Getting a paycheck is great but being the one to issue that paycheck can be a lot of work. There’s a lot that goes into paying your employees along with paying and reporting payroll taxes. This blog post will teach you the basics of processing payroll for a new employee in Washington State.
Here is what is included in the payroll process:
Deciding what to pay employees and how often
Gathering employee information
Tracking employee hours and benefits
Getting approvals for time
Calculating paycheck amounts and withholdings
Writing paychecks
Sending payroll tax payments and reports when due
1. Deciding what to pay employees and how often
Before you hire a new employee, you need to determine their:
Pay rate: How much will you pay them?
Basis of pay: Hourly, salaried, commission, etc.
Pay frequency: Weekly, bi-weekly, semi-monthly, monthly, etc.
2. Gathering employee information
Once you have hired a new employee, here is some information that you need to request and submit to various agencies:
W-4, Employee’s Withholding Certificate: Provides employee information and how much you need to withhold for federal taxes. (IRS)
I-9, Employment Eligibility Verification: Verifies employee’s identity and eligibility to work in the U.S. (U.S. Citizenship and Immigration Services)
Employee Paid Sick Leave Notification: Provides employee’s entitlement to paid sick leave (Labor & Industries)
New Hire Reporting: Determines if child support needs to be collected from employees, helps prevent benefits fraud, and stops unemployment insurance. (Washington State Department of Social and Health Services)
You must keep employee records for at least three years in Washington state. In addition to the above forms, you need to have the following information on file:
Employee's full name
Home address
Occupation
Date of birth (for employees under 18)
Employment start date
Time of day and day of week the employee's workweek begins
Actual hours worked on a daily basis
Rate(s) of pay
Total wages earned
Tips and service charges earned
Addition to or deduction from wages
Addition records required for paid sick leave
Depending on how you choose to pay an employee and what benefits you offer, you may need to request additional information such as a bank account number.
3. Track employee hours and benefits
When you have set up an employee on your payroll, you will need to start tracking their hours and the benefits they accrue. This can be done using timekeeping software or a physical timesheet that employees fill out every day. It’s important that you let employees know what day their timesheet needs to be submitted to run the payroll on time.
4. Getting approvals for time
On the last day of the pay period, employees need to approve their time to ensure it is accurate. If you’re using software, there is typically a place where employees can go and approve it. For physical timesheets, employees will need to sign and date them.
5. Calculating paycheck amounts and withholdings
The first thing you need to do is calculate the gross pay for an employee during the pay period. Then you will need to calculate the required payroll taxes that must be deducted: federal income tax, Social Security, Medicare, and other voluntary deductions for employer-sponsored plans such as premiums on health and life insurance, retirement plan contributions, and employee stock purchase plans.
Employers are required to pay taxes for each employee. This includes:
Social Security and Medicare: Employers must match the amount withheld from employees
Federal Unemployment Tax Act (FUTA) Taxes: As an employer, you may need to pay federal unemployment tax that is used to allocate funds for unemployment compensation (IRS)
Washington State Unemployment Insurance Tax (SUI): In addition to federal unemployment, you will also need to contribute to state unemployment tax. (Employment Security Department)
Washington Paid Family and Medical Leave: Employers may choose to withhold premiums from the employee’s paycheck or pay some or all the premium (ESD)
Note: This is not an exhaustive list of payroll taxes you may be required to pay. Please consult with your bookkeeper or tax advisor for the most accurate information specific to your business.
6. Writing paychecks and providing pay stubs
Now it’s time to pay up by depositing paychecks into bank accounts or writing checks for each employee. With each paycheck, employers must provide a pay stub, either electronically or on paper that includes the following information:
Dates of the pay period
Rate or rates of pay
Gross Pay
Itemized list of taxes withheld
Net pay
Sick leave accrual, usage, and balance
7. Send payroll tax payments and reports when due
The final step in the payroll process is remitting taxes collected from employees and those paid by the employer and reporting them to the collecting agency. You may need to report and pay taxes on a monthly, quarterly, or annual basis depending on your required filing frequency. It’s extremely important that you do this before the deadline to avoid late fees and penalties.
Running a successful payroll
There’s a lot of work that goes into paying your employees and ensuring all the payroll taxes are reported and paid. Accuracy and timeliness are key when it comes to successfully running a payroll.
Now that you have an idea of what goes into the payroll process, you can make an informed decision on how and who you want to handle payroll. As a business owner, you wear many hats and may choose to do it yourself. However, it can be time-consuming and you may find that it would be better to hire someone.
If you're looking for payroll and full-charge bookkeeping services, our team of bookkeepers at Summit Bookkeeping is experienced in the entire payroll process. We offer flexible solutions to help you where you need them. To talk to one of our bookkeepers, contact us here or give us a call at (360) 756-5020. We’d be happy to help with all your payroll and bookkeeping needs!