Payroll Basics Every Employer Needs to Know

• Reading Time: 3 Minutes
• Published: October 12, 2020
• Last Updated: April 5, 2025

After hiring of an employee, you need to ensure that he/she gets paid for the respective job profile. It is imperative to know the basics of payroll system because, if effectively managed, it can reduce the overall cost as well as time devoted. You can outsource these services and reduce the human resource employed, in particular, for this purpose.

Pay Schedule

You need to select a payment schedule, i.e. the starting date and ending date of the schedule. It is called a pay period, and it represents the time frame in which your employees earned wages or logged their time of work. In various companies, pay periods can be semi-monthly, biweekly, and weekly. Payday is described as the date of giving salaries or wages. It is mostly a fixed period of time. It is also payday that helps you to find out the period for filing payroll taxes.

Collection of Employer and Employee taxes

Employers and Employees need to pay taxes on salaries or wages. Both the parties owe taxes to the state as well as the federal government. In a few cases, they owe to municipalities or cities also. Form W-4 needs to be filled by every employee that joins your organization. According to this form, employers are accountable for the collection of Medicare and Social Security Tax, Federal Income Tax from the paychecks of employees. Employers are also needed to pay the same amount of Medicare and Social Security Tax and Federal Unemployment Tax (FUTA).

Paying Taxes

Monthly basis is a general rule to pay state and federal income taxes. However, taxes such as FUTA are paid quarterly. The frequency to pay these kinds of taxes depends upon the magnitude of your business. Mostly, employers pay these taxes monthly, but the federal government and state government notify the businesses that need to pay the taxes more regularly.

Filing Taxes

You need to file some kinds of forms like Federal Form 941, Form 940, Forms W3 & W2. You need to file Federal Form 941 each quarter, Form 940-annually. Filing of Forms W3 & W2 are required to be sent to the Social Security Administration annually. Many payroll service providers handle this work electronically and reduce your effort to a great extent.

Laws- Federal, State, Local

Every company needs to adhere to labor and employment laws of Federal, State as well as Local Federal FLSA (Fair Labor Standards Act) establishes premium pay for working overtime, minimum wage, children protection to those who work. You need to adhere to FLSA regulations as well as local and state laws and must follow provisions, which are in favor of employees.

Record of Time

All the workers are categorized as exempt or non-exempt employees, which depend on the work for which they are employed and the amount of salary. You need to keep track of the working hours of non-exempt employees efficiently. You can also study FSLA provisions for more information.

You can contact IRS or state and local tax authorities for inquiring about for reporting, registering and other forms of compliance requirements. With minimum inputs from your side, Whiz Consulting, a leading payroll service company, can handle your payrolls with great ease, which can reduce your overall costs.

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