Breaking Down Payroll for Employers

Managing payroll can be a complex task for any employer. From calculating employee wages to understanding and complying with various tax regulations, there are so many variables you need to consider to have a comprehensive understanding of the payroll process!

Here at Horizon, we specialize in simplifying the process for employers, ensuring accuracy, compliance, and efficiency. In this brief guide, we'll break down all you need to know about payroll as an employer so you have the knowledge and confidence to handle your payroll responsibilities with ease.

Our Payroll Breakdown for Employers

At Horizon, we believe that an informed employer is a successful employer, so we've carefully outlined the key components of payroll to ensure you have a clear understanding of each. Read on to learn more! 

Base Pay and Worker Compensation

Obviously, one of the fundamental aspects of payroll is worker compensation. From hours worked, to overtime, sick days, and more, getting your employees paid accurately and on-time is essential for your business! 

Calculate Your Employees' Wages and Gross Pay

Calculating employees' wages and gross pay accurately is crucial to ensure your employees receive fair compensation for the work they do. While old businesses used to do this manually, plenty of user-friendly software options can help streamline the process.  

A modern, automated payroll system should allow you to input hourly rates, work hours, and any applicable bonuses or overtime, so you can rest assured that your employees' net pay and total wages are accurate and compliant. 

Paid Bonuses, Overtime, Holidays, etc.

Beyond regular wages, you likely have to account for a wide range of additional payments, such as bonuses, overtime, and holiday pay. With the right payroll software, you can easily factor in these components and manage employee compensation. However, it's equally important to understand the legal requirements for such payments to avoid compliance issues, which is why our team is always available to provide guidance!  

Employer Withheld Payroll Taxes

Employer-withheld payroll taxes are another critical aspect of payroll management. There are a few different types of payroll taxes employers are responsible for, including federal, state, and local income tax, Social Security and Medicare (FICA), and federal and state unemployment taxes.

Your business is responsible for accurately calculating and withholding these taxes from your employee paychecks as an employer. Failure to do so or intentionally misreporting payments can mean large penalties or legal consequences!

Tax withholding is typically reported and paid to the respective authorities, either quarterly or monthly. Employees can see the withholding details on their pay stubs or wage statements. At the end of the year, they'll get a Form W-2 outlining their total earnings and the amount of taxes withheld throughout the year. Let's take a closer look at the different payroll tax types you need to look out for. 

Federal, State, and Local Income Tax

Employers must withhold federal income tax from employee paychecks based on the information provided on their W-4 forms. The amount you withhold will depend on the employee's filing status, number of allowances, and any additional withholding requests.

Compliance with federal, state, and local income tax regulations is essential here, which is why our payroll experts at Horizon stay up-to-date with the latest tax laws! We want to ensure we can always assist our clients in accurately calculating and withholding the right amount of income tax from their employee's paychecks while mitigating the risk of errors. 

Social Security and Medicare (FICA Taxes)

Both employers and employees are responsible for contributing to Social Security. The current Social Security tax rate is a percentage of the employee's wages determined by the Social Security Administration. And much like with Social Security taxes, employers and employees are also required to contribute to the Medicare tax, which is a flat percentage of the employee's wages with no annual wage base limit.

The Federal Insurance Contributions Act (FICA) was put in place to mandate employers withholding Social Security and Medicare taxes from employee wages. Knowing how to calculate and remit these taxes is equally crucial for payroll and tax compliance.  

Federal and State Unemployment

Lastly, we have federal and state unemployment taxes. The federal unemployment tax falls solely on the employer's shoulders and is governed by the Federal Unemployment Tax Act (FUTA). Employers must contribute 6% of the first $7,000 of each employee's wages, though some businesses are eligible for a 5.4% tax credit.

State unemployment taxes also fall entirely on the employer's shoulders (unless you're in Alaska, New Jersey, or Pennsylvania). The rates can vary from state to state, so it is essential to verify the applicable State Unemployment Tax Act (SUTA) rates in each state you have employees.

Benefits Deductions

In addition to compensation and taxes, benefits deductions also play a vital role in payroll processing, from health insurance to pension, retirement plans, and more. 

Health Insurance and Other Benefit Withholdings

Offering health insurance and other similar benefits isn't mandatory, though it is one of the most valuable ways to attract and retain top talent. As an employer, you may need to deduct contributions for health insurance, dental plans, vision coverage, and other benefits from your employees' checks each pay cycle.  

Employer Payroll Contributions to Pension and Retirement Plans

Many employers provide retirement plans or pensions to help their employees save for the future and ensure they receive regular monthly payments post-retirement. As per the matching principle, the cost of these pension benefits must be acknowledged during the years when employees are actively working and earning the benefit rather than when they have retired.

The process can be complicated, which is why our team at Horizon can help manage employer contributions to retirement plans, such as 401(k)s or pensions, making it easy for you to support your employees' financial well-being! 

Horizon is a Top-Rated Partner for Payroll and HR Operations

There are so many reasons why you might consider partnering with Horizon for your payroll and HR needs. As a top-rated provider of solutions for payroll, HR, hiring, onboarding, and more, we are sure to have the expertise your business needs to thrive! Contact us today for more information. 

Trusted Solutions for Payroll and Tax Compliance

With over two decades of experience, Horizon is proud to have been a trusted partner for businesses across the country. Our comprehensive payroll and HR services cater to businesses in all industries – see a full list of our top-rated solutions here. 

Helping Businesses Across the Country Since 1999

Since 1999, our team has been dedicated to assisting small-to-medium sized businesses with their payroll needs. Our commitment to excellence has earned us the trust of numerous clients, making us a reliable choice for employers who want to simplify their payroll processes! 

Tailored Payroll Services and Software Integration

At Horizon, we understand that every business is unique, which is why we offer tailored payroll services that align with your specific requirements. Whether you have a small startup or a large corporation, our team can seamlessly integrate with your existing systems to streamline your payroll operations. 

Contact Us Today for a Free Consultation

Ready to take advantage of a payroll and HR solution that is efficient, reliable, and accurate? Contact us today for a free consultation with our payroll experts, and let us show you how our services can benefit your business. We look forward to hearing from you!