare. For state unemployment tax (SUTA) the employer pays solely and for federal unemployment tax (FUTA) there is a tax credit available for SUTA tax paid up to 5.4% of the gross income. This means FUTA tax can be reduced from 6.2% to a tiny 0.8%.

4. Now it's possible to hand out the paychecks (electronically or by mail).

This is really a simplified version but you can see that manually processing payroll takes time and resources.

Automation makes the process quicker and less expensive

Most of the payroll service providers and the software available works exactly to the specifications of the Internal Revenue Service and will be able to automatically submit all the required information in monthly reports. Because staff must enter information into form fields, this reduces the amount of human error possible as the field will only accept information if it is formatted exactly to a certain specification.

Not only this, but the automated payroll process is linked electronically to the company's bank accounts as well as the government's bank accounts, streamlining the tax payment process efficiently so everything is automatic. Thousands of hours of time can be freed up for staff to work on more pressing functions and if you don't have a dedicated accounting team in a small or medium sized business then you will be able to spend less time per month on administration and more on whatever your company does best. How to process payroll does not have to be a difficult task, especially if you use an automated system.

It is possible for a small business with 50 employees to hire an outsourced payroll service to handle payroll and payroll taxes for as little as $125 per payday. Not only is this less expensive than hiring a dedicated employee, the process runs smoother, quicker and there is less chance of human error.