Keeping employee records accurate and up to date is essential for your business, especially when considering all the state and federal filing requirements for employee taxes. Otherwise, you’ll have a hard time filling out all the necessary forms and providing quarterly detail on your employees and your payroll.
The best way to track employee information using a manual bookkeeping system is to set up an employee journal and create a separate journal page for each employee.
The detailed individual records you keep on each employee should include this basic information, most of which is collected or determined as part of the hiring process:
Name, address, phone number, and Social Security number
Department or division within the company
Start date with the company
Pay rate
Pay period (weekly, biweekly, semimonthly, or monthly)
Whether hourly or salaried
Whether exempt or nonexempt
W-4 withholding allowances
Benefits information
Payroll deductions
All payroll activity
If an employee asks to change the number of withholding allowances and file a new W-4 or asks for benefits changes, his or her record must be updated to reflect such changes.
The personal detail that doesn’t change each pay period should appear at the top of the journal page. Then, you divide the remaining information into at least seven columns.
Here’s a sample of what an employee’s journal page may look like:
The sample journal page contains only seven columns: date of check, taxable wages, Social Security tax, Medicare tax, federal withholding, state withholding, and net check amount. (The state tax in the sample is zero because this particular employee works in a nonincome tax state.)
| Date | Taxable Wages | SS | Med | Fed WH | State WH | Check |
|---|---|---|---|---|---|---|
| 4/8 | $640 | 39.68 | 9.28 | 8.62 | 0 | $582.42 |
| 4/22 | $640 | 38.68 | 9.28 | 8.62 | 0 | $582.42 |
You may want to add other columns to your employee journal to keep track of things such as:
Non-taxable wages. These include health or retirement benefits that are paid before taxes are taken out.
Benefits. If the employee receives benefits, you need at least one column to track any money taken out of the employee’s check to pay for those benefits. In fact, you may want to consider tracking each benefit in a separate column.
Sick time
Vacation time
Clearly, these employee journal sheets can get very lengthy very quickly. That’s why many small businesses use computerized accounting systems to monitor both payroll and employee records. The following figures show you how a new employee is added to the QuickBooks system.
