How to do Payroll
What are my payroll tax responsibilities?
Employers are responsible for paying the employer’s share of payroll taxes, depositing tax withholdings from their employees’ paychecks, preparing associated reports, accounting the payroll expense and filing payroll tax returns. The employer’s portion of payroll taxes includes social security tax, Medicare tax and federal and state unemployment tax. Generally, you need to pay federal and state income taxes on at least a monthly basis. As for filing, Federal Form 941 (quarterly federal tax return) must be filed each quarter. Form 940 (FUTA tax return) must be filed yearly. Employers must send Forms W-3 and W-2 to the Social Security Administration each year.
What is the purpose of a Tax Form W-4?
Tax Form W-4 is used to withhold the proper amount of federal income tax from employee paychecks. The IRS recommends employees submit a new W-4 tax form each year, or any time their personal or financial situation changes.
Is my employee exempt or non-exempt?
Exempt employees generally receive a set salary and don’t qualify for overtime pay when they work more than 40 hours in a week. The DOL establishes criteria under which employees are exempt, including:
- Employees who are paid above a certain weekly income threshold
- Employees who have a base salary that cannot be reduced based on the quantity or quality of work
- Employees who have a specific set of job functions (this includes roles like executives and sales professionals)
Read more about these and other classifications in the FLSA and your state’s wage and hour laws.
How do I pay an employee who receives tips?
Under federal law, employers must pay a tipped employee at least $2.13 per hour before tips are counted. The $2.13 plus the tips reported by the employee should equal at least the minimum wage. See your state’s minimum wage laws to determine the cash wage that is required for tipped employees.
Is direct deposit safe?
Most employers (and banks) agree that direct deposit is safer than paying employees by check. It also means you don’t have to worry about stolen, damaged or lost checks.
What is a wage garnishment?
A wage garnishment is a court-issued order requiring employers to withhold a certain amount of an employee’s paycheck and send it directly to the person or institution to whom the employee owes money, until the debt is satisfied.
What is a pay period?
Employers must decide on pay schedules early on. The beginning and ending dates of this schedule is known as the pay period. Examples of pay periods include bi-weekly, semi-monthly, or monthly. Pay day is the day employees actually get paid, which tends to be a few days after the end of a pay period to allow time for payroll processing.
What is a workweek?
Even if your pay period covers more than one week (like bi-weekly or semi-monthly), employers must still establish a 7-day work week. The work week is necessary because it determines when overtime is due to your non-exempt employees (when they work in excess of 40 hours in a single week). This fact sheet by the Wage and Hour Division of the Department of Labor can help you better understand overtime and the work week.
What’s the best way to track hours worked?
Employers must keep track of all hours worked for nonexempt employees (regardless of the method of pay). Employers may use any timekeeping method they choose as long as it is complete and accurate. For example, they may use a time clock, have a timekeeper keep track of employee's work hours, or tell their workers to write their own times on the records.
You don't have to worry about how to do payroll when you outsource it to a PEO like FrankCrum. Partnering with us means you have a dedicated payroll coordinator that will work with you during each payroll cycle and a team of experts to handle complex payroll and tax obligations. Contact us to learn more about FrankCrum’s payroll services.