How to Pay Employees in a Small Business: Tax Forms, Payroll, Employee Timekeeping

how to pay employees in a small business
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Liz Strikwerda

Content strategist and corporate blogger (2000+ posts). Her work has been featured on G2's Learning Hub, Human Resources Today, Better Buys and over 500 business websites. She plays bluegrass mandolin and enjoys sailing her catamaran and hiking in the red rock wilderness of southern Utah. Connect with me on LinkedIn

New business? You’ve set up your website. You’ve hired employees. You’re ready to roll. But you’ve never paid employees before. Welcome to the world of payroll.

Let’s talk about paying employees in a small business.

How Do I Pay Employees in a Small Business?

First, you need payroll paperwork. Get the necessary information from your employees. You should have the job application. You also need some tax forms. Don’t worry, you can get them online.

What Tax Forms Do I Need To Pay Employees?

Here are the must-haves:

  • W-4 (Employee’s Withholding Allowance Certificate)
  • Application for state withholding
  • I-9 (Verifies that the employee is authorized to work in the United States)

What is a W-4 Form?

The W-4 or Employee’s Withholding Allowance Certificate tells you how much to withhold from the employee’s paycheck. On this form, they indicate their tax filing status. They list the number of allowances they are claiming. They let you know if they want you to withhold any additional amount.

Keep employee W-4 forms with your payroll records. If your employee changes their form, keep the old one and the new one. You want detailed payroll records to manage employee costs. Your W-4 forms help you plan for employee costs when it comes to payroll.

What If I Don’t Have a W-4 For My Employee?

First off, why don’t you have one? You can print one off from the IRS website. However, if for some reason your employee hasn’t filled one out, you still need to pay them. Withhold as if the employee files single and has no allowances. Then insist they fill one out before the next pay period.

Prevent this problem by not allowing a new hire to start work until they complete and sign their W-4.

Can I Fill Out a W-4 For My Employee?

No. They need to fill it out and sign it. In fact, you aren’t supposed to give them tax advice. It’s generally okay to give objective instructions. Consult legal counsel if you’re not sure.

Can Employees Change Their W-4?

Yes. They have the right to change a W-4 any time they want to. If their income changes or their filing status changes, they need to update their form.

Where Do I Get The Tax Forms To Pay My Employees?

Federal tax forms for employers can be found on the IRS website.

How Do I Know How Much To Withhold?

You have to withhold federal, state, and local taxes. For federal, use the Employer’s Supplemental Tax Guide. Make sure you are using the guide for the correct year.

Your state has a taxing authority as well. Contact your state department of labor for information about calculating and paying state taxes.

You might also have local taxes to deal with. (We never said this wan’t complicated.) Contact your local taxing authority for information.

If you hire a payroll provider, they will figure this out for you.

What Other Forms Do I Need to Pay My Employees?

If you offer medical insurance and a retirement plan, you will need these documents as well. If your employees belong to a union, you will need copies of the union contracts.

For this article, we are focusing on the basics. We are discussing the tax forms every employer needs to start doing payroll.

How Do I Pay Payroll Taxes?

You can submit payroll taxes online with the Electronic Federal Tax Payment System (EFTPS).

How Often Am I Supposed to Pay My Employees in a Small Business?

Most small business owners pay employees weekly, twice a month, or monthly. Pick a payroll schedule and stick to it. Employers are regulated by the Fair Labor Standards Act (FLSA). Read your obligations on the FLSA website. The feds don’t care how often you pay, but you need to be consistent. This makes sense. How can your employees manage their bills if they never know when they are going to get their paycheck?

I said this before but it bears repetition. Hire a payroll provider to keep you legal.

Remember Your State Has Laws for Employers

Each state has its own laws that apply to employers. Consult your state department of labor to make sure you are compliant.

How Do I Record Employee Hours?

Whether you pay your employees hourly or salary, you need to track their time. This is a snap with a mobile timesheet app. It keeps track of your employee cost for payroll.

You can download a cloud-based app today. Your employees access the time clock from a device that connects to the internet. The apps are cheap, convenient, and require no training.

Employee Timekeeping is The Easiest Part of Payroll

A timesheet app is the most important component of your employee expenses software. It tracks hours automatically. You can run your business efficiently. Avoid the headaches of paper timesheets. Prevent employee time fraud.

How Do I Make Sure My Payroll is Accurate?

A good time tracking app is essential for accurate payroll. Payroll mistakes cause problems legally. And they result in angry employees, which is understandable.

You can import employee hours from the app into your payroll system. Whether you outsource payroll or have employee expenses software.

Track Employee Hours With a Time Tracking App

An employee time tracking app helps you manage employee costs. Employee costs make up the biggest portion of your operating expenses. It is a key part of your accounting system.

How to Pay Employees in a Small Business

  1. Gather tax information
  2. Pay federal, state, and local payroll taxes
  3. Use employee expenses software or outsource payroll
  4. Download an employee timekeeping app to track hours

Maintain legal compliance. Keep your employees happy. Manage employee costs as your business grows.

By Liz Strikwerda

Simplify HR management today.

Simplify HR management today.

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