How to Calculate Payroll for a Retail Business

Doing your own payroll can be a breeze with the right information.

Calculating payroll for employees can be a daunting task. The retail business, however, relies heavily on an educated sales force to stay alive, so payroll is inevitable. Learning the process on your own can help keep money in your pocket.

Instructions

1. Have each employee fill out a W-4 form when they are hired. These forms provide vital information such as Social Security number, filing status and number of dependents. Having this information in one place for every employee is vital to making the payroll process seamless.

2. Calculate the gross wages for each employee. Most workers at your store will be an hourly employee, with some only working seasonally. To figure up the gross wage for an hourly employee, simply multiply total number of hours worked by the hourly wage. You may have a salaried employee, like a store manager, in which case you have to divide their yearly salary by the number of pay periods per year to figure the salaried employee’s gross wages.

3. Deduct voluntary payroll reductions such as Health Saving Account or IRA contributions. Some of these deductions are pre-tax, so calculate them before taxing the pay. Other voluntary deductions are taxable, so include them in the taxable wages

4. Calculate statutory payroll taxes such as the federal, state and local withholding. Federal withholding is based on the employee's filing status and number of dependents. State withholding is dependent on the state. For example, Alaska and Texas don’t collect income taxes. The same is true for localities. Residents of Birmingham, Alabama, pay an another 1 percent in local tax. You should be familiar with the taxes required by your city and state and plan accordingly.

5. Deduct for Social Security and Medicare taxes as well. As of 2011, the employee’s portion of the FICA payments are 4.2 percent for Social Security and 1.45 percent for Medicare.

6. Make the check out for the remainder after all deductions are made.

References

• Accounting Coach: Payroll Withholdings
• IRS: Publication 15