22 Aug Payroll 101 for entrepreneurs
You have hired your first employee, congratulations! Hold on, this means you need to pay them. Have you ever run a payroll? If not, here is a breakdown of the things you need to keep in mind before you give out that first pay cheque.
When will you pay your employees?
There are a number of options here, but the most common ones are weekly, bi-weekly and monthly. From an employee standpoint, they may not be happy getting paid only once a month. You will also want to determine what day of the week they will be paid. Look at your businesses financials and see what makes the most sense.
Will you print out cheques or offer direct deposit?
If you are a small business it may not make sense to go with direct deposit but we believe you should start how you want to finish. If you plan on hiring more employees down the road then it might make sense to get everyone on direct deposit now. Plus, direct deposit is pretty much industry standard as most large companies have done away with pay cheques. If you don’t want to do direct deposit with a payroll company, you can send a e-transfer or bank transfer depending on your bank and who the employee banks with.
What software will you use?
Thankfully we live in an age of amazing software programs like Intuit Quickbooks that make payroll easy for business owners. They calculate all the taxes and also take care of pay stubs and other tax slips that are needed for employees to file their taxes. QuickBooks is just one of many payroll software options available.
Alternatively, there are manual ways like using the Online Payroll Deduction Calculator on the CRA Website, but this can be quite timely and not very efficient. It also leaves room for errors, which most companies don’t want. Be sure to research each before moving forward as some programs as better than others.
How much tax do you take off?
This can be where things go wrong. Most software programs do calculate your taxes. However, a software program is only as good as the numbers you put into it and if they are wrong or set up incorrectly then you are in trouble. If you want to minimize fines, then it’s crucial to get this right from the start. It’s also important to run your payroll on time.
What are the payroll rules in the province you live in?
Every province has different rules. Depending on the province you live in, this could differ from other provinces and these rules can also change frequently. If you do business with another country this also needs to be taken into account.
Should you hire an employee or a subcontractor?
Before you head straight for hiring an employee, it might make more sense to hire a subcontractor as the rules for each are different. Be sure to investigate the differences and decide what is the best option for your business and the industry that you work in.
At Rochon & Associates we love helping business owners with their bookkeeping and are happy to throw a payroll run into the deal as well, or even take on just your payroll. If you don’t want the headache of doing this every month, get in touch with us today!