A Guide To Budget Your Payroll

A Guide To Budget Your Payroll

Why should you create a payroll budget? Let me count the reasons….first of all, one of the main reasons would have to be because you want to determine the total cost for each person in each role, including wages, benefits, and taxes. Since payroll is so important, how do you go about doing it? What are some steps that you should take? Here are some considerations that you should keep in mind:

What should my payroll budget include?

A payroll budget, also called a payroll accounting, should include such things as the wages that you pay each employee; any commissions and bonuses that they might receive; any payroll taxes or witholding that an employee is subject to; the premiums for health insurance benefits; and any company contributions to employee retirement accounts.

What should I do about my headcount?

This is another question that you should ask yourself. First of all, your headcount is defined simply as the identification of all of the people that work for your company, including those who are subject to 1099s as well as hourly temp workers and of course full and part-time employees. Basically, anyone that works for your company and gets paid for it (even if it’s not in the traditional pay cycle) should be included.

Should I consider mapping costs for each employee as well?

The answer to this question is an emphatic yes! You definitely should map out each employee’s costs, and how you do this depends on the size of your company and their position. Alternately, you can do this by position or simply just by itemizing costs by the employees themselves. Of course, reviewing the resulting report is crucial. Looking at costs by employee is only the beginning. You also should look at the costs by department and also the aggregate costs.

Review the budget for your payroll.

After you have built up your company’s payroll budget by allotting the number and type of your employees and the cost per each, it is now time for you to review the resulting report. You should not only look at costs by employee but also the costs by department and in the aggregation yet again. You would want to track the payroll budget report over time because it can be different from one pay period to the next. Employers need to be able to track the total cost of their payroll, find potential savings, and identify key cost centers.

Process Payroll

“Processing payroll” is just a fancy term for paying everybody. This will involve such things as wages, payroll taxes, both full and partial employee benefit premiums, matching contributions for retirement plans, and any other type of expenses.

So, there you have it. In a nutshell, that is how you manage payroll. Of course, there is no question that payroll within your business can become costly, so that is why you need to do everything in your power to keep it under control. Doing things such as using a payroll service, tracking every dollar closely, knowing your cost centers, balancing your costs and benefits, and being proactive.