You should realize by now, that there's a lot more to Payroll than just multiplying, adding, and subtracting.
What Did We Cover ?
The Introduction provided an overview of payroll, employees, and your requirements as a business.
Lesson 1 Types Of Compensation discussed and explained that an employee's compensation includes not only direct payments (salary and wages) but also indirect benefits known as fringe benefits or "perks".
Lesson 2 Types Of Deductions discussed and explained the different types of deductions that are taken from an employee's salary or wages such as social security, medicare, federal and state income tax, and other deductions such as health insurance and retirement plans.
Lesson 3 Payroll Taxes and Withholdings discussed and reviewed how an employer reports and deposits amounts deducted from their employees' wages and salaries and also how an employer is required to "match" amounts deducted for social security and medicare.
Lesson 4 Calculating Payroll used a fictitious company called Mom's Secret Recipes to illustrate what calculations are needed and how to do them in order to correctly calculate and pay your employees.
Lesson 5 Payroll Records illustrated and discussed the records needed by employers to properly document and record their employee's wages and salaries and deductions taken.
Lesson 6 Self Employed reviewed and explained what self employment tax is, who is required to pay this tax, and how to properly calculate, report, and deposit this tax.
Lesson 7 Government Regulations presented a brief overview of the federal and state laws, rules, and regulations that you as a business owner or manager need to be aware of.
Lesson 8 Payroll Options presented a brief overview of your options available for handling your payroll obligations.
What should we now know or at least be familiar with ?
- How to determine whether an Employer Identification Number is needed and how to apply.
- Who is and is not classified as an employee. Remember owner's of most "flow thru" types of organizations are not considered as employees, but are classified as self-employed.
- What you need to do when hiring employees (steps to take).
- How to classify your employees as exempt or nonexempt when required.
- Employee compensation includes not only direct payments made to employees for work performed but also any benefits indirectly paid on behalf of the employee. The employee's compensation includes not only cash paid to employees but basically anything of value.
- As a general rule all types of compensation paid directly or indirectly to an employee is subject to withholding and employment taxes.
- The IRS does allow an employer to provide some benefits that do provide favorable tax treatment to the business as well as to the individual. In other words, the employer can deduct the expense and the employee doesn't have to include the compensation in his/her earnings.
- How we grouped an employee's total compensation into four categories:
- Employer Provided Benefits
- Benefits Provided By Law
- How fringe benefits (perks) help attract qualified employees.
- Why it's a good practice to have signed authorizations for deductions taken from an employees wages.
- How we classified deductions from pay into three categories:
- Deductions Required by Law
- Deductions for the Employer's Convenience
- Deductions for the Employee's Convenience
- You can establish different pay periods for different employee job categories.
- You can have different methods of calculating pay for different employee job categories.
- That salaries are compensation based on a fixed amount and paid to an employee for management, professional, administrative, or similar services (exempt type of jobs). That it is usually stated in terms of a weekly, monthly, or yearly amount. Although salaries are normally used to pay for the so called exempt types of jobs, they may also be used as the payment method for skilled or unskilled employees in non management or supervisory jobs , the so called nonexempt types of jobs. With a "true" salaried position the employee is paid the same amount regardless of how many hours the employee actually works during the pay period.
- When an employer must pay overtime and how to properly calculate the amount.
- Tipped Employees are subject to special rules and laws.
- What a tip credit is and how it's used with employees that receive tips as a portion of their wages.
- All nonexempt employees must be paid overtime for all hours worked in excess of 40 hours during a week.
- Only actual hours worked are used in calculating overtime.
- We used the following methods of calculating our employee's earnings - hourly rate ,hourly rate + tips, piece rate, sales commission rate, salary for exempt, salary for nonexempt, and additional bonuses for some of our employees which illustrate that an employees earnings may be calculated using different agreed upon methods.
- Although an employer and employee may agree on any method they want to calculate an employee's earnings, the employer must pay at least the minimum wage for the actual hours worked and must also pay overtime for any hours worked over 40 during a week for all nonexempt employees.
- Bonuses, shift payments, and other compensation are normally included in calculating an employee's straight time and overtime rates.
- A salaried employees earnings may be based on more than a 40 hour work week.
- That the employee's rate calculation includes other compensation in addition to the employee's base rate of pay. The employee's actual calculated rate may vary week to week depending on what compensation they earned during the period.
- Discussed and determined that some deductions might require you to seek professional help and guidance.
- Learned that some deductions called pre tax receive favorable tax treatment
- IRS publications provide employers with tables and methods to aid in calculating social security, medicare, and amounts of income tax to withhold from employee's salaries and wages.
- Most states have a state income tax and require employers to withhold (deduct) estimated amounts for state employee income tax. The states provide tables and methods similar to the IRS tables and methods for calculating the amounts.
- How to determine when and how to deposit payroll taxes and withholdings.
- Forms used to report and/or calculate payroll taxes and withholdings and federal and state unemployment taxes.
- What records are needed for a payroll system.
- Who is subject to self employment tax.
- How to calculate and report the self employment tax.
- Familiarity with the government laws, rules, and regulations that affect employers.
CongratulationsCongratulations, we're done ! You started out as a baby and hopefully you ended up as a mature adult. Your introduction into the world of Payroll has provided you with a good foundation for you to build on. At the very least, you should now be familiar with some terminology, forms, and regulations that affect you as an employer and where to go for sources of information .
What's Next ?