So you found someone good and you’re ready to hire. Congrats. Before that first paycheck goes out, there are a few things worth knowing, and I’ll keep it simple.
You do not need to become a payroll expert. Payroll software does most of the work for you now. My job is making sure payroll gets recorded right in your books, so you get real numbers you can trust.
A paycheck costs more than the wage
On top of what you pay your employee, you pay your share of Social Security and Medicare (they pay the other half out of their check). You also pay unemployment insurance to Colorado and to the federal government.
I left the rates out on purpose. They change, and I want you getting them straight from the source. The IRS and the Colorado Department of Labor post the current numbers.
Some of that money isn’t yours
This is the part that matters most for your books.
When payroll runs, part of what comes out of the check belongs to your employee. Their income tax, their half of Social Security and Medicare, and their share of FAMLI (Colorado’s paid family and medical leave program) are their money. You’re just holding it until it gets sent in.
If that money gets recorded as a business expense, your profit looks smaller than it is, and it looks like you owe less than you do. That’s where I come in. I make sure it’s recorded as money you’re holding, so your books match what you owe.
Quick note on FAMLI: if you have fewer than 10 employees, you don’t pay the employer half. You still send in your employee’s share.
What the software handles for you
The payroll software I recommend figures the taxes every payday, pays them, and files the federal and Colorado reports for you. It’ll even send in the new hire report once you tell it to. That takes a lot off your plate!
A few things are still on you:
- Workers’ comp. Colorado requires it once you have one employee, even part-time or family. It’s an insurance policy you buy, and the cost can’t come out of their check.
- Employee or contractor. That’s a question for a CPA or an employment attorney, and it’s worth settling before the first paycheck.
- Getting registered with the state. Your Colorado tax accounts need to exist before anything can be filed. Some payroll software will do this for an extra fee.
If you’re about to hire and have questions, let’s talk. The consult is free, and I’ll tell you what you need and what you don’t.
Book a free consult