Compensating a new employee is a multilayered operation, consisting of activities that must be completed before, during, and after payroll processing.
Before Payroll Processing
To begin the payroll process, check the following:
- Determine the new hire’s pay frequency, such as weekly, biweekly, semimonthly, or monthly. Make sure the payday frequency doesn’t run afoul of state law.
- Verify that you have all the information needed to process the employee’s first paycheck, including direct deposit form, W-4 form for
federal income tax withholding, and applicable state withholding form. If you use an integrated human resource (HR) and payroll solution, related information, including the employee’s Social Security Number, address, date of birth, and benefit deductions, should already be in the payroll system.
- Gather the employee’s timecard information, if he or she is nonexempt, and check for accuracy. Submit the necessary preprocessing data to your payroll service provider if you outsource payroll.
During Payroll Processing
When preparing payroll, compensate employees according to their status:
- If employees are nonexempt, compensate them based on hours worked and ensure that compensation is not less than the federal or state minimum wage.
- If employees are exempt, pay them at the agreed-upon salary.
- If employees work under an employment contract, compensate them according to the terms of the agreement.
Note that exempt-salaried new hires will not submit timecards, as they are not paid according to hours worked. Ordinarily, unless a permissible deduction applies, exempt-salaried employees should receive their full salary each payday. But, regarding the first week of employment, employers need only pay the exempt-salaried new hire for the number of days worked during that week.
Withhold taxes and deduct applicable benefits. Before closing out the payroll, run reports and double-check the new hire’s compensation.
After Payroll Processing
When you finish processing payroll, ensure you complete the following:
- Record your payroll liabilities and expenses, including the new hire’s wages and withholdings payable, for the pay period in the general ledger.
- Pay the new hire, whether by printed check or direct deposit, on the established payday. Give all new employees a paystub showing their gross wages, deductions, and net pay, even if this is not required by state law.
- Submit the new hire’s withheld taxes to the Internal Revenue Service (IRS) and applicable state revenue agency, by the mandated deadline for your business.
- Report the new employee’s wages and withholdings to the IRS (such as on your quarterly Form 941) and state revenue agency. Also, report wages to the state unemployment agency.
- Give the new hire a Form W-2 by the required due date and be sure to file the form with the Social Security Administration.
Although new hire reporting is essentially an HR function, it’s still part of payroll compliance, because it allows child support agencies to find delinquent child support payers and issue income withholding orders. Contact us for more guidance about processing payroll for your new hires.
Did you know that Autopaychecks HCM will report your new hires for you? Contact us today at 970-245-4244 to find out how we can help give you more time and flexibility to run your business.
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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