As a beauty and wellness business owner, paying your staff is a top priority. 

But navigating the numbers is overwhelming, and outsourcing payroll can break the bank. The good news is that handling payroll yourself doesn’t have to feel like a chore – and if it does, at least it’s an easier one. 

If you want to save money and skip hiring a payroll provider, learn how to do payroll yourself with our step-by-step guide. It's easier than you think, and once you know how to do it, you can invest those savings where they really matter. 

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Setting Up Payroll for Beauty and Wellness Businesses: How Does It Work?

Business payroll is the process of compensating your employees for their hard work. It involves several key components: calculating wages, managing taxes, and handling deductions. It’s more than handing staff a wad of cash at the end of the day.

First, you have to know your employees’ total wages. This includes their salaries or hourly rates, plus any commissions and tips. For example, if you run a nail salon, employees might earn an hourly wage plus client tips. Their pay varies according to how much an employee has worked throughout the pay period (usually two weeks or a month) or the tips they earned (if you don’t split them), which means you have to keep accurate records.

Plus, you have to withhold mandatory federal and state taxes from your employees' paychecks. For example, if you run a massage spa and one of your massage therapists earns $2,500 in a pay period, they won’t take home $2,500. The number will be $2,500 minus the tax deductions you pay to the IRS. 

You also need to subtract any other deductions from your team's payments. These include disability insurance premiums, retirement plan contributions, and union dues – whatever applies to your business operations. For example, if you offer disability insurance as an employer, team members who opt in can choose to have their premiums deducted from their paychecks. 

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Pros and Cons of Learning How To Do Payroll Yourself 

As a business owner, taking a DIY approach to managing your finances isn't a decision to take lightly. While in-house payroll can offer big savings and greater control, it also comes with unique challenges. Payroll can be a time suck, and if you aren’t familiar with the process, there’s a whole lot of room for error.

Let's explore two benefits and two drawbacks of doing your own payroll:

Pros 

• Potential Savings 

Saving money is one of the biggest perks of managing financial activities yourself. Hiring an accountant or other service can be costly, and you know as well as we do that every dollar counts when you're operating a small spa or salon. Process payroll yourself means you can take the funds you'd spend on a payroll service and direct them toward essential expenses, like new equipment or ad space. 

• Control and Oversight  

Self-payroll services give you complete control of staff payments. You monitor every step of the process to ensure everything is accurate and stays on track. If something goes wrong, you’re the first to know, and you don’t have to wait for someone at a help desk to jump on the scene.

Cons 

• Time Saving 

It may sound obvious but it’s worth pointing out that running your own payroll does take time out of your schedule. All-in-one business management software like GlossGenius can help you save time with automated tax filing, unlimited runs, and custom tips and commissions on payroll. 

• Potential Mistakes 

When it comes to DIY payroll, the risk of making mistakes is a huge downside. Entering data and calculating taxes can be tricky, especially if you’re not a math whiz. And because you're managing employees' livelihoods, an error can have severe consequences for both their taxes and their lives. Plus, mistakes can throw a huge wrench in your tax process and lead to more ramifications.

For example, the IRS legally requires you to deduct a certain amount from an employee's paycheck for Medicare and Social Security tax. If you fail to do this accurately, you might face fines. On top of that, mistakes can also damage your team’s trust in you.

• Complicated Regulations 

Keeping up with evolving tax laws and payroll regulations takes time and effort – two resources you don’t always have as a business owner. But if you don't stay up to date, you might miss a change in federal tax rates or another important consideration. You could end up over or underpaying your business taxes, and fixing that problem later on is expensive and stressful. 

How To Do Payroll for Small Businesses: 9 Steps   

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While the process does get tricky, you can learn how to run payroll efficiently and accurately with a step-by-step approach. Here's how to do it:

1. Collect Employee Information 

Gather the information you need to pay your employees, like their Social Security numbers, completed W-4s (which tells you how much money to withhold for each person), and any other forms for tax withholdings. The IRS has a list that constantly updates, so check that first. 

You should also ask employees to fill direct deposit forms if you plan on setting up automatic deposits into employees' bank accounts. 

2. Choose a Pay Schedule 

Decide how often to pay staff. Most businesses choose weekly (52 pay periods per year), bi-weekly (26 pay periods per year), semi-monthly (24 pay periods per year), or monthly (12 pay periods per year). 

Choose a frequency that aligns with the type and pace of your business. For example, if you run a busy hair salon, your stylists may prefer getting paid every week rather than every month to better manage their income. But for small businesses, weekly payroll can strain your resources. The bi-weekly approach is popular as a happy medium.

3. Calculate Regular and Overtime Wages 

Calculate gross pay – which is how much someone earns before taxes and deductions – for each employee, including any overtime hours. For regular wages, multiply their hourly rate by the number of hours worked. For overtime wages, multiply their overtime hourly rate by the number of overtime hours worked. 

For example, a nail technician who works 40 hours a week at $20 per hour earns $800. If they work five overtime hours at $30 per hour, they earn $150 in overtime pay. The employee's gross pay is $950. 

4. Withhold Federal, State, and Local Taxes 

Use the information from your employees' W-4 and other tax withholding forms to calculate how much to deduct in federal, state, and local taxes. These include Social Security tax, Medicare tax, and federal income tax, which varies according to how much an employee earns and their marital status. State income tax requirements vary. Check with the IRS every year, because the rates change.

5. Process Deductions 

Calculate and deduct any additional withholdings from your employees' gross pay, like health insurance premiums and retirement plans. The remaining figure is the employee's net pay, which is how much actually ends up in their pockets.

6. Choose a Payment Method and Process Payments

Decide how to pay your team. Two popular ways are direct deposit and checks, but direct deposits are usually more convenient for everyone. 

Set up the payments according to your chosen pay schedule. Direct deposits can take a couple of days to reach staff bank accounts, so process the payments in advance to make sure everyone gets their money on time. For each payment, provide proof in the form of a pay stub that breaks down all of the pay and deductions. 

7. Record Payroll 

Keep detailed records of your payroll processing. An easy way to do this is with a spreadsheet, where you can log all of your transactions, but a comprehensive system like GlossGenius does tracking even better. Knowing how much you paid and deducted for each employee is essential for tax reporting and filing, organization, and compliance.

8. File and Pay Payroll Taxes 

Small businesses have to calculate payroll taxes and pay them to the IRS monthly or semiweekly. The IRS should tell you when your deadline is, but in most cases, it’s on the 15th of every month.

Paying payroll taxes requires an employer identification number (EIN). If you employ anyone, you should already have one of these. It’s how the IRS identifies you as an employer. 

9. Prepare and Distribute End-of-Year Tax Forms 

At the end of the year, prepare W-2 forms for your employees and distribute them by the deadline – typically January 31st. These forms tell employees how much they earned and paid in taxes over the year, helping them file their personal taxes accurately and on time.   

Simplify Payroll Management With GlossGenius 

You and your employees deserve fair compensation – without the hassle. GlossGenius's all-in-one platform makes managing payments a breeze. 

In addition to Online Booking, Client Management, Marketing, and POS, we offer everything you need to run Payroll, including automated tax filing, custom commissions and tips, and no manual data entry. Whether your employees are salaried or hourly, paid monthly or semi-monthly, GlossGenius is here to help with our ultra-customizable system. Plus, it’s easy to transfer your existing payroll information into GlossGenius when you start. 

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