Business owners typically turn to HR professionals for payroll services. After all, it can be difficult to learn how to set up payroll for the first time. HR managers can set up payroll for one employee or hundreds. However, some business owners like yourself only have one employee and prefer to conduct payroll on their own. After all, it is a major responsibility that many executives do not want to leave in others’ hands. Payroll systems allow companies to function legally and meet their responsibilities. More so, they prevent businesses from having to pay IRS penalty fees. Continue reading to learn how to set up payroll for one employee on your own.
Pick A Payroll System
To begin setting up payroll for one employee, pick a payroll system. Numerous payroll companies provide quality services. However, if you want to do your own payroll, you need to purchase a software system. There are many payroll software options that eliminate business owners’ stress as a company would. You no longer have to manually input information or calculate equations. A reliable payroll system can perform those duties for you, saving you time to drive your business forward. After purchasing a system, get it up and running by entering your employee’s information. Input their name, social security number, address and other relevant pieces of information. Research the top software to ensure that you invest in a system that will not cause you issues with the IRS when conducting payroll for one employee.
Choose Between Salary And Hourly
Once you have a payroll system, choose your company wages. Some employers choose to pay their workers on an hourly basis. Others offer various salaries depending on the job. In addition, many companies offer a mixture of the two, typically varying by number of hours. Since you only have one employee, you need to choose just one option. When business owners decide to exempt workers from earning overtime, they pay them a salary. Nonexempt employees can get paid a salary or hourly wages. Decide which option will work best for your employee and company before setting up payroll for one employee.
Determine Pay Periods
After you decide between salary and hourly wages, determine pay periods for your one employee. Workers typically prefer to know what their pay periods will be before accepting a job offer. In order to provide an employee with this information, you need to decide yourself and implement your choice in your payroll strategy. Popular pay periods include weekly, bi-weekly, semi-monthly and monthly. With just one employee, you need to select just one option and use it for their payments. This is crucial because employees grow unsatisfied when their paychecks are late. To avoid causing frustration in the workplace, determine pay periods early on in the set up process for payroll for one employee.
Track Employee Hours
Another feature to establish early on is how you will track employee hours for payroll. With one employee, this step is fairly simple. You can choose between using time cards, tracking computer logins, inputting the information yourself and having your employee enter their hours themselves. While various small businesses with just one employee succeed using all of these methods, you need to keep the future of your company in mind. When making your decision, visualize how many employees you could have a year from now. If you plan to grow significantly, employee self entering may not be the best option. You might not be able to trust every employee with honestly tracking their own hours. Consider your future growth to decide how you will track employee hours. If you choose to use your software to track hours, activate the action on your system. Business owners who do so avoid commonly made payroll mistakes. Furthermore, they move along in the payroll process quickly.
Learn Which Taxes To Withhold
Lastly, you need to consider taxes when doing payroll for one employee. When conducting payroll, you deal with multiple types of taxes including local, state and federal. You need to withheld these taxes from your employee’s paychecks. If you are not familiar with the necessary tax withholdings, visit the IRS website. There, you will also find each type of tax’s rate. The site provides information on federal income tax, social security and Medicare taxes, other Medicare taxes and federal unemployment tax. After educating yourself, automate taxes on your payroll system. Then, you can do payroll for one employee worry-free and legally.
When you just have one employee, you can easily set up payroll for one employee yourself. To do so, first pick a payroll system that is reliable. Then, choose whether you want to pay your worker a salary or hourly wages. Determine pay periods and input them into your system to avoid paying your employee late. Another feature to input in your system is an employee tracking strategy. Finally, educate yourself on the taxes to withhold before beginning to pay your one employee. Use these steps to set up payroll for one employee on your own.