Payroll Setup Decisions
Here are the important decisions you will need to make as you set up payroll:
- Hourly Employees vs. Salaried Employees
Hourly employees are paid by the hour. To calculate hourly pay, multiply the hourly rate times the number of hours a week. Salaried employees receive an annual salary, divided over the number of pays each year. Hourly employees receive overtime, but salaried employees do not.
- How Often Employees are Paid
You can pay employees weekly, every other week, twice a month, or monthly. It costs money to prepare a payroll, so you want to keep the number of paydays to a minimum, but employees like to be paid more frequently. Most companies pay either twice a month or every other week.
- Paying Overtime
You will need to decide when to pay overtime for hourly employees. By law, you must pay overtime at time-and-a-half (1 1/2) if an employee works more than 40 hours in a week.
- Part-time vs. Full-time
You may decide to have part-time employees instead of full-time employees. The only difference is in the hours of work and the number of hours an employee must work to be considered as full-time. This may be any amount of time, but usually someone is considered full-time if he or she works at least 30 hours a week. The biggest difference between part-time and full-time employees is that full-time employees usually receive benefits, such as health coverage, while part-time employees do not.
