How To Do Payroll Yourself: An Easy, Detailed Guide

If you want to learn how to do payroll yourself, here are the key things you need to know first:

  • Calculating payroll manually can be time-consuming
  • Manual processes increase the likelihood of errors
  • Payroll software streamlines payroll processing
  • By using software, you can save time and increase payroll accuracy
  • It’s vital to find the right payroll tools for your business 

Learning how to do payroll yourself might be a smart move, as it can save you money and give you better oversight of your company’s finances. However, payroll management can feel daunting without the right game plan and tools. 

Here are some practical payrolling strategies designed to help you process payroll yourself without exposing your business to undue risk.

Why manage payroll yourself?

Not sure if you should handle payroll internally? Here are a few reasons you should consider doing your own payroll.

Save money

Taking care of your own payroll can offer money-saving benefits. However, there will come a point when managing payroll yourself becomes tedious and time-consuming. The good news? There are some great alternatives to outsourcing, such as adopting full-service payroll software

Have more control over the process

Outsourcing means giving up a little (or a lot) of your control over your business. There are times when outsourcing just makes sense. However, you also need to know what’s going on with your business. Keeping your financial processes in-house maximizes visibility into cash flow and labor expenses. 

Ensure compliance with laws and regulations

If you learn how to do payroll yourself with the support of payrolling software, you can make maintaining compliance a breeze. The best tools are jam-packed with compliance tools and other features designed to protect your bottom line. These tools are valuable come tax time, as they help you streamline IRS reporting processes. 

How to do payroll yourself with manual calculations

Here are some basic payroll tips for small business owners that will help you perform manual calculations. Make sure you know the specific regulations for your industry and location.

1. Apply for a federal EIN with the IRS

First, you’ll need an employer identification number (EIN). This unique number identifies your business as a tax-paying entity. You’ll have to include your EIN on all tax documents and business files, including the documents outlining payroll expenses, tax withholdings, and more. 

2. Collect necessary forms and information

Next, gather forms about your employees, such as direct deposit authorizations and multiple forms of identification. It’s vital that you verify the identity of each person on your payroll. 

3. Determine the right payroll schedule for your company

Select a payroll schedule, such as weekly, biweekly, or monthly. Weekly and biweekly are the most common. Biweekly tends to be a popular option because it minimizes how many times you have to process payroll each month. 

4. Track employee time

You’ll need a simple and reliable way of tracking employee time. You could go with an old-school time clock, but these tools are inefficient and prone to errors.

The best option? Invest in a time-tracking app. Check out our guide to the best employee time-tracking apps so you can find the ideal solution for your business. 

5. Calculate gross pay

It’s simple to calculate gross pay for each employee. Multiply the number of hours they worked in the pay period by their hourly rate. For instance, if an employee works 80 hours per biweekly period and gets paid $20 per hour, their gross pay comes out to $1,600. Add up the gross pay of all employees to determine your total gross payroll costs. 

6. Calculate and withhold taxes and other deductions

Next, you’ll have to calculate and withhold taxes and other deductions (e.g., 401(k) contributions, benefits, child support, etc…) from each employee’s check. Be careful to triple-check your calculations to ensure you withhold the right amount from each person’s pay. 

7. Pay necessary taxes

You’ll have to pay necessary payroll taxes for both your business and each individual’s income taxes. It’s vital that you pay out the right amount for each person based on their elections. Otherwise, they are likely to owe the IRS more at the end of the year. 

8. Pay your employees

Finally, each employee’s net pay will be distributed using their preferred method. Most employees will probably request a direct deposit, but some may prefer a paper check. 

9. File relevant tax forms and W-2s

At the end of the year, file all tax forms to report your payroll expenses and any fees you paid out. Also, create and provide employees with their W-2s so they can file their individual tax returns. 

Manual payroll pros and cons

Does manual payrolling sound like a lot of work? That’s because it can be! Let’s take a closer look at the good and bad of manual payrolling for small businesses. 

Pros of manual payroll for small businesses

The key benefits of calculating your payroll manually include:

  • Cost savings
  • Control
  • Insights into your expenses

When you comb through every pay period manually, you’ll know the ins and outs of your labor costs. However, you’ll spend a lot of time on the process. 

Cons of manual payroll for small businesses

The cons of manual payroll include:

  • Payroll errors: When you crunch the numbers manually, there are more risks of introducing errors.
  • Time-consuming: Manual payrolling can also be very time-consuming and frustrating. 
  • Lack of scalability: You can’t scale manual payroll workflows.

You may be able to handle payroll for a few employees, but keeping up with the pay for a growing team will quickly become overwhelming. That’s why you should use an alternative, like payroll software. 

Easy alternative to manual methods: Payroll software

Small business payroll software includes a wealth of features and tools designed to help streamline payrolling processes. For instance, When I Work includes scheduling tools, a time clock, integrations, and more.

When I Work is way more affordable than hiring accounting contractors or bringing in a full-time payroll person. It allows you to maintain total control over your expenses, identify cost-saving opportunities, and automate tedious processes. 

How to do payroll yourself with payroll software

Payroll software could be the answer to all of your manual payrolling headaches. With that in mind, here’s a brief rundown of how to do payroll yourself with software like When I Work. This isn’t an exhaustive list, so make sure to consult with local professionals to ensure you are complying with all relevant regulations. 

1. Determine what type of payroll software your company needs

Full-service payroll solutions like When I Work include everything from time clock tools to integrations with accounting software. The alternative would be a limited payroll tool that simply keeps track of hours and gross pay. All-in-one options provide a better bang for your buck. 

2. Explore software options

Next, explore the best small business payroll options. Make a wish list of must-have features and see which platforms best align with your needs. 

3. Choose the best one for your business needs

Don’t buy before you try. Take advantage of free trial opportunities so you can see each option in action for yourself. 

4. Enter your company information

During onboarding, you’ll have to provide your EIN and some other basic company details. Make sure to customize your workflows so you can get the most out of the platform. 

5. Run payroll

Running payroll should be quick and easy once you input everyone’s hourly pay. If you choose a platform like When I Work, the platform will tally everyone’s hours worked when they clock in. Talk about easy!

6. File taxes and any other paperwork

The best tools will help with filing taxes and generating forms for the IRS. They should be able to compile data from the entire year and consolidate it into a few simple reports. 

7. Enjoy the time you saved!

Use that extra time to focus on growing your business. Allocate the money you saved to exploring new opportunities and focus on other areas of your business. 

Make your payroll process easier with the help of When I Work

Don’t waste your time with manual payroll accounting processes. Schedule a free trial of When I Work and experience the advantages of digital patrolling! 

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