Paying employees: How to pay employees in a small business

How to pay employees in a small business

Nearly 93 percent of all Americans get their pay through direct deposits. Most employers consider this option useful, considering that it ensures greater control over the payroll system. Whether your business is small or, medium-sized managing employee’ payments can be a real hassle.

Are you wondering how to pay employees in a small business? You aren’t alone. Many small businesses find the process of handling information, validating entries, and making corrections when handling payroll overwhelming.

Are you stuck wondering how to deal with employee payments? You are in luck. Read on to learn more.

Get Your EIN

Your first step when preparing to pay your employees the right way should be to get an EIN. EIN stands for an employee identification number and is essential for tax purposes.

This number is essential for your small business when filing all your income tax returns. You cannot begin to pay your employees without this mandatory business number.


Categorize Your Employees 

Before you begin to pay your staff, it would help to categorize them to avoid legal liability. The United States recognizes your workforce as either independent contractors or full-time employees. An independent contractor is a person contracted to perform work or render services as a non-employee or freelancer.

Independent contractors pay their social security and medical taxes. However, if you’ve full-time employees, you might need to consider disclosing all information about their employment terms.

Schedule Your Payment Periods 

You have the liberty to schedule your payment periods to suit your needs. The most common schedule is a semi-monthly payment plan. Small businesses also pay their independent contractors on hourly or daily schedules.

You might also consider a monthly or weekly basis as your payment period.

Choose Between an in- House or External Payroll 

Payroll administration is an essential function when paying your employees. You might either decide to undertake this process in-house or consider an external payroll administrator. Both options have their pros and cons.

The best thing about payroll administration is that you can also access a free pay stub template online. This makes it easy to manage your employee’s payment process by keeping a reliable trace. With a pay stub template, you no longer have to worry about showing proof of payment when you pay your staff.

Decide the Payment Method to Use 

The federal government has set the minimum wage for workers covered by FLSA as $7.25 per hour. It’s essential to determine the method of ensuring that these funds get to the intended recipient. Paychecks are the most common payment approach, although they might be outdated in some organizations.

You can also consider direct deposits as the other viable option on how to pay staff. Employers may also consider payroll cards or cash payments. However, cash may not be the best alternative if you’re keen on having a paper or digital trail of payment made.


This Is How to Pay Employees in a Small Business

Your small business can do much better with a structured payment system.

Are you wondering how to pay employees in a small business? You might need to consider all the federal and State regulations, including registering an EIN before setting your up your payroll.

Once you determine a payment schedule and payment methods, you can outsource a free pay stub template online to help you manage your payments.

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