Updated: Jan 24, 2020
If you’re growing your business from the ground up, it’s inevitable that you’ll eventually take on extra pairs of hands when things get busy. And if you hire new people you’ll need to pay them - this is where payroll comes in.
But what does payroll mean and what does it involve? In this blog post I'm going to go over the definition of payroll, why it's necessary and the different options you have when it comes to running it within your company.
Payroll is the process of providing compensation to employees for their efforts on behalf of a business. The outcome of the payroll process can result in one of the largest periodic cash expenditures of a business. Employees are hired to do a specific job at a specific rate of pay. Some employees are paid a salary, which is the same amount every payday. Other employees are paid by the hour, so their pay for the pay period changes based on the number of hours worked. Overtime may be included in the pay of an employee who works more than a specific number of hours a week. This amount is called the employee's gross pay. All calculations in the payroll process are based on the gross pay amount for that pay period. Then, on a regular date determined by the company, these employees are paid. (Some employees may be paid at different times, depending upon their status. For example, salaried employees may be paid twice a month, while hourly employees may be paid every week.
There is a considerable risk of large penalties imposed by the government if payroll taxes and related withholdings are not remitted to the government in accordance with a strict payment schedule. This is a major concern for small business owners, since the cash payments must be made on time. A good way to avoid the risk of missing these tax remittances is to outsource payroll to a third-party payroll processing service, which remits the funds on behalf of the business.
There are a variety of payroll best practices that can be applied to the streamlining of the payroll process, which can otherwise be a time-consuming process that requires an excessive amount of staff time and which may result in a large number of errors. The concept of payroll can be extended to the payment of contractors, though these payments are made through the accounts payable system rather than the payroll system.
Did you know that at PAQ Group, we have an in-house Chartered Accountant (CA) that you can leverage to your advantage? What does this mean for you? This means that you get that additional business knowledge, advice and insights when you have your initial consult.
If you’re still unsure about payroll services or where to start, please don’t hesitate to get in touch with us; we’ll be happy to answer any payroll questions you may have.
About the Author
Justin Wong is the Financial Comrade at PAQ Group.
The mission of PAQ Group is to create a stress-free bookkeeping experience.
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