Setting Up Payroll

Once you have your business set up and you’re ready to hire employees, you need to think about payroll – the way you will compensate these employees for the work they provide for your business. It’s important that you set up a system from the beginning, as it will help you stay on top of your legal and regulatory responsibilities as an employer.  Let’s discuss what you need to do in order to set up a payroll system.

  1. Obtain an Employer Identification Number (EIN) – If you haven’t done so already, you will need to get an employer identification number before hiring any employees. This number is required for reporting taxes and other documentation to the IRS. Apply online or contact the IRS.
  2. Decide The Pay Period – Before you start hiring, decide how frequently you want to pay employees. It has become more common for companies to pay monthly and bi-monthly, but many still pay weekly.
  3. Choose a Payroll System – It’s a good idea to have a system set up and ready to go before you bring any employees on. Payroll can either be done in-house or outsourced. There are several payroll systems available for employers who choose to do their payroll in-house, but we suggest using QuickBooks. Not only is QuickBooks easy to use, but we are also a Certificated ProAdvisor, so we can answer your questions and give you any assistance you need. Your other option is to outsource payroll duties to an accounting company such as ourselves. This will give you less to worry about, and will guarantee that your payroll will be done right!
  4. Employee Compensation Terms – As you set up your payroll system, you need to decide how you are going to track employee hours, handle paid time off (if offered), and if and how you will pay any overtime, health benefits, and retirement compensation (if offered). Make sure that however you set it up, it is easy to understand.
  5. Employee Paperwork – Now you are ready to hire employees, so you need to make sure they fill out the proper paperwork.  One of the many important forms they must fill out is the Federal Income Tax Withholding Form W-4, which lets you or your payroll provider know how much federal income tax should be withheld from their paycheck. Once they have filled out the necessary forms and you have submitted the information, put the forms somewhere safe with your records. You are required to keep their paperwork on file as long as they are an active employee of yours, and if they leave your business, you must still keep their paperwork for an additional three years after their termination date.

Once you have your system ready to go and employees in place, you can start running payroll! Whether you decide to do it yourself or outsource is completely up to you, but no matter what, always make sure you keep your records and report your payroll taxes to the IRS. Should you have any questions, please don’t hesitate to call!


Ryder & Company is located in West Lawn, PA and offers a variety of accounting services, part-time CFO services, payroll preparation, and much more! We also offer tax preparation for individuals, as well as businesses and nonprofit entities.

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