Payroll - How To Properly Set It Up

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us dollar billsFor many farm businesses, payroll is a big segment of their operation, which is why it’s good practice to review your payroll material every year.  A well-defined review process will have documentation, checklists and standard operating procedures (SOP’s) defining their payroll processes, with necessary modifications made each year.

Most businesses use a software program that handles the payroll tax calculations; the payroll software tax tables will require an update at the start of a new year.  You want to be sure you update your tax tables before processing payroll in the new year to avoid any tax discrepancies.  Take the time to review the pay periods and payroll pay dates for the upcoming year and publish them for all employees to view.  Don’t forget to account for holidays during the upcoming year and publish them with the payroll calendar.  

The start of a new calendar year is a great time to update current employees and inactivate files for terminated employees.  Each current employee should be given updated Federal W4, State W4, I9 and direct deposit documents to fill out and be used to update their employee record.  Over the course of the year, employees could have had a change of address, marital status or exemptions that need to be updated for the upcoming year.  When updating employee records, take this time to review any outstanding employee loan or advance balances and any employee garnishments.  If you offer vacation and sick time policies, then the policy should be reviewed, and any rollover time should be handled appropriately.  If you have any employees who require federal or state verification, such as a CDL license, be sure to review that they are in compliance.

Payroll information should be updated continuously as the information changes, but sometimes this is inadvertently overlooked. Doing a thorough review at the start of the new payroll year should help catch anything that slipped through the cracks throughout the year.  As a recap, remember to:

  • Review and modify payroll documentation, checklists and SOP’s
  • Update payroll tax tables in your payroll software
  • Define payroll pay periods and pay dates, and publish these for employees to view (include any holidays)
  • Update employee files and inactivate terminated employees
  • Distribute updated Federal W4, State W4, I9, and direct deposit documents to employees to update payroll information for any changes
  • Review employee loans and advances and garnishments for any necessary changes
  • Review vacation and sick time policy (if applicable) and update year-end balances to roll over to the new year
  • Review any federal and/or state employee compliance documents such as CDL validation

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Written By

Amanda Schaaf

Amanda Schaaf

Senior Accountant

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