The payroll onboarding process is all about getting new team members set up in the company's payroll system. Usually, someone from the human resources department or an office manager gathers the required info and documents from the new hire.
Then, they get them set up in the system so payroll processing is good to go, ensuring that employees get paid the right amount on time. Whether you’re hiring your first employee or you’re a seasoned payroll expert, we’re here to help you simplify the process. 🙌
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In this article:
Why the payroll onboarding process matters
An employee’s first day is hectic enough. They might be reviewing the employee handbook and getting their bearings with the new role. They probably have tons of meetings with their coworkers and supervisors. This doesn't even include the specific training sessions they have to attend. Talk about information overload. 🥴
Having a clear and simple employee onboarding process for payroll gives the new hire a great first impression of the company.
3 steps to simplify the payroll onboarding process
Stepping into a new job can be an intimidating experience for employees. It's important to remember that day one sets the tone for their entire journey with the company—including the payroll onboarding process.
Here are a few ways to streamline that process. 🤓
1. Create a payroll onboarding checklist 📝
Having a payroll checklist template is an important part of onboarding best practices. It makes the process seamless for both the new hire and the HR team (or whoever is doing the employee onboarding). Plus, it ensures you aren’t forgetting anything amid the first-day chaos! 🤪
Your payroll onboarding checklist should include things like...
✅ Getting the employee’s contact information
Many payroll systems require information like legal name and address (sometimes phone number) especially if you’re paying employees via direct deposit. 🏠
✅ Filling out tax and other legal forms
You'll need to verify documents for the federal I-9 form and have them fill out tax forms like the W-4 Form for employees or the W-9 Form for freelancers. These should be filled out on the first day and input into the payroll system ASAP to avoid costly errors. You want to make sure you have all your payroll ducks in a row for your new employees. 🦆
✅ Setting up direct deposit
Yes, your new hire is there because they’re a good fit for your company. But, ultimately, they are there because they want to get paid. Be sure they fill out the direct deposit form so they can get their paycheck on time. ⏰
✅ Completing employee benefits withholding forms
If your employees are getting benefits like health insurance or retirement, those are considered pre-tax. That’s a fancy way of saying the portion employees pay is taken out of the paycheck before taxes are applied. Companies typically have withholding forms new hires need to fill out. 🖊️
2. Implement payroll policies 📋
An effective onboarding program will address all of the company policies and procedures. Think of this as a place to include everything an employee needs to know about payroll. Every organization, whether you’re a small business or a large corporation, should at least have these payroll policies in place:
💵 A direct deposit policy
💵 Withholding taxes and benefits from paychecks
💵 Time and attendance policies, like paid time off (PTO)
💵 How often employees get paid
💵 Where to direct payroll questions to (i.e. the HR department)
3. Use payroll software 💿
Payroll software can be a complete game changer for small businesses. It streamlines the payroll process and cuts down on hours of administrative time. (And don't worry, there are dozens of payroll automation solutions for small businesses available for any budget. 💸)
Not sure if payroll automation is right for you? Here are a few reasons to add this to your company's payroll onboarding process:
It saves time and money. 💰
They say, “time is money”—and they aren’t wrong. Payroll software automates the manual process and frees up more of your time as a small business owner or as an HR department to focus on other things. 🔎
It simplifies bookkeeping. 😄
How much time are you spending trying to decipher your bank statements? Some payroll platforms, like Gusto, will integrate with your online banking platform, like Relay. (That's us! 👋)
You’ll get to see detailed transaction data for every payroll cycle. No more pouring over your statements every month wondering what they mean. What will you do with all your extra time? 🙌
Fewer compliance risks. ⚠️
Manual payroll processing can mean human error. Unfortunately, payroll mistakes can be costly (no pun intended). If the company doesn’t withhold the right amount of taxes it can result in fines and you definitely don’t want that! ❌
When you use software to automate the process, you’ll have more accurate records. That means avoiding getting tangled up with the IRS and having to pay fines. 😬
Lock down your data with better security. 🔒
Payroll systems come with the latest security features to protect your company and your employees or freelancers. They keep your data safe from security breaches or unauthorized access. 🥷
Payroll software also acts as a central database for all employee information. That means no more mistakes from manually updating records or calculating withholdings. You and your employees will also have secure access to important documents like tax forms and pay stubs. 🗃️
Live: How to Grow Your Business Without Chasing More Clients
Tuesday, November 26 | Ft. Certified Profit First Professional Debbie Deknight
Save Your Spot⚖️ Legal considerations for payroll onboarding
Now that you know how to start streamlining your payroll process, let's make sure you're up-to-date on all the legal requirements that come with that process.
While laws differ based on both the employer and employee’s location (including remote employees), some basics hold true across the board. Always be sure to check all local labor and tax laws to make sure your organization is in compliance.
Here are some general rules to abide by when it comes to your payroll onboarding process:
Taxes and deductions: Employers must accurately withhold and remit income taxes like Social Security and Medicare contributions from employee paychecks. They must also submit accurate tax reports to the relevant tax authorities (i.e. the IRS). Keep in mind that the company will also have to remit payroll taxes.
Classifying employees properly: Companies must classify employees as either hourly or salary (exempt or non-exempt). For example, hourly workers are able to get overtime pay while salary employees typically do not. How they’re paid will vary based on their classification.
Wage and hour laws: There are federal laws that govern minimum wage, overtime pay, and working hours. All employees need to make at least minimum wage and be paid for overtime work if they qualify.
Anti-discrimination laws: Compliance with anti-discrimination laws ensures that payroll practices do not discriminate against employees based on factors such as gender, race, age, or disability.
Employee benefits: Depending on your organization, you may be required to provide employees with benefits like health insurance or retirement plans. The employee portion of these expenses is typically deducted from their paycheck.
Record keeping: Keeping accurate and up-to-date records is a key component of compliance. This includes records of hours worked, wages paid, tax withholdings, etc.
Local regulations: Sometimes there are additional requirements beyond federal laws. Employers need to be aware of and follow all applicable regulations. This includes laws in every location they operate.
Payroll onboarding for freelancers vs. employees
Lastly, let's talk about the differences between employees and freelancers—especially when it comes to the payroll onboarding process.
Employees and freelancers are two different types of workers, and therefore there are fundamental differences in their employment relationships. While they may be doing similar jobs, how the company pays them is different.
This is crucial to understand since it impacts the way you onboard full-time hires vs. freelancers. Here are two key differences to keep in mind:
1. Payment terms 💸
Employees: Employees get a steady paycheck, whether it's a monthly salary or hourly wage. To put it simply, payment is predictable and reliable. This means you can pay employees on a regular basis—like once per month or biweekly.
Freelancers: Freelancers live on a project-to-project basis. It's all about negotiating fees for each project, and payment terms can vary depending on the payment they agree to with the client. As a result, you may pay freelancers on an irregular basis, vs. via your monthly payroll run.
2. Taxes 📊
Employees: Employers handle the tax game for employees, pulling out income taxes, Social Security, and Medicare from their paychecks. Plus, employees typically get perks like health insurance, retirement plans, and paid time off. That means getting your employees' tax information is critical during the payroll onboarding process.
Freelancers: Companies pay freelancers without withholding taxes or benefits and freelancers handle their own taxes. The company's only responsibility is to give the freelancer a Form 1099 each year, which is a tax form documenting the payments made to them.
By keeping these distinctions in mind, you can ensure a seamless onboarding process and fair payment practices for all members of your team. 💼
Stay on top of payroll with Relay and Gusto 💸
When you connect the payroll software, Gusto, to your Relay account, you’ll stay on top of payroll.
Relay will help you by showing you detailed transaction data for every payroll cycle and debit type (like net salary, tax deduction, and reimbursement payments). Plus, we’ll send you a notification if your account is low on funds, two weeks before a scheduled payroll cycle. 🙌
Ready to get started with Relay? You can sign up here. 😎
