Thinking About Hiring? Part 2: Payroll 101

Payroll can be complicated. But there are essentially 3 main jobs for employers in doing payroll:

1.       Paying employees (and withholding the right taxes from paychecks)

2.       Paying payroll taxes (both taxes withheld from employees' paychecks and taxes employers pay on behalf of their employees)

3.       Filing tax forms

To learn more about payroll, check out this Payroll 101 guide.

 

When it comes to running payroll, you want to choose the option that's right for your business. There are 3 basic ways to do your payroll — by yourself, by yourself with the help of software, or by outsourcing to a third-party service. The differences between these methods are described below.

 

Pay Employees: You do it all manually—track time worked, calculate taxes and create paychecks.

 

Pay the Government: You calculate taxes manually and keep track of when taxes are due. You make payments by mail or electronically.

 

File Tax Forms: You fill out forms manually. You file by mail or electronically (in some states).

 

Chose the option that suits your company best: For business owners who are highly cost-conscious and who have the time, expertise, and willingness to handle administrative payroll tasks manually.

 

 

Pay Employees : You enter time worked into the software. The payroll software calculates taxes automatically. You print paychecks (or pay employees by Direct Deposit).

 

Pay the Government: The payroll software calculates taxes automatically and can remind you when taxes are due. You make payments by mail or electronically. Some software services or accountants can handle payments for you.

 

File Tax Forms: The software fills out the forms at the click of a button. You can file electronically or print and mail. Some software services or accountants can handle tax filings for you.

 

Chose the option that suits your company best: For business owners who want to save time by automating as much of the payroll process as possible, while still maintaining control. The cost of software is modest compared to the time savings.

 

 

Pay Employees : You report time worked to the payroll outsourcer. The payroll outsourcer calculates taxes.  The payroll outsourcer typically delivers the paychecks.

 

Pay the Government: The payroll outsourcer calculates taxes and keeps tracks of when taxes are due.  The payroll outsourcer typically handles the payments for you.

                                                                                         

File Tax Forms: The payroll outsourcer completes the forms and handles the tax filing.

 

Chose the option that suits your company best: For business owners who want to fully delegate payroll and tax filings. The cost of outsourced payroll can be higher than that of payroll software, but services are typically more extensive.

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