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Hiring Employees and Processing Payroll

Hiring and managing employees are important steps in your company’s growth. Whether you’ve 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. We’ve 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 we’ve 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 applicant’s right to privacy: marital situation, economic background, personal life, etc.
Don’t imply things you can’t 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

NOTE: Our Incorporation and LLC clients receive access to a detailed, state-specific checklist that includes links to state-specific forms and applications as well as specific information on hiring employees and doing business in your state.

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 Worker’s 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 you’ve 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 you’ve 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 here’s 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 State’s 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 you’ve deducted and deposited from paychecks.

Are You Confused About Payroll Yet?

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: PayCycle.

PayCycle — Online Payroll Service

PayCycle 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.

With PayCycle, you get all of the following for as low as $19.99 per month:

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 (available with PayCycle Plus)
Electronic or pre-filled state tax payment coupons and filing forms with email reminders for upcoming deadlines (available with PayCycle Plus)

Using PayCycle, the process of doing payroll becomes so simple and automated that we can’t imagine doing it any other way. In fact, we utilize PayCycle for MyNewCompany.com, Inc. employees.

Best of all, PayCycle starts at just $19.99 a month. That includes payroll (with direct-deposit capability) for up to 5 employees no matter how many times or in what manner you pay them. Additional employees can be added for just $0.99 per month.

Click here for a 30 day FREE trial with PayCycle!