Did you know payroll refers to the process of calculating and managing the financial aspects of employee compensation within your law firm? While you may have started as a true solo or with only independent contract assistance initially, as you grow your firm payroll becomes an important part of your law practice hub of operations. Law firm payroll can include calculating and disbursing salaries or wages, deducting applicable taxes and other withholdings, and ensuring that employees receive accurate and timely payments.
Payroll can be a function of your law firm bookkeeper. Your law firm bookkeeper will already know the ins and outs of your business and will be able to seamlessly help you set up each employee or contractor correctly, pay them timely, and even handle bonuses when the time comes. Overall, the law firm payroll process typically includes, but is not limited to, a combination of the following:
1. Timekeeping. Employers track the number of hours worked by employees, either through manual timecards, electronic timekeeping systems, or other methods.
2. Wage Calculation. Based on the hours worked, your payroll company or payroll bookkeeper calculates each employee's gross wages or salary. This calculation may take into account regular pay rates, overtime rates if there are any, and any other special considerations such as origination fees or bonuses.
3. Deductions. Various deductions are made from an employee's gross wages to determine the net pay they will receive. Common deductions include income tax withholding, Social Security and Medicare taxes (FICA), health insurance premiums, retirement contributions, and any other voluntary or mandatory deductions.
4. Withholding and Reporting. The employer is responsible for withholding the appropriate amount of income tax and payroll taxes from employees' wages. These withheld amounts, along with the employer's share of payroll taxes, must be reported and remitted to the appropriate government agencies, such as the Internal Revenue Service (IRS) in the United States.
5. Law Firm Payroll Records. Accurate records must be maintained to document each employee's earnings, deductions, and payroll taxes. This includes information such as employee details, pay rates, hours worked, and any changes in employment status.
6. Law Firm Payroll Processing. Once all the necessary calculations and deductions have been made, your payroll company or payroll bookkeeper prepares the actual paychecks or initiates electronic fund transfers, also known as direct deposit, to ensure employees receive their wages on time.
7. Law Firm Payroll Compliance. You know as a lawyer yourself, law firm owners must comply with relevant labor laws, tax regulations, and reporting requirements when managing payroll. This includes ensuring proper classification of employees, accurate calculation and payment of wages, timely submission of tax forms, and compliance with any local, state, or federal regulations related to employment and taxation.
Effective law firm payroll management is a critical component of your overall law firm operations. You need a turnkey system and a trusted bookkeeper overseeing your law firm payroll who can work with your partners, associates,employees and contractors, comply with legal obligations, and facilitate accurate financial reporting within an organization. Many law firm business owners choose to outsource payroll functions to specialized providers like the Practice42 Premier Law Books Team to streamline the process, minimize errors, and take back their time by focusing on the things only they can do in their practice.
We know you need money to run your law practice. More importantly, we know you do not need the added stress that comes from doing your own books each day or bookkeeper turnover. After all, you need to be busy practicing law! You need a bookkeeping solution you can trust to get your law practice books right each month. The Practice42 Premier Law Books Team of bookkeepers know just how important staying on track with your books, and your cash flow, is to the success and growth of your firm! Use this link to schedule a free 30 minute Practice42 Strategy Session with us so we can share with you how we can help you reach your goals for success in your law firm!
