Hiring Employees and Processing Payroll
Hiring and managing employees are important steps in your companys growth. Whether youve decided to hire yourself as an employee of your corporation or LLC, or if you simply need to add people to your growing business, we can help. Weve broken this section down into 2 areas:
1. Hiring Employees
The first thing you should do before hiring an employee or employees is to know exactly why you need them. Many business owners simply become overwhelmed and need to hire an employee to handle the overload. The better approach, as weve outlined in detail in our Automate Your Business section, is to imagine your business in 1 to 3 years and create an organizational chart, job titles and job descriptions to match your vision. Then, you can slowly "fill-out" your organizational chart with employees until your company reaches operating perfection!
The following steps are helpful:
The Job Description
This organizational chart approach requires you to create a detailed job description for each position in your company that includes:
- an overview of the position and responsibilities
- who is responsible for supervision of that position
- what is required on a daily, weekly, monthly and even quarterly or yearly basis
- what constitutes successfully doing the job (job goals)
- exact procedures for doing the job (please see our section on the Business Operations Manual for more information on automating processes and procedures.)
Legal Requirements for Hiring
There are numerous Federal, State and Local rules regarding hiring employees, and most large companies maintain in-house legal counsel and human resource departments to deal with these rules. But, if you are a small company, these are unaffordable luxuries. Therefore, here are some simple common-sense guidelines for hiring employees:
- Do not discriminate based on race, color, gender, religion, handicap status, etc.
- Respect the applicants right to privacy: marital situation, economic background, personal life, etc.
- Dont imply things you cant deliver: job security, benefits, etc.
- Observe all laws relating to minimum wage, hiring young or immigrant workers.
- Follow the IRS guidelines for hiring independent contractors.
- Follow all IRS and State new hiring requirements (discussed below)
Tips on Hiring and Interviewing
Before Hiring the Employee
Before hiring an employee you must do the following:
- Obtain a Federal Employer Identification Number (FEIN)
- Register with your State Labor or Employer Division
- Obtain Workers Compensation Insurance (if required)
- Post an "Employee Poster" as required by Federal and most State Governments ( Click here to obtain one for your State.)
After Hiring the Employee
The following forms must be filed for every new employee:
- Federal W-4 Form
- Federal I-9 Form (verifies the legal status of the employee)
- State New Hire Reporting Form
These forms and any other employee paperwork must be kept by the employer in an "employee file" for at least 4 years.
2. Processing Payroll
Okay, so youve hired the employee, registered with the appropriate agencies, obtained the necessary ID #s and complied with the necessary regulations. The next step is processing payroll.
There are basically 3 things you need to know:
- How much you are paying your employee(s).
- How much you need to take out of each paycheck for the various Federal, State and Local Taxes.
- A running total of how much youve paid your employees, how much has been taken out and for which reason (i.e. how much was for social security taxes, how much for state unemployment, etc.).
This is important because you will need to know these totals to file quarterly tax forms. Most accounting software can tabulate these totals automatically.
So heres the overall process:
- Pay your employee(s) (either weekly, bi-weekly, bi-monthly or however).
- Withhold the proper amount from each paycheck, keep track of the totals either with accounting software or manually.
- Deposit the total Federal Taxes (Income, Social Security and Medicare) owed monthly to the IRS.
- If applicaple, deposit income or other State taxes to your States taxing authority (this could be bi-weekly, monthly or quarterly).
- Quarterly file IRS Form 941 summarizing what you have deposited monthly for the previous quarter. Yearly file the IRS Form 940.
- Quarterly (or bi-weekly or monthly depending on the State), file the necessary state forms summarizing what youve deducted and deposited from paychecks.
Are You Confused About Payroll Yet?
Are you confused or overwhelmed by the whole payroll process? You should be. The government has taken a relatively simple process and made it positively complex. However, there is a solution that we recommend for every small business. In fact, this service alone is one of our most highly recommended services: Intuit Online Payroll.
Intuit Online Payroll Service
Intuit Online Payroll takes a complicated process that can take several hours a month and literally breaks it down to about 5 minutes. It is the fastest, easiest and lowest cost way for small businesses to manage payroll.
- Instant, 100% guaranteed accurate federal, state and local tax calculations
- Flexibility to pay your employees by FREE Direct Deposit or by printing paychecks or paystubs
- Electronic federal tax payments with email reminders before tax deadlines
- Electronic federal tax filing of forms 940s, 941s and W-2s with email reminders before filing deadlines
- Export of payroll information into QuickBooks, QuickBooks Online, and Microsoft Money
- Customized "To Do" list that tells you exactly what to do and when
- New hire federal forms including W-4 and I-9
- New hire state forms
- Electronic or pre-filled state tax payment coupons and filing forms with email reminders for upcoming deadlines (available as an option)
Using Intuit Online Payroll, the process of doing payroll becomes so simple and automated that we cant imagine doing it any other way. In fact, we utilize Intuit Online Payroll for MyNewCompany.com, Inc. employees.
Best of all, Intuit Online Payroll is FREE for 30 days and starts at just $25 a month.