In small business administration, a payroll serves as the legal recording of all employee information in the company. All salaries paid, tax payments made, vacation pay, sick leave taken etc are recorded in payroll. In general terms, payroll also involves keeping track of hours worked and various other transactions and activities performed by the employees in the course of their employment. With the increasing complexities and variables of the modern business world, payroll has become an integral part of any organization and no business can function without it.
Small business administration (SBA) helps the employers and employees in collecting all the payroll and other relevant information on behalf of the employers. The payroll data comprises of information like salaries paid, deductions made, total number of hours worked, holiday pay, sick leave taken, tax payments made and other employee related information. In essence, payroll simply consists of the record of all these transactions done by all the employees working under an organization. The payroll service provided by the SBA to its employers is generally handled through an electronic system. It saves time and effort for both the employer and the employee.
In small companies, payroll involves not only salaries of the employees but also the maintenance of records of the employees, including their tax information, bank details and social security numbers etc. This leads to the situation where sometimes, even the tax authorities become confused and end up making mistakes in computing the employees’ tax returns or in computing the workers wages. Even in big companies, sometimes the payroll department is forced to conduct its own verification of all the data submitted by the employees earning wages. For all these reasons, it is advisable that the payroll department should be entirely outsourced to a reliable payroll services provider who will provide the company with the latest payroll software solutions designed and developed after great research and analysis of all the parameters involved in calculating the payroll.
For small businesses, an automated payroll software provides them the most feasible method to process their payroll data and to generate their payslips and pay checks within a short period of time. Small businesses can use this system even while they are on holiday or when they are away from their office. Even if they are busy with some other business concerns, they can access this payroll software and get their works done accurately and swiftly even when they are away from the office. Using this system, companies save a lot of time which can be used elsewhere for more profitable ventures.
It is very important that all employers calculate their employees’ federal income tax and social security taxes on a monthly basis. This ensures that no individual, whether employed or self-employed, evades the payroll or social security tax. Hence, every employer should make sure to calculate their FICA taxes on a regular basis. This helps them stay compliant with their federal income tax laws. If you are an employer who has not calculated your FICA taxes, you may find it very difficult to claim refund of the excess amount that you have overpaid.
Every employee should be made to understand the difference between their gross pay and their net pay. They should also be made aware of their respective net incomes after their taxes have been deducted. The calculation of gross pay includes only the gross income of an employee before he is paid and before he is allowed to claim any deductions. The calculation of net income includes the net incomes of an employee after he has been allowed to claim any deductions for social security tax and for Medicare tax. Hence, both the gross pay and net income should be computed accurately by every employer to determine their actual quarterly FICO score.