How Payroll System Works with a Software Tool

Knowing how payroll system works is essential for any business to make sure you pay your employees the right amount and on time. Some businesses might have the resources to have a designated payroll employee who manages time cards and payments. However, business owners are sometimes stretched thin and have to handle payroll services. In these cases, a semi-automated payroll system, like the one AMS offers, can greatly help streamline payroll and make your job as a business owner that much easier. We will describe how payroll system works and explain how AMS payroll software is useful.



How to Complete Payroll

Payroll consists of calculating your employees’ wages, distributing paycheck via check or direct deposit, and keeping accurate, annual records of wages. To get a payroll started, you need to have each of your employees complete a W-4 form. W-4s allow the employee to indicate how much of their pay you withhold for taxes.

Along with the right tax deductions, you need to know how much you pay each employee. The amount depends on if the employee earns a yearly salary or if they work hourly. You often negotiate the rate of pay with your employees or have a set hourly rate.

Once you have the employee’s W-4 and pay rate, you can establish a pay schedule for when you distribute paychecks. Many businesses use a weekly or bi-weekly pay schedule, but you can consult with your employees to pick a frequency that works.

You complete a payroll cycle once you deduct taxes and distribute the paychecks on schedule to your employees. The next payroll starts when the previous one ends.


Other Payroll Considerations

Knowing how payroll system works involves some other considerations. Printing checks is one aspect of payroll for which you need a system. If an employee opts for printed checks instead of direct deposit, you will need to print the check and the pay stub summary.

Payroll taxes take careful calculations to avoid costly mistakes. Employers must withhold a certain percentage of a worker’s pay to cover what’s called FICA taxes. FICA taxes go towards Social Security and Medicare, and employers take the set amount out of each paycheck.


What Type of Workers Use Payroll

Business owners need to include all of their employees on the payroll. The only types of workers that do not need to be on the payroll are any independent contractors that you hire and pay a flat amount. If you deduct taxes from an employee, that employee goes on the payroll.


How AMS Payroll Software Is Helpful

After learning how payroll system works, it is clear that payroll is a complicated and time-consuming process that is crucial to any business operation. Because of the precise tax laws and the strict pay schedule, many businesses opt to use a payroll service. The AMS Payroll Software can help at every step of the payroll process from entering an employee’s W-4 information, calculating payroll taxes, distributing paychecks, and processing year-end reports. Investing in a payroll software saves the cost of hiring a service but makes payroll manageable even for a business owner with other responsibilities on their plate.


Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.