This is a brief, educational article about setting up payroll for startups and micro-businesses.
Nobody *likes* payroll. But every business needs it. And your people probably wouldn't show up without it. Still, payroll, especially payroll for startups, is simply a necessary evil. An administrative task you know you have to complete, but one you'd prefer to spend as little time actually thinking about and doing.
Setting up payroll for your startup should be pretty simple, as long as you get these key steps right...
- First and foremost, you need to obtain your employer identification number (EIN) as well as your state/local ID, if that's necessary.
- Then you need to complete your employee paperwork. (By the way, if you're confused about anything at this step, it's the perfect time to ask an expert for some help.)
- Make sure you know the difference between an employee and an independent contractor. This affects how salaries and taxes get paid.
- Decide on a payment period (i.e., weekly, biweekly, monthly, etc.). Often times this varies based on the type of employee. For example, you may have an executive that gets paid biweekly but manual laborers that must be paid weekly.
- Tracking is huge for payroll for startups. Make sure you have all the necessary systems in place that will help you track employee work hours, manage part-time payments and make the distinctions between health plan premiums and other business deductibles.
- Set up your Worker's Compensation and Short-Term Disability (SDI) Insurances. These insurances are state-mandated and catch many new business owners off guard. It's a good reminder that setting up payroll is more involved than some people think.
- Find the right payroll system for you, whether it's having an employee do it in-house our outsourcing it to a payroll processing firm. Do some research and get some opinions from some other business owners in your network.
Keep in mind, if you're running a startup, you're an employer. And as an employer, you are responsible for the following...
- filing tax documents
- keeping records
- paying your people
- paying your payroll taxes
- setting up your state-mandated insurances
(Of course, there's a lot more. But those are the key responsibilities as they relate to payroll for startups.)
This is why many businesses, startups included, choose to outsource their payroll. It's one of the lowest-cost administrative tasks to outsource. And one of the biggest advantages of outsourcing payroll for startups is avoiding the hassles of cutting checks, reporting taxes and complying to a variety of rules and regulations most business owners aren't aware of in the first place.
If you're a startup and have any questions about payroll for your business - EVEN if you think it's a silly question - don't you dare hesitate to reach out to us. We have a team of experts on staff that would be glad to assist you.