How to Run Payroll Like a Pro [Free Payroll Checklist]

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In March of 2023, there were over 155 million Total Nonfarm Payroll employees across the US––that’s a lot of people who rely on accurate payroll processes. Many organizations choose to outsource their payroll entirely to PEOs, but some small businesses often have to go the DIY route.

Want to run payroll yourself with the confidence of a pro? We’ve broken down the complete payroll process into seven clear steps.

Editor's Note: Always ensure you are keeping accurate records in case there is a discrepancy. Employers have the burden of proof if there is any dispute with employees or government agencies.

Free Download: Payroll Checklist

Nothing squashes employee morale like a botched payday. That’s why we’ve wrangled all the important payroll to-dos you need to ensure accurate, on-time payroll runs for your company.

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How to Do Payroll Yourself in 7 Steps

Step 1: Prior To Processing Payroll

Prior to running payroll for the first time, you will need:

Step 2: Review Employee Information

Did you know that the average company has an 80% payroll accuracy rate and makes 15 corrections per pay period? These can add up quickly and result in thousands lost annually due to payroll errors. Taking the time to make sure all employee information is accurate can quite literally pay off.

Review your employee information prior to running payroll to ensure everything is up to date.

Step 3: Calculate Gross Pay

Next, you’ll want to calculate gross pay, or the total pay earned before taxes and deductions. This is also the time to check on PTO, additional pay such as commissions and bonuses, and any other factors that will influence your employees’ paychecks.

Calculate the correct amount of money each employee will receive before withholdings.

Step 4: Calculate Net Pay

Calculate the amount of money you need to take out of each employee’s pay, making sure to deduct all pre-tax contributions before calculating taxes. Also, don’t forget to calculate any company-matched contributions to healthcare or retirement funds.

Step 5: Final Review

Now is the time to review, review, review. Before you cut paper checks or enter amounts for direct deposit, be sure to do a final pass to look for discrepancies and ensure you’re working with updated records.

As we mentioned earlier, payroll mistakes can cost your business more than you may realize. It never hurts to double check.

Step 6: Disburse Payment

Whether you’re sending paper checks or direct deposits to your employees, don’t forget to review employee pay instructions and disburse payment. You’ve now neared the end of the process, and your employees are getting ready to do their payday happy dance.

Free Paystub Template (Example Included!)

Our template helps you create professional, easy-to-read paystubs so your people understand what they’re earning. Plus, you'll get a sneak peek BambooHR® Payroll paystub!

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Step 7: Distribute Withholdings

Money withheld from employees’ pay must be deposited to the proper accounts for eventual payment to state, local, and federal taxes, or directly to retirement funds and benefits providers.

Remember that any company-matched contributions should be included along with these distributions.

There you have it, do-it-yourself payroll for small business in seven steps!

Payroll Software, the Payroll Pro’s Perfect Sidekick

Have you ever eagerly anticipated payday only to receive an incorrect or delayed paycheck? If so, you know why accurate, timely pay is arguably the most important benefit you can provide your employees. DIY or homegrown payroll solutions become unwieldy and error-prone as the business grows, and upgrading to payroll software is a powerful next step, especially if you want to keep your payroll process in-house.

Using payroll software also minimizes your risk, since the responsibilities for withholding and paying taxes, overtime, and benefits premiums are often handled by the payroll provider, who should be insured.

Next Steps: Pay Your People Confidently

If processing payroll has one rule that’s important above all others, it’s keeping accurate and complete records. In the event that a current or former employee receives incorrect pay or a state or federal agency receives incorrect taxes, the burden of proof is on the employer to prove everything was accurate. It’s critical for employers to remain in compliance by doing the following:

Pay your people confidently.

BambooHR makes running your payroll easy, quick, and stress-free.

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