How to Calculate Payrolls of Your Business?

Payroll is the most important part of any business. An effective and solid payroll management system is required to keep your business going smoothly. Some people wrongly associate the payroll process with the salaries of your employees only. However, it is in fact about all the payments that you have to make when running a business. From employees’ salaries to taxes, you need to calculate everything for effective payroll management of your business.

Though you can use a software program with a monthly, biweekly, or hourly paycheck calculator for easy calculations of salaries, some people want to do so manually to save the money that they have to pay for the tool. Yes, it is possible to calculate the payrolls of your business manually. Definitely, you too will be willing to know more about this manual process. This will help you to figure out if it is worth spending money on payroll management software or if you too must go for the manual process.

Following is complete detail about calculating the payrolls of your business. Let’s go through it and make a final call about whether you need a payroll software program for your business or not.

Calculating Salaries

First of all, you need to calculate the salaries of your employees. Paying them timely is the key to winning their trust and increasing their productivity. When calculating their salaries, you need to decide on a payment plan first. If you are paying them a monthly decided salary, then you just need to add bonuses and make deductions from it to calculate it properly.

However, if you are paying them according to their working hours, then things will get complex. Firstly, you need to calculate their total working hours for a day. Then you have to multiply them by the total working days of a month. You have to keep an eye on their overtime as well and need to add these hours as well. Finding leaves from work and deducting these hours is also necessary.

In the end, you have to multiply the total working hours that you have calculated for an employee by the per-hour income to figure out the salary. However, you also have to add some bonuses to it or make any required deductions. Doing all these things manually to calculate the salary of every single employee will take a lot of time.

Calculating Taxes

Things will not end after calculating the salaries of employees. You need to calculate the taxes on their salaries as well to make sure they don’t face any difficulty in paying taxes. To calculate taxes, you need to keep several things in mind. First of all, you must know the national tax average. Then you must have proper knowledge about other rules of the state or country regarding taxes.

The worst thing about calculating taxes manually is that you don’t have to calculate a single type of tax only but of several types. Following are some of the taxes that you need to calculate for your entire business including the salaries of your employees.

1. Federal Income tax
2. Social Security tax
3. Medicare tax
4. State Income tax ( will be applicable only in certain regions)
5. Local Income tax ( will be applicable only in certain regions)

Other Calculations

You need to make some other calculations as well. These calculations are usually related to the salaries of your employees or payments that you have paid to specific dealers. Pre-salary tax and post-salary tax are the key things needed to be calculated.

Takeaway

Manually calculating the payrolls of your business is a complete headache. It will require a lot of time. Therefore, you must use payroll software as it has a tip and tax calculator which will automatically calculate the taxes on every employee’s salary. Netchex should be your ultimate pick to get payroll management software as it is a trusted company with the best rates. The best part? It lets you personalize your software. You can choose features you desire to have in your package and pay accordingly. Isn’t it great?