18 Commonly Asked Questions Regarding Payroll for Startups

As a budding startup, managing payroll and ensuring compliance can be complex and time-consuming. Whether you are just starting or expanding your global team, understanding the payroll process is crucial for smooth business administration.

‍

TL;DR

1. Payroll and compliance involve intricate processes that can overwhelm startups, but a solid foundation is crucial for long-term success.
2. Startups must consider legal requirements, payroll frequency, payment methods, payroll taxes, contractor payments, invoices and pay stubs, payroll confidentiality, payroll reports and documentation, payroll deductions, and more.
3. Deel offers a comprehensive global payroll platform that streamlines hiring, payroll, and compliance processes, making life easier for startups and small business owners.

‍

In this article, we've compiled the most common startup payroll questions and their answers. Discover how Deel's services can streamline your processes, saving time and headaches along the way. Let’s dive in!
‍

‍

1. How Do I Set Up Payroll For My Startup?

When it comes to onboarding employees, setting up payroll is among the initial and crucial steps for any business. There are several viable options to choose from, each presenting its own advantages and disadvantages. Here are four popular methods to consider:

‍

Option one: Establish an internal payroll team

Pros: Enhanced data security and confidentiality. 

Cons: Initial setup costs can be considerable.

Option two: Outsourcing payroll to a third-party provider

Pros: Relieve the burden of managing payroll, which can be complex and time-consuming. 

Cons: The process might involve disjointed systems, particularly when hiring across multiple locations.

‍

Option three: Utilize a payroll software

Pros: Streamline payroll, save time and money. 

Cons: Often designed for single locations and may lack integration with HR software.

‍

Option four: Use a global payroll provider like Deel

Pros: Offers a centralized platform for seamless global hiring, payroll, and HR management.

Cons: Vendor selection may pose some challenges.

‍

2. What Are The Legal Requirements For Payroll In My Jurisdiction?

Complying with legal obligations in payroll can be overwhelming for startups. From registering with tax authorities to maintaining employee records, it requires careful attention. But fear not! With Deel's Global Hiring Guide, you'll find country-specific answers to simplify the process.

Beyond expert guidance, the global payroll platform from Deel offers a comprehensive solution: 

• In-house payroll experts in 100+ countries 
• Employee benefits and deductions, including health insurance 
• Local filing with authorities 
• Localized contracts and documents 
• Compliant onboarding and offboarding

‍

3. How Often Should I Process Payroll For My Startup?

The frequency of payroll is influenced by various factors, including local labor laws and company policies. When selecting a pay period, it's essential to consider legal requirements in the local jurisdiction and choose a frequency that aligns with your business needs, employee preferences, and cash flow considerations.

Typical payroll runs are available in the following intervals:

• Weekly
• Bi-weekly (every two weeks)
• Semi-monthly (twice a month)
• Monthly

Deel's global payroll platform streamlines the payroll process by providing prompts for the correct payment schedule based on local regulations and norms. While bi-weekly, semi-monthly, and monthly schedules are standard, Deel also offers the flexibility of on-demand payroll. This feature enables you to process payments outside of regular cycles, giving your team members the option to receive their earnings when needed, reducing financial stress and supporting unexpected expenses.

‍

4. What Employee Information Do I Need For Payroll Purposes?

To effectively handle payroll for employees on a global and local scale, it is imperative to possess all pertinent information and ensure adherence to compliance regulations. Typically, the following details are necessary:

• Basic employee information such as full name, address, Social Security number, or national identification number
• Tax withholding information
• Bank account details for direct deposit
• Other relevant employment details

Deel's platform ensures business owners have all the necessary information by guiding them through the collection and secure storage of data and documentation for new hires. Through Deel's self-service dashboard, new employees can conveniently provide most of this information themselves.

‍

5. How Do I Calculate And Withhold Payroll Taxes?

To ensure compliance, it is crucial to determine federal tax rates, as well as local and state taxes, based on your employee's income and location. Calculate the required deductions, such as Medicare and income tax withholdings, subtracted from the employee's gross income.

It is essential to have the necessary tax forms in place to avoid penalties. Accuracy and timeliness are paramount, and Deel's platform streamlines these calculations by assisting with compliance documents and tax filing with local authorities. This ensures smooth and accurate payroll processing while maintaining compliance with tax regulations.

‍

6. How Do I Handle Payroll For Contractors Or Freelancers?

Engaging contractors and freelancers can be financially beneficial for small businesses and startups, but managing their payroll requires a unique approach.

• Clearly define contractor agreements to distinguish them from employees.
• Track their hours or project scope accurately for payment purposes.
• Establish a reliable system for invoicing and payment processing.
• Deduct any applicable taxes to remain compliant.
• Maintain proper records for tax reporting.

Deel offers specialized contractor payroll software that keeps you organized and compliant, facilitating smooth and efficient payroll management for employees and contractors through a unified platform.

‍

7. How Do I Ensure Payroll Confidentiality And Data Security?

Maintaining confidentiality and data security is crucial when handling global payroll and safeguarding sensitive employee information and financial data. To optimize security, follow these steps:

• Limit access to payroll data to authorized personnel.
• Educate employees on the significance of data security and confidentiality.
• Safely store payroll data in secure systems and databases.
• Stay updated with relevant data protection and privacy regulations.
• Keep payroll software and operating systems up to date.
• Establish policies and procedures for data retention and disposal.
  

Deel prioritizes data security through protocols, including SSL encryption, two-factor authentication, ISO 27001 certification, and SOC 2 and GDPR compliance. Its dedicated security team continuously monitors the systems to ensure no vulnerabilities or risks.

‍

8. What Is The Process For Issuing Pay Stubs Or Employee Statements?

The process of issuing pay stubs or employee statements can vary depending on the software and other factors, but it typically includes the following steps:

• Gather payroll data for the specific pay period.
• Calculate earnings and deductions based on the gathered information.
• Prepare the pay stub, ensuring it includes all legally-required information.
• Determine the preferred delivery method for the pay stub while maintaining confidentiality during distribution.
• Keep detailed payroll records for future references, audits, or potential disputes.

While this process is traditionally manual and time-consuming, Deel streamlines it by automating payslip distribution and digital invoices for every contractor payment, resulting in significant time and cost savings.

‍

9. How Do I Handle Overtime Pay And Employee Benefits In Payroll?

Within the payroll process, managing overtime pay and employee benefits is essential. By understanding overtime pay regulations and employee benefits requirements in your jurisdiction, you can follow these steps:

• Track overtime hours worked by employees.
• Calculate overtime pay, typically based on a higher hourly rate than regular pay.
• Ensure that overtime pay is accurately included on pay stubs for transparency.
• Administer employee benefits and deduct employee contributions as applicable.
• Maintain compliance throughout each step of the process.

With Deel's global payroll platform, adjusting payments to include overtime pay and recurring benefits becomes effortless. This ensures precise and accurate employee payments while the global payroll report reflects the correct data.

‍

10. What Should I Consider When Determining Employee Compensation?

In designing a compensation plan, it's crucial to balance market standards with various types of compensation, employee benefits, and effective compensation strategies to attract and retain top talent. When formulating the plan, consider these key details:

• Company budget: Ensure that the compensation plan aligns with the financial resources of the company.
• Industry competitiveness: Stay competitive within the industry to attract skilled professionals.
• Business alignment: Ensure the compensation plan supports objectives and goals.
• Compliance with local laws: Adhere to relevant laws and regulations governing compensation practices.

With Deel, accessing valuable salary insights for both contractors and employees becomes easier, assisting in the creation of a well-rounded compensation strategy.

‍

11. How Do I Handle Payroll For Remote Or International Employees?

When hiring and compensating international employees or remote workers, unique challenges must be expected. Start by deciding whether to hire them as independent contractors or Employer of Record(EOR) employees.

Next, carefully consider tax compliance laws, payroll regulations, international payment restrictions, and exchange rates. One option is to collaborate with a local company for payroll administration. Alternatively, you can leverage a global payroll provider like Deel to simplify cross-border payments and minimize non-compliance risks.

With Deel's comprehensive platform, startups can effortlessly manage payroll in over 100 countries, streamlining administrative tasks and saving valuable time.

‍

‍

‍

12. What Payroll Reports And Documents Do I Need To Maintain?

Accurate payroll reports and documents are crucial for record-keeping, ensuring compliance, and facilitating future references. Essential documentation includes employee payroll records, payroll registers summarizing payroll information, payroll tax reports, time and attendance records, year-end payroll reports, payment records, benefits records, employment tax records, and any relevant modifications.

Managing all this documentation requires precision and attention to detail. Fortunately, Deel provides a convenient, accessible system to store and access this information, including Deel HR payroll reports that can be viewed and downloaded when needed.

‍

13. What Is The Process For Terminating Employees And Handling Final Paychecks?

Terminating employees can be a challenging process, especially when finances are involved. To handle final paychecks smoothly and without drama, it's essential to follow a specific process:

• Review the employment contract or policies, notify the employee, and provide a termination letter for documentation.
• Calculate the final paycheck, including accrued wages, unpaid salary, unused paid time off, and consider any deductions or withholdings.
• If applicable, consider providing severance pay.
• Pay the final wages promptly and in accordance with local labor laws.
• Provide a pay stub or statement and document the final settlement.
• If applicable, consider COBRA benefits for continued health coverage.

Whether you're dealing with termination or resignation for an EOR employee, Deel offers a convenient solution to handle final payments through the onboarding section of the platform. With Deel, the offboarding process remains compliant, streamlined, and drama-free.

‍

14. How Do I Handle Payroll Deductions And Garnishments?

In most cases, employers are responsible for withholding payroll taxes from their employee's paychecks and remitting the funds to the relevant authorities on a monthly or biweekly basis.

To ensure compliance during this process, consider the following key points:

• Understand the applicable laws and regulations regarding payroll deductions and garnishments in your jurisdiction.
• Obtain written authorization from the employee for voluntary reductions, such as retirement contributions.
• Identify mandatory deductions required by law and calculate them based on the employee's income and applicable tax rates.
• Review garnishment orders, such as court-ordered judgments, and understand the requirements.
• Accurately calculate garnishment requirements based on the provided instructions.
• Maintain open communication with the employee throughout the process.
• Keep records of payroll deductions and garnishments for future reference.

It is crucial to follow these steps carefully and accurately. Deel's payroll deduction and garnishment feature run on autopilot, reducing human error and saving time during this critical process.

‍

15. Can I Offer Direct Deposit For Employee Payments?

Direct deposit is a widely used and convenient method for businesses to distribute employee wages into their designated bank accounts electronically.

When offering this payment method, it's essential to obtain written authorization from employees and prioritize the security and confidentiality of their banking details. Integrating a payroll system that complies with relevant laws and regulations is also crucial.

While direct deposit streamlines payment transactions, providing pay stubs or statements remains essential for maintaining a comprehensive record of employee payments. As a robust software solution, Deel offers a range of payment options, including direct deposit, pay cards, and even cryptocurrency, ensuring full compliance throughout the entire payroll process. 

‍

16. How Do I Handle Payroll For Equity Compensation Or Stock Options?

Equity compensation and stock options are popular tools used by startups to attract top talent, but accurate handling and reporting are essential to meet tax obligations.

First and foremost, understanding your equity compensation plan or stock option program is crucial, ensuring it aligns with fair market value. Calculating taxable income, withholding applicable taxes, and reporting taxable income are the next steps.

As a responsible startup founder or entrepreneur, providing employees with clear statements or documentation detailing their equity compensation or stock option activity is vital. This empowers employees to understand the tax implications for their personal tax returns and reporting.

Deel comes to the rescue for startups by facilitating the granting of global team equity and assisting with additional requirements needed by local tax authorities. This includes reporting the grant to authorities, obtaining advance approval, and addressing valuation considerations, if required, prior to the grant.

‍

17. How Do I Handle Payroll During Mergers, Acquisitions, Or Restructuring?

Maintaining consistent payroll becomes crucial during mergers, acquisitions, or restructuring despite the changes businesses and employees experience. To navigate this transition smoothly, meticulous planning, coordination, and effective communication are paramount.

Traditional payroll providers often take over six months to set up, and even minor changes can cause prolonged back-and-forth processes, leading to frustration and delays in M&A implementation and transitional services agreements (TSA).

Here are some practical tips for handling payroll during these times:

• Review legal and contractual obligations.
• Swiftly align payroll systems, including compensation and benefits.
• Address employee classification appropriately.
• Ensure compliance with all legal requirements.
• Transfer employee data seamlessly and provide payroll staff with necessary training.

Deel's global payroll platform comes to the rescue by enabling businesses to set up their entire team's payroll in less than half the average time. The user-friendly system allows easy in-platform changes backed by direct 24/7 customer support from Deel's expert team. With Deel, companies can effortlessly manage global payroll in over 100 countries, centralized on a single platform. It offers the convenience of reviewing all salaries and paying the entire team through a single invoice.

‍

18. What Resources Or Tools Are Available For Startup Payroll Management?

In the quest to streamline payroll processes and maintain compliance, startups can leverage a range of invaluable tools and resources. These resources prove incredibly beneficial when managing a diverse global team comprising contractors, full-time employees, and other contractual arrangements.

Here are the essential software and resources every growing startup should consider:

• Payroll Software: Automate payroll calculations, tax withholdings, and other essential tasks.
• Human Resources Information System (HRIS): Streamline HR functions, including payroll management, employee records, and benefits administration.
• Time and Attendance Systems: Efficiently track working hours, overtime, and leave for accurate payroll processing.
• Accounting Software with Payroll Functionality: Seamlessly integrate payroll with accounting processes for better financial management.
• Online Payroll Calculators: Quick and convenient tools for on-the-spot payroll calculations.
• Compliance Resources and Guides: Stay informed and compliant with resources from reputable sources, like the IRS website.
• Online Communities and Forums: Join startup founder and payroll professional communities to share knowledge, experiences and support each other.

With these indispensable tools and resources at hand, startups can navigate payroll complexities with ease, ensuring smooth and compliant payroll operations for their global workforce.

‍

Wrapping Up

We've covered some burning questions about payroll for startups, ensuring that you are well-equipped to handle this crucial aspect of business administration. From navigating legal obligations and compliance to choosing suitable payment methods and frequencies, we've got you covered.

Deel provides a comprehensive solution for managing and scaling global teams. Businesses can streamline hiring, payroll, and compliance with their centralized payroll platform, freeing time to concentrate on business growth.