The Bookkeeping Corner

10 Best Practices for New Employee Hiring & Payroll

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If you are planning to hire employees, here are some things you should consider:

1. Do you have a federal tax identification number?  You can apply for one via the IRS's website or Form SS-4.
2. Do you have a state withholding ID number? You'll need to apply for one via your state's taxation & revenue department
3. Are you registered for your state's unemployment insurance? You will need to register with your state for an unemployment account and id number. Some states won't assign you a number until you've actually paid an employee.
4. Get a Form W-4 and your state's equivalent Form W-4 completed by all employees.  Keep the original signed forms in your employee's file.
5. If you will be utilizing direct deposit, make sure you have a direct deposit authorization form and voided check from each employee who elects to receive their paycheck via direct deposit.
6. How will you track employees' time? Will your employees be billable? Depending on the number of employees you have or how you bill them, it may be more efficient to have a web-based or some type of computer based time tracking software.  If you have very few employees, a simple spreadsheet or Excel template can be used as well.
7. Consider the frequency at which you want to pay your employees (weekly, bi-weekly, semi-monthly, etc.). If you're using a payroll service ask about the  pricing for each type of payroll frequency.
8. Consider the pay period ending. Will you pay your employees based on a one-week lag?
9. Will you offer employee benefits?  If you want to share the cost of health insurance coverage, you should consider establishing a cafeteria plan.  In addition, some employee benefits affect the amount of payroll taxes to be withheld and paid by the employer.
10. If offered to your employees, consider how vacation or sick time will be accrued and tracked.

If you plan on preparing payroll yourself, sign up for an EFTPS account.  It is a free service by the IRS that will allow you to pay your federal payroll taxes electronically. Many states offer a similar service - check your state's revenue department.

Want to learn more about setting up an EFTPS account?  Receive a free 10 minute consultation from The Financial Boutique!