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Payroll 101: The Basics of Payroll for Small Business Owners




As with a ladder, every step (pun intended 😉) is important to reaching your end goal. In this sense, think of your ‘steps’ as your employees. It is important to fairly value and reward each person who helps you and your business accomplish their goals. One way to ensure this is to have a consistent and efficient payroll system. This guarantees that your employees are accurately compensated. We know that for a small business, payroll can seem like an extremely overwhelming task. Let us break it down for you as we go over what payroll is and what you need to know to build a strong system that you and your employees can rely on. 

 

What is payroll? 

Put simply, payroll is the process of employers paying their employees for the work they have completed. This process also includes calculating gross and net wages to make tax payments (also known as “source deductions”). 

 

Handling payroll correctly is not only important but required by law. As a business owner, you need to be diligent about your payroll process and give it the time and effort it requires. 

 

Payroll also directly impacts the morale and trust of your employees. No one is going to trust a business that has sloppy finances. By maintaining timely and accurate payments, you reassure your team that they are valued for their work. A well-managed payroll system can retain top talent as well as increase overall job satisfaction.

 

What is involved in running payroll? 

Despite common belief, payroll is more than just paying your employees, and consists of many tasks such as: 

  1. Determining employees’ gross wages (including overtime and non-exempt employees)

  2. Withholding all required payroll taxes (federal, provincial and local)

  3. Withholding all employee benefit premiums (medical, life insurance, etc.)

 

What do you need to run payroll? 

Now that we’ve laid out the groundwork, here are the tools you need to implement your payroll system: 

  1. Employer identification number (EIN)

  2. Business bank account 

  3. Payroll legal compliance resources (federal, provincial and local) 

  4. Knowledge of how to calculate payroll or a calculator tool

  5. Time keeping system

  6. Payroll deduction amounts 

  7. Payroll forms 

 

With all that considered, managing payroll is no small task. Maintaining a strong payroll system can be overwhelming and time consuming. Sometimes outsourcing your payroll can help save you the headache and any costly compliance issues. Luckily, we are here to help! Here at STEPS, we offer payroll assistance for you and your small business. You can learn more on our payroll tab or reach out to us on our contact page. 

 

Also, if you would like to learn more about the specifics of payroll, stay tuned to hear more about it in our upcoming blog posts!

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