Understanding online payroll for small business
What is payroll?
We'll look at both meanings in this guide, because understanding payroll is all about understanding the accounting regulations that cover how and when to pay your employees.
Payroll is an important part of business accounting, for two big reasons. First, because it's a legal requirement to get it right, especially for tax purposes. Second, if you don't pay your employees correctly then they probably won't be your employees for long!
So here's what you need to know in order to understand payroll for your small business.
Five areas of the law to understand about payroll
In certain countries you may have other obligations too, such as paying funds towards unemployment cover, or checking that each employee is legally allowed to work in your country.
Understand what to do when your payroll changes
Payments to the people on your payroll will vary too and you'll need to include them in your system in different ways. Some examples include:
Salaried worker
Someone who's paid a fixed salary for each pay period.
Regular hourly or casual employee
Paid an hourly rate for a certain number of hours each week.
Commission
Paid for services rendered, products or services sold, usually on a percentage basis.
Bonus
Paid for good performance over and above expected levels.
Supplemental wages
A catch-all term that includes bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses.
Archive your payroll records
- Name, address and your country’s welfare ID number (for example, in the US this would be your social security number). Check this according to your country’s local regulations.
- Date of hire.
- Date of termination (if not still employed by you).
- Amounts and dates of all wage, annuity and pension payments.
- Copies of all relevant forms supplied to (and by) the employee.
- Details of sickness or injury payments, including dates, amounts and who made the payments.
- Dates and amounts of tax deposits you made.
- Copies of returns filed and confirmation numbers.
- Records of fringe benefits and expense reimbursements provided to your employees.
There may also be other information that you're legally obliged to keep. Check with your local tax office to find out.
Salaried worker
Regular hourly or casual employee
Paid an hourly rate for a certain number of hours each week.
Commission
Paid for services rendered, products or services sold, usually on a percentage basis.
Bonus
Paid for good performance over and above expected levels.
Supplemental wages
A catch-all term that includes bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses.
Payroll is your responsibility to get right
You can make life easier for yourself by choosing the right payroll accounting software and setting it up properly. Get whatever help you need from your accountant and the tax office to make sure this is done properly. Putting in some effort now will save you tons of time and expenses as your business grows and you take on new employees.
Wanna know more? Take a look at our payroll services here!
Source: Xero.com
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