Running payroll may not be the most thrilling task, but it is a crucial aspect of managing a small business. In this article, we will delve into the intricacies of payroll management and highlight the importance of doing it correctly.
Whether you are an HR professional or a small business owner, this comprehensive guide will help you navigate the process efficiently and avoid common pitfalls.
But before jumping into the complete tutorial, I want to share with you a great video I created for you, where I go through every single step of the process while sharing my screen. If you follow these steps, you can quickly complete your payroll!
We will focus on Gusto, an intuitive and cloud-based payroll service, and explore how it simplifies payroll management for small businesses. So, let’s dive in!
Table of Contents
Gusto: A Game-Changing Payroll Service
Among the various payroll service options available, Gusto stands out as a modern, cloud-based solution designed to simplify payroll management. Unlike antiquated systems like Paychex and QuickBooks Payroll, Gusto offers a clean and user-friendly interface, making payroll processes intuitive and efficient. Let’s explore how Gusto can transform your payroll operations:
Getting Started with Gusto
Setting up a Gusto account is a straightforward process that typically takes around 20 minutes. For a smooth onboarding experience, consider contacting their customer support via the provided 1-800 number. Their team can guide you through the setup process, answering any questions you may have and ensuring you start off on the right foot.
Hiring and Onboarding
Gusto offers a comprehensive suite of features beyond payroll management. It allows you to generate offer letters, manage benefits, and handle various HR tasks. Utilizing these tools can present your business as professional and organized, providing a positive onboarding experience for new employees.
Running payroll becomes a breeze once your account is set up and employees are added to Gusto. Gusto allows you to determine the pay frequency and automate the process through their autopilot feature. However, you also retain the flexibility to make adjustments when needed. The platform enables you to modify employee compensation, update pay periods, and seamlessly handle payroll corrections.
Support and Resources
In case you encounter any issues or need assistance, Gusto offers reliable customer support. You can access their help center, which provides self-help resources and guides for common queries. You can also connect with their support team via chat, phone, or email for more personalized assistance if required.
Tax and Compliance Made Easy
Gusto takes the complexity out of tax reporting and compliance by providing a centralized platform for managing federal, state, and local tax obligations. With a few clicks, you can access and review documents such as W-2s and 1099s, ensuring that all necessary forms are filed accurately and on time. This streamlined approach eliminates the anxiety often associated with payroll-related tax matters.
Integrations & Tools
While Gusto focuses on payroll management, it seamlessly integrates with other business tools to create a comprehensive business ecosystem. For instance, you can connect Gusto with Bench, a bookkeeping service, to automate your financial record-keeping.
Things To Consider With Gusto
The following key points provide an overview of the importance of proper payroll management and the benefits of using Gusto as a payroll service:
- Importance of Legitimate Payroll: Running payroll properly is crucial for small businesses to ensure compliance with IRS and state regulations and to protect the business from legal liabilities.
- Liability and Asset Protection: Properly managing payroll helps protect personal and business assets by maintaining a clear separation between personal and business finances.
- Co-Mingling Funds: It is essential to have a separate business bank account for payroll transactions to avoid commingling personal and business funds.
- Choosing a Payroll Service: Gusto is the best-recommended tool for running payroll due to its user-friendly interface, cloud-based functionality, and compliance with payroll regulations.
- Benefits of Gusto: Gusto offers features beyond payroll, such as sending offer letters, benefits administration, and a clean user interface. It also integrates with other tools and provides good customer support.
- Setting Up Payroll: The process of setting up a payroll account with Gusto involves:
- Hiring a new employee.
- Specifying their employment type.
- Setting their salary.
- Providing necessary details for payroll processing.
- Payroll Settings and Customization: Gusto allows businesses to customize pay schedules, automate payroll calculations, and set up autopilot for convenient payroll processing.
- Payroll Corrections and Support: Gusto provides options for payroll corrections and offers support through chat, phone calls, or email for any payroll-related issues.
- Tax Filings and Compliance: Gusto assists in tax filings and compliance by providing reports and documents necessary for federal and state tax obligations.
- $100 Gift Card: Gusto provides a $100 Visa debit card to users who sign up using our links after running their first payroll.
- Ensure Legitimacy and Separation of Funds:
- Understand the importance of running payroll properly to comply with IRS and state regulations.
- Set up a separate business checking account to avoid commingling personal and business funds.
- Choose a Payroll Service:
- Consider using Gusto, a cloud-based payroll service, known for its user-friendly interface and compliance with payroll regulations.
- Set Up Your Gusto Account:
- Sign up for Gusto and go through the setup process, which may take around 20 minutes.
- Utilize the 1-800 number to receive assistance and have a representative walk you through the setup process.
- Add Employees:
- Within Gusto, navigate to the “People” section and click on “Hire a New Person.”
- Choose the appropriate employee type (e.g., employees, contractors) and follow the instructions to enter their information.
- Specify Employment Details:
- Determine the employment type (hourly, salary, contractor) for each employee.
- Enter the wage or salary amount and select the pay frequency (e.g., weekly, bi-weekly, monthly).
- Complete Onboarding Tasks:
- Gusto will guide you through onboarding tasks for each employee, such as sending offer letters or benefits administration.
- Customize the process based on your business needs.
- Review Payroll Settings:
- Navigate to the “Payroll Settings” section within Gusto.
- Confirm the pay schedule, ensuring it aligns with your desired payment frequency.
- Enable autopilot to automate the payroll process.
- Adjust Employee Details or Compensation:
- In the “Team Members” section, click on individual employees to review and modify their compensation details.
- Update wages, salary, deductions, or any other relevant information as needed.
- Save changes to ensure accurate payroll calculations.
- Run Payroll:
- Once your employee details and compensation are accurately set up, you can proceed to run payroll.
- Within Gusto, click on “Payroll” and select the appropriate payroll type (regular, bonus, off-cycle).
- Review the summary of the payroll details, including employee wages and deductions.
- Proceed with processing the payroll, ensuring all amounts are correct.
- Monitor Tax Filings and Compliance:
- Gusto handles tax calculations and filings, simplifying your payroll tax obligations.
- Regularly check the “Taxes & Compliance” section to ensure federal, state, and local tax filings are being processed correctly.
- Seek Support and Assistance:
- If you encounter any issues or have questions regarding payroll, Gusto offers customer support through chat, phone calls, or email.
- Take advantage of their resources and reach out for assistance when needed.
Payroll Tips For Yor Business
As a small business owner, one of your core responsibilities is managing payroll. Payroll refers to the process of calculating and distributing employee wages, including salaries, bonuses, and deductions.
While it may seem daunting, handling payroll efficiently is crucial for both legal compliance and maintaining employee satisfaction. In this article, we will provide essential tips to help you navigate the world of payroll as a small business owner, ensuring accuracy, compliance, and streamlined operations.
Classify Employees Correctly
One of the first steps in payroll management is properly classifying your employees. Understand the distinction between employees and independent contractors, as misclassifying workers can lead to legal and tax complications. Consult applicable labor laws and the IRS guidelines to ensure accurate classification.
Establish a Pay Schedule
Consistency is key when it comes to paying your employees. Establish a regular pay schedule, whether it’s weekly, bi-weekly, or monthly, and communicate it clearly to your employees. Adhering to a defined pay cycle helps maintain order, improves cash flow planning, and fosters trust with your staff.
Keep Accurate Employee Records
Maintaining comprehensive employee records is essential for payroll management. Ensure you have accurate information on each employee, including personal details, Social Security numbers, tax withholding allowances, and any benefit or deduction information. Implement a secure and organized system to store and update employee records.
Understand and Comply with Tax Obligations
Payroll taxes are a critical aspect of running payroll. Familiarize yourself with federal, state, and local tax requirements, including income tax withholding, Social Security, Medicare, and unemployment taxes. Stay updated on tax rates, filing deadlines, and reporting obligations to avoid penalties and ensure compliance.
Separate Business and Personal Finances
To maintain financial integrity and protect both your business and personal assets, establish a separate business bank account for payroll purposes. Commingling funds can lead to legal complications and hinder accurate record-keeping. Keep business income, payroll transactions, and related expenses strictly separate from personal finances.
Choose a Reliable Payroll System
Invest in a reliable payroll system or consider outsourcing to a reputable payroll service provider like Gusto. These platforms streamline the payroll process, automate calculations, generate pay stubs, and handle tax reporting. Evaluate your business needs, budget, and desired features when selecting a payroll system.
Stay Up-to-Date with Employment Laws
Employment laws and regulations are subject to change, so it’s crucial to stay informed. Familiarize yourself with minimum wage requirements, overtime rules, paid leave policies, and any other relevant labor laws specific to your jurisdiction. Regularly review and update your payroll practices to ensure compliance with evolving regulations.
Automate Where Possible
Embrace automation to simplify and streamline your payroll processes. Use payroll software to automate calculations, direct deposit payments, and generate payroll reports. Automation reduces the risk of errors, saves time, and increases efficiency, allowing you to focus on other aspects of your business.
Seek Professional Assistance if Needed
If you find payroll management overwhelming or lack expertise in this area, consider seeking professional help. Accountants, HR consultants, or payroll service providers can offer guidance, ensure compliance, and provide peace of mind, allowing you to concentrate on core business activities.
Effectively managing payroll is essential for small business success. By implementing these tips, you can navigate the intricacies of payroll management with confidence. From correctly classifying employees to complying with tax obligations and leveraging modern payroll systems, you can streamline operations, maintain legal compliance, and foster positive employee relations.
Invest time and resources into establishing a robust payroll process, and your small business will thrive while keeping your workforce content and motivated.
Mistakes To Avoid When Doing Payroll
Managing payroll for a small business involves several potential pitfalls. Let’s discuss some common mistakes small business owners make with payroll and how to avoid them:
Misclassifying employees as independent contractors can have legal and financial consequences. It’s important to understand the criteria for proper classification and accurately categorize workers based on their job responsibilities and the level of control you have over their work. Consult with legal professionals or HR experts to ensure compliance and avoid costly misclassification issues.
Incorrect Payroll Tax Calculations
Mistakes in calculating payroll taxes can lead to penalties and audits. Errors may occur in determining the correct federal, state, and local tax withholdings, as well as in calculating Social Security, Medicare, and unemployment taxes. Utilize reliable payroll software that automates tax calculations and stays updated with tax law changes. Regularly review and reconcile payroll tax reports to ensure accuracy.
Inaccurate Timekeeping And Tracking
Relying on manual timekeeping or outdated tracking systems can result in inaccuracies and discrepancies in calculating employee hours and wages. Consider implementing a modern time and attendance system that integrates with your payroll software to ensure accurate and automated time tracking. Properly train employees on how to record their hours to minimize errors.
Inadequate record-keeping can lead to compliance issues and difficulties in resolving payroll disputes. Maintain comprehensive records of employee information, including personal details, tax forms, benefits, and deductions. Implement a structured system to organize and securely store payroll records for easy access and retrieval when needed.
Late or missed payroll tax filings and payments can result in penalties and interest charges. Stay organized and aware of tax filing deadlines at the federal, state, and local levels. Set reminders and establish a schedule to ensure timely submissions. Consider using payroll software that automates tax filings and provides reminders for upcoming deadlines.
Improper Handling of Garnishments and Deductions
Managing wage garnishments, such as child support or tax levies, requires accuracy and compliance with legal requirements. Mishandling garnishments can result in legal repercussions. Familiarize yourself with federal and state garnishment laws, and ensure payroll software or service providers can handle and correctly process garnishments and other deductions.
Lack of Documentation and Employee Communication
Failure to provide proper pay stubs, maintain accurate records of hours worked, or communicate payroll-related policies and changes to employees can lead to misunderstandings and employee dissatisfaction. Clearly communicate pay rates, pay periods, deductions, and any policy updates to employees. Provide accurate and detailed pay stubs that comply with legal requirements.
Commingling of Funds
Mixing personal and business funds is a common mistake that can lead to legal and financial complications. Establish a separate business bank account for payroll transactions, ensuring a clear separation between personal and business finances. Use this account exclusively for payroll-related activities and maintain proper documentation of transactions.
Avoiding these common small business payroll mistakes requires attention to detail, proper training, and leveraging modern payroll systems or services. Stay informed about payroll regulations, invest in reliable technology, and seek professional guidance when necessary to ensure accurate, compliant, and efficient payroll management for your small business.
Gusto vs. Paychex vs. QuickBooks
Besides Gusto, there are other payroll apps available to streamline operations. In the following box, we will compare Gusto with Paychex and QuickBooks Payroll:
|GUSTO||– Intuitive and easy-to-use platform, making payroll management simple even for non-experts.|
– Automates payroll calculations, tax withholdings, and generates pay stubs.
– Offers direct deposit and provides employees with self-service access to pay stubs and tax documents.
– Handles tax filings and compliance, reducing the burden of payroll tax management.
– Integrates with other business tools such as accounting software, time and attendance systems, and benefits administration platforms.
|Gusto’s pricing is transparent and affordable. They offer tiered pricing based on the number of employees and additional features required. Pricing starts at a base fee per month plus a per-employee fee.||-User-friendly interface and intuitive design.|
– Comprehensive payroll features and tax compliance support.
– Integrates seamlessly with other business tools.
– Excellent customer support and resources.
– Offers additional HR functionalities beyond payroll.
|– Some advanced HR features may require an additional fee.|
– Limited customization options for pay schedules and deductions.
– Not ideal for businesses with complex payroll needs or large employee counts.
|PAYCHECK||– Extensive range of payroll services, including payroll processing, tax administration, and HR solutions.|
– Provides dedicated support from payroll specialists who can handle complex payroll tasks.
– Offers flexibility in pay frequency and payment options.
– Integrates with various time and attendance systems to streamline data entry.
|Paychex’s pricing varies depending on factors such as the number of employees, services required, and customization options. They offer customized quotes tailored to each business’s specific needs.||– Wide range of payroll and HR services in addition to payroll processing.|
– Personalized customer support and assistance from payroll specialists.
– Robust reporting capabilities and analytics tools.
– Scalable options for businesses with different sizes and needs.
|– Costs may be higher compared to other payroll apps, particularly for businesses with smaller employee counts.|
– User interface and navigation can be less intuitive compared to other apps.
– Additional fees may apply for certain features or integrations.
|QUICKBOOKS||– Streamlines payroll processes by automatically calculating wages, taxes, and deductions.|
– Offers options for direct deposit and provides employees with online access to pay stubs.
– Seamlessly integrates with QuickBooks accounting software, simplifying financial management.
– Provides payroll tax calculation and filing support.
|QuickBooks Payroll offers three pricing plans: Basic, Enhanced, and Full-Service. The cost varies depending on the plan chosen, the number of employees, and additional features required.||– Easy integration with QuickBooks accounting software.|
– Simplified payroll processes with automated calculations and tax filings.
– Robust reporting capabilities and customizable payroll settings.
– Offers a mobile app for convenient access to payroll information on the go.
|– Limited features compared to dedicated payroll apps like Gusto or Paychex.|
– Additional fees for some features or services.
– Customer support may be less comprehensive compared to other providers.
Gusto stands out with its user-friendly interface, comprehensive features, and affordable pricing. Paychex offers a wide range of services, personalized support, and scalability. QuickBooks Payroll integrates seamlessly with QuickBooks accounting software and provides simplified payroll processes. Evaluate your business requirements carefully, consider the benefits and costs of each app, and select the one that best aligns with your payroll management needs.
In conclusion, managing payroll doesn’t have to be a headache for small businesses. With the right payroll app, you can streamline your processes, ensure compliance, and save valuable time and resources. Gusto, Paychex, and QuickBooks Payroll are all powerful tools that offer unique features and benefits, but here at BizBuddy, we think that Gusto is the best option for your business.
If you’re looking for an intuitive and user-friendly interface coupled with comprehensive payroll functionalities, Gusto is the go-to choice. It simplifies payroll management and goes beyond with additional HR features.
Whichever app you choose, make sure it aligns with your specific payroll needs, budget, and integration requirements. Say goodbye to payroll headaches and embrace a streamlined, efficient, and accurate payroll management system for your small business. Your employees will thank you, and you’ll have more time to focus on growing your business.