SPOILER ALERT: this is a lengthy post as my Gusto review gives a TON of insight and tutorials… so feel free to skip directly to the part that applies to you:
- Start Running Payroll for your Business in 5 Simple Steps
- How I Became a Payroll Pro
- Gusto Payroll Review (With a Comparison of Payroll Providers)
- How to Set Up Your Account in Gusto Payroll (Tutorial #1)
- How to Sync your QuickBooks Online Account with Gusto (Tutorial #2)
- How to Run Payroll in Gusto (Tutorial #3)
- How to Set your Payroll to Automatic within Gusto Payroll (Tutorial #4)
Congrats! You’ve just hired your first employee (or are about to do so).
Or, maybe you just changed your business to an S-Corp, and now you have to start running payroll for yourself (as the biz owner).
Either way, it’s an exciting milestone for you and your business.
At the same time… figuring out payroll can feel a little daunting.
That’s why I want to share 5 simple steps to start payroll for your small business!
Hopefully it’ll save you time (and brainpower), and you’ll be ready to hit the ground running!
#1 If you haven’t already done so, you need to apply for an employer identification number (EIN).
There are many reasons to use an EIN for your business in general (such as incorporating, implementing a retirement plan, protecting your personal information, etc.). But the important point is that you need to have an EIN before you start running payroll. You can do that here.
#2 Depending on which state your company is based in, you may also need a state ID number prior to starting payroll.
Many states will give you a grace period of a few weeks before you need to provide the state payroll ID number. To find out more about your state’s requirements, check out this link.
#3 Determine your pay schedule.
Will you be running payroll weekly? bi-weekly? monthly? If you have no idea as to which schedule you should choose, I think it’s helpful to think about a few things:
- The type of employees you have now and the type of employees you will want to employ in the future. With that in mind, what might their needs be? For instance, is it realistic to expect a full-time professional (and likely breadwinner) to be paid once every two months? Probably not.
- Your business’ cash flow. For instance, do you have a financial cushion so that you can make payroll if you’re waiting on customer’s payments to still come in? Or, do you know that ALL your payments routinely come in at the end of every month? If you have a cushion and depending on how large it is, you may feel just fine scheduling payroll every two weeks. However, if you want to make sure you have a cash influx before running payroll each time, perhaps you pay employees on the first of every month.
- Frequency of payroll. Depending on your payroll provider, it can cost more to run payroll more frequently (as many payroll providers charge per payroll cycle). Check out my payroll provider cost comparison.
#4 Make a list of your payroll requirements.
Here are some questions to consider as you make your “needs” list:
- Do I want employees to be paid via check or direct deposit? If you want your employees to receive physical checks, then you might want to go with a payroll provider that will cut and issue the checks (this will save you a lot of time). If you want to use direct deposit, you need to make sure your payroll provider is equipped to deposit paycheck amounts into multiple employee bank accounts.
- Do I want my payroll to integrate with my accounting software? If so, make sure your payroll software will be compatible and work well with your setup prior to starting with a payroll provider.
- Are my employees paid by the hour, on salary, or do I have a mix? This will affect how your payroll is setup.
- What is the turnover rate of my employees? This is important to consider because high turnover is more work for whoever is taking care of your payroll and filing reports (and will cost more unless you go with a flat-fee provider).
- Do I hire seasonal employees? This is also important to think about because it will be a higher volume for whoever is doing your payroll during that season, but it will also be a larger job for whoever is performing payroll at the end of the year as you’ll be required to file W2s for these seasonal workers.
- In addition to taxes, is it possible that I may need to withhold wage garnishments on behalf of my employees? Obviously, you can’t predict the future. But as the employer, you may need to withhold child support payments or money to repay unpaid taxes or student loans. This is one reason it’s important to work with a payroll provider that has an intuitive setup and gives you easy and understandable options when setting up paycheck deductions.
- Do I offer (or want to offer) healthcare, a 401k plan, a 529 savings plan to employees? If so, make sure your payroll provider will be happy to set these up within payroll for you. Also, there can be a large difference among payroll providers as to how intuitive their setup is – read more about this here.
- What state(s) are my employees working in? For instance, if you have employees in multiple states, that’s going to require a more complex payroll setup, as well as multiple state reportings for the payroll provider.
#5 Start looking for a payroll provider.
Now that you have a better idea of what you need, it’s time to start finding the payroll service that’s right for you.
Remember to ask questions and make sure that you get the services and features you need. Keep reading for my Gusto review and comparison of payroll providers – and useful tips and tutorials!
How I Became a Payroll Pro 🙂
Here’s a little bit about me and my experience with payroll. Or, if you want, you can skip straight to my Gusto review and comparison of payroll providers.
I started a bookkeeping company in 2011, and in 2012 I decided to add payroll and payroll management to the list of services I offered my clients. I’ve worked with all of the major payroll providers, including ADP, Paychex, Intuit Full Service Payroll, Xero Payroll, Wave, Patriot, and Gusto payroll (formerly Zen Payroll).
My business clients work in many different industries, and their businesses range from small startups to multi-million dollar companies. However, I would say the majority of the businesses I’ve worked with are creative, employ 4 employees (or less), and annually bring in about mid six-figures. Volume of clients? I’ve actively managed over 100 client payroll subscriptions in the past 5 years.
Gusto Review (with a comparison of other payroll providers): Here’s Why I Think Gusto Payroll is Your Best Bet
In managing over 100 client payroll subscriptions in the past 5 years, I have become really familiar with all of the major payroll providers. And to be frank, most of these companies have left me feeling underwhelmed. The most consistent problems I’ve experienced have been confusing website interfaces, less-than-awesome customer service, and poor integration with accounting software. And to top it all off, these services tend to be overpriced.
The one consistent exception I’ve found is Gusto Payroll.
Let’s start with the PRICE. Gusto payroll is undisputedly the most economical option among the top payroll providers. We are talking about a serious price difference (see examples below).
Also, I think Gusto has the best INTERFACE and is the most USER-FRIENDLY, especially if you don’t have a background in payroll.
Another advantage that you get from Gusto is a TECHNICAL SUPPORT team that is far superior to what the other major payroll providers offer.
Lastly, Gusto payroll has the most accurate (and figure-out-able) software and 3rd-party INTEGRATIONS.
If you’re planning to run payroll for a larger company, Gusto payroll is probably a great option.
If you’re planning to run payroll for a small business or solopreneur, Gusto payroll is THE option.
Okay, that was the short version. Now let’s get into the real details:
Gusto starts at a base of $45 ($39/month + $6 for the first user). For each additional employee (or subcontractor) you add to the system, Gusto adds $6 to the total monthly cost. It doesn’t matter how often you run payroll for your company – you’ll still be paying the same monthly fee. In contrast, most other well-known payroll providers charge a fee EVERY time you run payroll.
One of the other things I love about Gusto payroll is that there are no hidden fees. When I work with clients who use other well-known payroll providers, they often receive additional surprise bills for employee direct deposits, filing of yearly reports, filing of 1099s, etc. No fun.
Now let’s get to the cost break-down. I decided to compare the rates that small businesses or solopreneurs would pay for payroll services from the major payroll providers. The 3 most popular payroll software providers (at least right now) are ADP, Paychex, and Intuit Full Service Payroll. For my cost comparison, Gusto and Intuit were easy, since both of them have set prices based on the number of employees you have. I called ADP and Paychex for quotes on a single-employee business as well as a business with 5 employees.1
*the above prices were quoted to me as of June 2017*
A BIG savings with Gusto, right?
And now let’s see how Gusto payroll compares to its competitors for a business with 5 employees:
*the above prices were quoted to me as of June 2017*
Annnnnnd, it’s another win for Gusto! 🙂
As you can see, for every company besides Gusto, there is large range of prices your business could pay. This range takes into account the initial discounts that the other services offer for signing up (which would only apply to your first year of service). Also ADP and Paychex both offer a lower monthly rate for small businesses who only need to run payroll once per month. But most businesses need to run payroll bi-weekly or weekly, so monthly payroll would not be an option. And even if your business usually runs payroll monthly, there are always situations that come up (such as bonus, correction and termination payrolls) that would necessitate running additional payrolls. And in these situations, ADP and Paychex will charge you for each additional payroll you run.
Even if you choose the cheapest possible service offered by the other payroll providers (including the sign-up incentive for the first year of service and limiting payroll to once per month) Gusto still saves you money.
Are you ready to get started with Gusto? Use this link for a FREE month trial.
“But wait,” you might ask, “Wouldn’t I save money if my bookkeeper or accountant processed my payroll for me?”
Not really. Some payroll providers used to offer deeply discounted subscription rates to accountants and bookkeepers (if they had a large number of accounts with the company). Prior to 2015, I used to process payroll for most of my clients, and I would pass these discounts along to them. But around 2015, the company I was using increased its accountant subscription price over 400%. I checked around and found out that other companies were doing the same thing (so they could charge business owners more to sign up directly). So at this point, I began recommending that my clients move to Gusto, since that was a much better and more economical option for everyone involved.
INTERFACE, EASE OF USE & EASE OF SETUP
In addition to being a more economical choice, Gusto payroll is EASY to use.
APD and Paychex both use interfaces that are non-intuitive, hard to navigate, and that rely on users’ familiarity with technical accounting terminology. Intuit Full Service Payroll is a little better but still not great.
Gusto, on the other hand, designed an interface that is intuitive, easy to learn, and doesn’t require a lot of accounting familiarity. I think it’s creators recognized the fact that most solopreneurs and small businesses don’t have a full-time accountant or bookkeeper running the payroll. So they designed an application that nearly anyone could understand or use.
I took some screenshots of the different interfaces. You can see the difference:
If you follow Gusto’s payroll prompts to setup your payroll account, you should be good-to-go. However, you can also check out my Gusto Setup Tutorial below for help with more advanced options and for help customizing to fit your specific business needs.
Also, if you run a regular payroll for salaried workers (or if your workers get paid by the hour but their hours don’t fluctuate), you can set Gusto payroll to run automatically. Make sure you check out my Tutorial on How to Run Payroll in Gusto below for more details in running payroll & for help on how to set it up to run automatically.
One last way that Gusto makes life easier for you? It will collect W-4 and I-9 forms from your employees so you don’t have to. At this point, Gusto is the only payroll service I’m aware of that actually does this (all of the other services make the employer collect these documents).
I have spent dozens of hours (or maybe more!) on the phone with customer support trying to resolve payroll integration issues, payroll employee withholding issues, filed payroll report issues, and special bonus and once-a-year payrolls. So I have had ample experience with customer service departments from all of the payroll providers we are looking at.
Don’t get me wrong, these customer service departments aren’t really bad, it’s just that they aren’t great. They basically provide the level of customer service that we’re all familiar with. You can usually expect to be on hold for a while, and then you will usually end up speaking with more than one person (in order to get to the person who actually knows how to fix your problem). Like I said, not terrible, but not great. And keep in mind, I have probably gotten better service that most people because I’ve had dozens of client accounts with each of these companies!
Gusto, on the other hand, gives a completely different level of customer support. In my experience, their employees have always been friendly, knowledgeable, and very well-trained.
Here are some specific ways that Gusto has taken their customer service to the next level:
- Gusto payroll provides clients multiple ways to reach them (email, message, direct chat & phone). Also, if you decide to call them, you can see the current wait time listed online before calling (I’ve never seen it above 5 minutes).
- When you get an email from a Gusto employee, there’s always a link in their signature so that you can schedule a time that’s good for you if you want to talk at length (or just schedule a convenient time rather than play phone tag).
- They gives clients a FREE month trial.
- Gusto payroll regularly sends clients helpful email reminders such as when to process payroll to ensure direct deposits hit employee’s bank accounts on schedule, and deadlines for end of year adjustments. *If reminders aren’t your thing, you can also turn these off.
- Gusto often sends follow-up reminders on outstanding issues (for instance, my California company dissolved at the end of 2016 and in 2017 I started a Texas company – I was waiting on receiving a TWC account number and Gusto gently reminded me several times via email to input it into their system).
- They offer free (and quick) technical support.
- Gusto Payroll will help you switch from another payroll provider for FREE (this is crucial as most payroll providers require you to input and wade through the payroll info you receive from your previous payroll provider). They just ask you give them 10 business days to get everything into the system.
- They are equipped to run payroll in all 50 states, and it keeps track of state, county, and municipal taxes. I have had several clients based in areas with unusual local taxes, and for these clients, Gusto is the only payroll provider I’ve seen that can calculate the local taxes without creating significant errors. Depending on where your business is located, this alone might be enough of a reason to switch to Gusto.
With Gusto payroll, you’ll finally feel like payroll doesn’t have to be at the forefront of your mind because they’re taking care of all those little details.
Now that we’re firmly in the digital age and online bookkeeping already accounts for 65% of the U.S.’s small business2, you’d think that the major payroll providers would sync seamlessly with all of the major accounting applications (such as QuickBooks Online). I mean, seriously, it shouldn’t be that hard, right? Well, apparently it is.
Paychex, ADP, and Intuit Full Service Payroll do offer syncing capabilities. BUT, in reality they don’t always work very well. In some cases, you perform a sync and your data doesn’t accurately and reliably transfer. In other cases, instead of importing individual paychecks and distinct line items that allow you to see details of payroll tax calculations (as well as net and gross paycheck amounts) when you perform a sync, what you get instead is a condensed general ledger that only includes a lump sum of how much the payroll cycle cost you in full (this will not give you important details like employee check numbers and gross and net totals).
With Intuit Full Service payroll, you usually can transfer your data accurately (and with the required details), but ONLY if the circumstances are right. In my experience, Intuit Payroll software often gets “confused” when there are multiple accountants and bookkeepers who regularly access the same accounts. This can lead to the application refusing to sync at all, which means that you will have to transfer all of the data manually.
Well, here’s the good news:
I’ve seen Gusto sync with QuickBooks Online with over 10 accounts that I manage–these accounts have synced perfectly with zero errors for months on end. I assume Gusto syncs so well because it was built as an online application from the get-go. But whatever the reason, if you go with Gusto, you shouldn’t ever have to manually enter payroll into your accounting software.
Gusto payroll offers affordable integrated benefit options such as a 529 College Savings Plan, a 401k contribution, health benefits, & worker’s comp. It’s true that other payroll providers offer benefit options too, but usually the user can’t see the details of those add-on options from within the payroll application (you have a separate relationship with the 529 College Savings Plan and a separate relationship with Worker’s Comp which also tends to mean you have separate logins with other companies for each add-on and you aren’t able to see the details other than a lump sum being taken out for each add-on). With Gusto you’ll have everything you need for payroll in ONE accessible place.
TO SUM UP THIS GUSTO REVIEW:
In other words, Gusto Payroll ROCKS! Now, are you ready to run your payroll?
I hope you found this Gusto review helpful – if so, please share with your friends, and kindly let me know! 🙂
Read on for my Gusto Tutorials below.
First Tutorial : Gusto Tutorial for Setup
#1, Sign up for your free trial.
#2, Gather & provide needed info.
Admittedly, the info needed to setup ANY payroll is looooong – you can definitely follow the prompts and log back-out if you need to look for something – so don’t let this list stop you! *If you skipped the section titled 5 Simple Steps to Start Payroll for Your Small Business, you might want to check it out now.
- Addresses: Business Mailing Address – location where you can receive mail from the government; Filing address – location you have on file with the IRS from when you registered your business; Work address(es) – locations where your employees are physically performing their work.
- Employee personal info (legal name, compensation, and ideally email address) *Gusto will email employees on your behalf and collect the employee’s address and SSN directly from them – they’ll also have them sign a From 1-9 and W-4 online which means waaaay less work for you!
- Business’ Federal Employer Identification Number (also referred to as FEIN or EIN).
- Business company type (Sole proprietorship, LLC, S-Corporation, etc).
- Legal entity name.
- Your assigned deposit schedule (If you don’t know this, you can find it on form CP-136). If this will be your first time to run payroll, disregard!
- State tax account numbers – the details of this will change a little bit depending on where you have employees working, but generally you’ll need to enter any income tax withholding and local tax accounts before running payroll.
- State tax account numbers part 2 – in most cases, you will need to enter your unemployment tax account after beginning to process payroll. *In some states, if this is your first time running payroll, you will not have this number as it’s not created unless you run payroll – don’t worry! Gusto will tell you how to obtain what you need.
- Your company bank account information.
- Your desired pay schedule.
- If you’re switching payroll providers mid-year, gather detailed payroll summaries for all previously run payroll.
#3 Follow the Gusto screen prompts.
- Add Company Addresses – While you must put in both a mailing and a filing address – depending on how your business operates, this might be the same address.
- Add Employees – You need to add each employee’s name, compensation and email address. You will also need to mark if you want them to be paid via direct deposit or check (note, you can switch this later on). Gusto will then send them an email on your company’s behalf to gather their social security number, mailing address and other pertinent info. You choose type of compensation per employee (take a look at the screenshot below), so if your company needs to pay both salaried and hourly workers, just make sure you choose the right dropdown option of Salary/No Overtime, Salary/Eligible for overtime, or Paid by the Hour.
- Federal Tax Setup – You’ll enter your EIN (also called FEIN) and tax deposit schedule here. If you don’t have these, Gusto will give you links to obtain this info.
- State Tax Setup – You’ll enter your state tax account numbers here. Each state has different needs, but have no fear, if there’s a piece of info you don’t have, Gusto will direct you on how to get it.
- Setup Bank Account – You’ll enter the bank account you want money to be withdrawn from to pay both the Employer taxes and employees from here.
- Setup Pay Schedule – You can choose to have multiple schedules or have all employees on the same schedule. Pay options include weekly, every other week, twice a month, on certain day(s) of the month, or monthly. Additionally, you will always have the option to run an off-cycle payroll or a bonus payroll. If you’re a solopreneur and only pay yourself once a year (or every few months), you need to choose the monthly schedule to set this up as that’s the longest regular schedule drop-down option Gusto payroll offers—however, this doesn’t mean you have to run payroll monthly. Just don’t run payroll if you’re not ready to when they send you the monthly reminder. When you are ready to run payroll, choose off-cycle or bonus.
- Sign Company Forms – You will need to sign a few forms so that you give Gusto permission to submit payroll forms on your behalf. Typically, this name and signature should be the business owner’s. Sometimes, you may wish to have your accountant or lawyer sign these forms.
- Verify Your Bank Account – Gusto will make two nominal deposits after you complete step 5 (entering your bank info). You will need to verify these amounts so that the bank account is verified before you will be able to run payroll.
#4, Ta-da! You’re now ready to run your first payroll!
Second Tutorial: Gusto Tutorial to Setup Sync with QuickBooks Online
- When you log into your Gusto payroll account, look to the L-hand side for “Settings.” Click on “Settings.”
- On the new screen, click on “connect to QuickBooks Online.”
- You will then be prompted to login into your QuickBooks Online account (type in your username and password).
- On the next screen, it will ask you to verify this company. For most users, you will have one company (yours) show here. In my screenshots, I have many companies appear as options because I have access to dozens of clients’ QuickBooks Online accounts – if you have multiple QBO accounts show too, choose the company you wish to sync your Gusto account to).
- Double check that the QuickBooks Online company account name shows on this screen and then click “Authorize.”
- At this point, you will be directed to a screen that says QuickBooks Online setup is incomplete. Click the edit button (to the R hand of “Account Mappings.”)
- Then choose from the drop-down menu the accounts from QuickBooks Online that Gusto should integrate with. The drop-down will show the accounts you already have setup in QuickBooks Online.
- For instance, on the bank account, you would choose the correct bank account that you will pay your employees with (likely a checking account).
- For wages, you’ll choose the account that you want wages your company pays employees to show in QuickBooks Online as (so likely Gross Wage expenses or Payroll expense).
- For reimbursements, you’ll choose the account that you want to allocate your employee reimbursements to show in QuickBooks Online as (likely Employee Reimbursements, Gasoline Reimbursements, or Office Expenses).
- For employer taxes, you’ll choose the account that you want to allocate your Employer Tax expenses to show in QuickBooks Online as (likely ER Tax Expense or Payroll Taxes).
- For employer liability accounts, you’ll choose the account that you want to allocate your employer liability to show in QuickBooks Online as (likely ER Payroll Tax Liability or Payroll Tax Liability)
- Click Save – you’ll see a note that your Auto-Sync is now activatedfour. 🙂
Third Tutorial : Gusto Tutorial to Run Payroll
#1 Login into your account.
#2 You will typically see a prompt to run payroll on your home screen.
Click “Run Regular Payroll.”
#3 Make sure the Payment Date is to your liking.
If it’s not, click and change it within the box.
If employees are on salary (as shown in the below example), the amount will be auto-populated (like below). If they are on an hourly schedule, you will need to enter in the total amount of hours.
Click “Save and Continue” once you’ve verified the proper hours/rates.
*If you need to make an adjustment to the rate (hourly or salary), you will need to temporarily leave this section, and go to “Employees” on the L hand side and click on the individual employee to change his/her rate.
#4 You’ll be taken to the Vacation & Sick Days section.
If you’re like this small solopreneur business, you will simply click “Save and Continue.”
#5 You’ll be taken to a Preview screen so that you can verify all payroll is correct before official submitting.
On this screen, you have the option of expanding a couple of areas like “What Gets Taxed and Debited,” and “What your Employee takes home.”
Once you verify all is correct, click “Submit Payroll.”
#6 You’ll receive confirmation that it was indeed submitted. 🙂
Fourth Tutorial : Gusto Tutorial to set an Automatic Payroll
IF your workers are salaried, you have the option of setting up an AUTOMATIC PAYROLL. To set up an automatic running of payroll within Gusto:
- Login into your account.
- Click on Settings on the L hand side of the screen. Find “Payroll on Auto Pilot.”
- Click the edit icon next to “Payroll on Auto Pilot.”
- Click the “Enable” button, and then click “Save.”
- Next to “Payroll on Auto Pilot,”you should now see “Enabled.”
Your Turn! Over to You –
Are you just starting payroll? Did you find this Gusto review helpful? What’s been your experience with payroll providers? Please share in the comments!
THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLAIMER FOR MORE INFO.
1. I requested quotes from ADP and Paychex based on the typical frequency that businesses run payroll. In my experience, a single-employee company will typically run payroll either bi-weekly or monthly, and a five-employee company will typically run payroll either weekly or bi-weekly↩