Understanding Online Payroll for Small Business
Payroll is one of the most important components in running an enterprise. Paying your employees on time and without any delay increase the employees satisfaction level and make your company reputation good in the eyes of future employees.
Payroll means accounting process of paying each & every member of your staff and the total of the overall amount paid. It is basically the list of employees you are paying salary to. Payroll is an important part of business accounting for two big reasons –
- It is a legal requirement you need to fulfill for tax purposes.
- If you will not pay your employees on time, they will not continue work in your organization for a longer period.
Before understanding payroll in detail we should understand the accounting regulations that covers how & when to pay your employees.
Five Areas of Law to Understand About Payroll
The detailed payroll regulations varies from one jurisdiction to another but there are some areas that are likely to be in force wherever you run your business and are as follows –
- Taxation – Paying payroll taxes to the government is very important for those businesses which are having staff under them. Every business having staff must pay payroll taxes to the government and act as a tax collector.
- Retirement Plans & Healthcare – You may also have to concentrate on things like healthcare, social security which varies from country to country. Withholding the right amount from the salary of the employee & generally paying employer’s contribution too. Sometimes, these amounts are fixed and sometimes they are percentage of each employee’s salary.
- Fines & Penalties – If you will not pay the payroll taxes to the government, you need to face high fines & penalties from the tax department. Hence, it is recommended that you must calculate the amount of payroll taxes you owe in order to pay it on time.
- Reporting – You must report all the tax liabilities to government agencies and employees in writing. This might be done weekly, monthly or yearly which depends upon local regulations.
- Payroll for Employees – Payroll is only for the employed staff and not for independent contractors or freelance workers or any person who is handling a business and invoicing you through your business. In case you are still having any confusion and you are unable to understand who’s on your payroll and who is not, talk to our qualified accountants.
How to Choose Payroll Software?
In some of the accounting software, you get payroll feature as an add-on-option or stand-alone payroll applications are also available for the same but before choosing an accounting software, you first analyze what are your business requirements are and keep in mind the following points –
- Work with what you have – In case you are already using accounting software, kindly check whether your software is having a built-in payroll option or any stand-alone payroll application available. If you are not using any of them, it’s time to upgrade.
- Find out if it is easy to use – Choose a payroll package or payroll accounting software add-on that even your financial advisor find it easy to use. Keep it simple in order to avoid swapping of files in different formats.
- Go online & use the cloud – It becomes very important now days to use cloud accounting payroll software & you can easily access your information anywhere and at any time. There is very less IT support required and you can even share your information with trusted partners.
- Make sure it can grow with you – No problem in case you are currently having one or two employees. We know that your aim is high and you must be planning to grow your firm in future. With the use of cloud accounting software, you don’t have to change systems and you can easily maintain data of as many employees you want to.
- Ensure it can do real time recording – Make sure that the payroll application you selected keep your records accurate, up to date and in real time.
- Get recommendations – You can even take the recommendations of your bookkeeper or accountant, business partners, financial advisor, bank and owners of similar companies in order to choose the best cloud accounting payroll software.
- Check the reporting requirements – Check what type of reports you can access with the help of chosen cloud accounting payroll software and how many of them are useful for your business.
Not only this but before choosing a software you must look into features like automated tax calculations, direct deposit management and timesheet handling. Hence, choose your cloud accounting payroll software very cautiously. Once you will choose wrong software; it will be hard for you to migrate from one payroll to another.
Six Points Checklist for Great Payroll
Choice of right payroll software can help you in saving your lots of time. Kindly follow the guidelines mentioned below –
- Register your business – Make sure that after registering your business, your registered business number must be included in all your payroll documentation as well as on the forms you are submitting to the tax office.
- Record your employee’s data – Payroll software records all your employee’s data such as name, address, contact details, salary, welfare ID number, deductions, sick days, days off, overtime and any other compensation. In order to find out what data you need to include, kindly check local regulations.
- Do the paperwork – Make sure your staff fills all the necessary tax forms and return them to tax office on time. Fill your own forms in the same way.
- Decide on payment periods – You need to decide how often you pay your employee’s. It might be weekly, monthly or fortnightly.
- Keep up to date – You must have a plan how to update your payroll information on regular basis. Do this yourself or hire a bookkeeper or an accountant to do it.
- Set up an archive – In order to maintain the records that are needed to be kept for several years; you need to plan a system to archive them. Good payroll software can do this easily but you will still need paper archives for documents like tax forms.
Understand what to do & when your Payroll changes
Your payroll changes every time you hire an employee and you need to fulfill all the legal formalities of the employee joining your organization. Even payments to the employees on your payroll varies too and you need to differentiate them in your system in the following ways –
- Salaried worker – A fixed salary has been paid to the employee every month.
- Regular hourly or casual employee – An hourly payment has been given to the workers for certain number of hours each week.
- Commission – They are paid on percentage basis for the services rendered or products & services sold.
- Bonus – Bonus is given whenever employee exceeds the desired level of performance.
- Supplemental wages – Supplemental wages include commissions, bonuses, overtime pay, severance pay, awards, prizes, back pay, retroactive pay increases, payments for accumulated sick leave & payments for non-deductible moving expenses.
Archive Your Payroll Records
Government asks you to maintain payroll records for several years. For ex – In countries like US & UK, you need to maintain records for current tax year as well as previous three tax years too. These records must contain the following information for each employee –
- Name, address & country’s welfare ID number.
- Hiring date
- Termination date
- Date & amount of all wage, annuity & pension payments.
- Sickness details or injury payments along with the date, amount & the authority who made the payments.
- Copies of all relevant forms supplied to the employee.
- Date& amount of tax deposits.
- Copies of return filed & confirmation numbers.
- Record of fringe benefits & expense reimbursements provided to your employee.
How Nomisma Cloud Payroll Software helps?
Nomisma cloud payroll software is one of the best payroll software’s for SMEs, Accountants, Sole Traders, Contractors, Agents, Self-Employed, and Freelancers. You can easily track and manage all expenses as well as tax deduction benefits with the help of Nomisma cloud payroll software. This cloud payroll software provides you access to everything in a much easier way in comparison to other software’s. You will find everything online along with automatic updates and data backup. With the help of Nomisma cloud payroll software, you can run your business from any part of the world.