Payroll processing for W-2 employees involves paying percentages of their income to federal, state, and local tax agencies and matching what is owed to Social Security and Medicare. You’ll also need to pay state unemployment insurance (SUI) and comply with the Federal Unemployment Tax Act (FUTA).
After you’ve made all of these complicated calculations, it’s time to cut paychecks or provide employee earnings via direct deposit so you and your staff are paid on time.
The next step is the all-important bookkeeping. Payroll journal entries fall under the payroll account and are a part of your small business general ledger. Expenses entered in the payroll account include gross wages, salaries, and other earnings as well as payroll taxes.
Payroll Processing Schedule
The four payroll schedules are weekly, bi-weekly, semi-monthly, and monthly. Most confusion comes with understanding the difference between bi-weekly and semi-monthly.
Usually, employees receive a paycheck on a specific day of the week, such as Friday. There are two months during the year when employees receive three paychecks.
- Occurs every two weeks
- Typically 26 times per year
- Generally 80 hours each pay period
The biggest disadvantage to a bi-weekly schedule is that paydays do not coincide with calendar months and can cause confusion in monthly budgeting, cost analysis, and cash flow.
Employees are paid slightly less often than on a bi-weekly schedule but receive slightly larger paychecks. Payroll can be processed less often and there are no additional payroll runs in leap years.
- Occurs twice per month
- 24 times per year
- 88.67 hours each pay period
One of the disadvantages is that most employees prefer to be paid more often. A bi-weekly schedule is more predictable.
Check in with your state to see if the decision has been made for you about which schedule to follow. If your state doesn’t have payroll schedule guidelines in place, you can choose a schedule best for your business.
Accelerated or On-Demand Payroll Processing
In addition to meeting regularly scheduled payroll deadlines, you’ll need to run expedited payroll at times.
For example, in Arizona, discharged employees must receive all due wages within three working days or by the end of the next pay period, whichever is sooner. Employees who quit must be paid all due wages by the next payday.
Flexibility in payroll processing is key when you are faced with an immediate need to run payroll outside of your normal schedule.
Outsourced Payroll Processing
Though essential to your small business, improper payroll processing and bookkeeping can result in fines, penalties, and headaches. In addition, outsourcing payroll is a far more affordable option than bringing these tasks in-house.
We take care of this core function for you, so you can focus on what matters: building your business and enjoying a work/life balance.
Contact Virtual Associates to learn more about our payroll processing services.
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