Part of running any business involves paying your employees for what they do through a payroll system. If you’re still in the dark about how to do this and you want to get your new business’ operations up and running as soon as possible, here’s what you need to know:
- Obtain an EIN–The first thing you need to do before hiring employees is obtain an EIN number from the IRS. This number is used for reporting taxes for your business, and it’s used whenever you need to report information about employees to any state agencies.
- Manage paperwork--When you hire new employees, they need to fill out a Federal Tax Withholding Form W-4. Before you can add a new employee to your payroll system, they need to fill out one of these forms and give it back to you.
- Determine a pay period--Although you might already have instituted a manual process for this, you need to decide whether you are going to pay your employees on a monthly or bi-monthly schedule. Keep in mind that even if your employees do not work a full pay period, you still have to withhold income tax for this time period.
- Document employee compensation terms--When you set up your payroll system, you need to decide how you are going to track paid time off, overtime, and other related issues. Make sure you carefully document these policies, so you can avoid employee disputes at a later date.