Payroll software: what it is and how it works.

Learn more about a payroll system and why it’s necessary for your business.

Payroll is the act of paying your employees, and it’s a necessary element of any business. You not only want to make sure that you accurately pay your employees for the hours they work, you also need to make sure that the right amount of tax is withheld from their paychecks. Let’s explore how payroll software can make this process easier.

How payroll works.

Whenever you hire a new employee, you’ll need to collect information from them in order to calculate their payroll, usually through a W-4 form that they fill out and then sign. As their employer, it’s your responsibility then to withhold federal and state taxes from their paycheck, as well as any Medicare taxes, Social Security taxes, local taxes, and employee benefits, if applicable.

After these withholdings, you’ll calculate their net pay and issue payment, usually as a paper check or direct deposit. You’ll eventually report tax information for every employee to the IRS and your state department of revenue.

All of this is in addition to running the day-to-day of your business, which can be a lot to juggle. This is where payroll software helps alleviate the burden.

What payroll software does.

Payroll software makes it easier to pay your employees by automating the entire process. The software tracks each employee’s hours, calculates their pay based on their rate, and withholds the correct amount of taxes and other deductions so you don’t have to do it manually.

While you can install payroll software on your computer, most applications are now cloud-based, allowing you to access data from nearly anywhere.

No matter the type of payroll software you choose for your business, these applications can help you stay compliant with your federal and state tax obligations as well as labor laws. And the best part? They help free up time so you can focus on running your business instead of handling burdensome administrative tasks.

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