Larry Fine—of Three Stooges fame—once said, “The pain goes away on payday.” That quote certainly rings true for those of us on the depositing end of the transaction. But, if you’re the one responsible for signing the checks, I’m betting payday has caused its fair share of pain—and I’m not just talking about the blow to your bottom line. After all, as a business owner—especially in the business of health care—you’ve got a lot of proverbial t’s to cross and i’s to dot before you can even issue a check. Here are seven private practice payroll must-dos:

The State of Rehab Therapy in 2019 Guide - Regular BannerThe State of Rehab Therapy in 2019 Guide - Small Banner

1. Get an EIN

That stands for Employer Identification Number (a.k.a. Employer Tax ID, Federal Tax Identification Number, or Form SS-4), and you’ll need one so your business can file taxes and other important documents with the IRS. You’ll also need it to submit employee information to state agencies. Basically, you can’t get away with not having one, so before you set up your employee payroll—actually, before you even hire any employees—make sure you apply for your EIN online or contact the IRS to obtain one. Additionally, some states require separate ID numbers for state tax purposes, so make sure you research—and abide by—your state’s requirements.

2. Do the Paperwork

Each new employee must fill out a federal W-4 and a state W-4 (in states that require this form) before receiving a paycheck. That way, you can withhold the appropriate dollar amount from each check. You also will need to file a signed I-9 form within three days of the employee’s start date (for work eligibility verification) and complete the appropriate new hire reporting as required by your state. For a more detailed list of tasks you’ll need to tackle before bringing your first hire on board, check out this blog post. And for an in-depth breakdown of all the new-employee forms you should have on file, take a look at this post.

3. Classify Correctly

For new businesses, classifying employees accurately from the get-go is crucial. And, as this Justworks article explains, employee misclassification is one of the most common—and most costly—mistakes that startup business owners make: “if the responsibilities of the job don’t materially change when a contractor ‘converts’ into an employee, the IRS considers that worker as having been an employee all along and can fine you for misclassifying them originally.” So, before you take advantage of the tax, benefits, insurance, and overtime savings that come with classifying an employee as an independent contractor, make sure the employee actually fits that description. (Hint: if the length of the work engagement is indefinite, then the worker is most likely an employee.) Furthermore, once you classify each employee, double-check the manner in which you are withholding income taxes, withholding and paying Social Security and Medicare taxes, and paying unemployment taxes for those employees (as noted here, these processes differ based on whether an employee is a contractor).

4. Set Your Pay Period

Most employers cut checks on a monthly or twice-monthly schedule, with some states requiring the latter. Once you determine how frequently you will pay your employees, you can adjust the amounts of any withholdings (e.g., taxes, health plan premiums, or retirement plan contributions).

5. Document Compensation Details, Policies, and Processes

For legal purposes, it’s crucial that you have an official record of not only each employee’s job duties and associated compensation details, but also your practice’s policies for paid time off (PTO) accrual and use; hours-tracking; and payment for overtime. Furthermore, you’re legally required to maintain certain records for periods extending beyond their years of active use. For example, as this US Small Business Administration (SBA) resource explains, “W-4 forms (on which employees indicate their tax withholding status) must be kept on file for all active employees and for three years after an employee is terminated.” The article goes on to caution that employers “also need to keep W-2s, copies of filed tax forms, and dates and amounts of all tax deposits.”

6. Pick a Payroll Service

In this day and age, payroll is not a do-it-yourself sort of endeavor. As this blog post notes, “Payroll is so hard to do, and business screw it up so often, that the IRS penalizes about 1 in 3 business for payroll mistakes.” So, unless you want to dedicate a substantial portion of your time to managing all of the aforementioned obligations, then you’ll probably want to invest in a payroll service. There are a variety of options—both in-house and outsourced—available to business owners in the US. But, you’ll want to make sure you find one that meets your specific needs as a healthcare business owner. Thus, just as the SBA suggests, I recommend starting your search by asking fellow therapy practice owners “which method they use and if they have any tips for setting up and administering payroll.” Just remember that whichever route you go, you’re still on the hook for ensuring proper reporting and payment of payroll taxes.

7. Stay on Top of Tax Reports

Speaking of taxes, businesses must submit certain payroll tax reports to various regulatory entities on either a quarterly or annual basis. Not clear on the specifics of your tax-reporting responsibilities? Then, as the SBA suggests, refer to the IRS’s Employer’s Tax Guide or contact your state tax agency.

For employees, payday is a joyous affair. But for business owners, payroll is no laughing matter—which is why it pays (get it?) to be hyper-vigilant about your practice’s payroll processes, systems, and compliance requirements. Got a payroll question or tip? Leave us your two cents in the comment section below.

  • 4 Surprising Factors Potential PT Hires Want in a Job Image

    articleApr 25, 2018 | 5 min. read

    4 Surprising Factors Potential PT Hires Want in a Job

    When you’re looking to hire a new physical therapist, you clearly want to find the best one possible: someone who is competent, committed to lifelong learning, conscientious, and caring. During the the search process, you probably pore over average salaries in your area , doing everything you can to ensure you’re providing a competitive payment and benefit package . After all, most PTs want the best possible compensation, right? Well, that’s partially true. With the cost of …

  • Inside Job: Combating Employee Theft in Your Practice Image

    articleMay 12, 2015 | 8 min. read

    Inside Job: Combating Employee Theft in Your Practice

    I spent my youth working in retail and at restaurants—two industries rife with high turnover rates and employee theft. Still, I was always shocked when I heard that an employee had been fired for pocketing cash from the registers or stealing merchandise from the shelves. Believe it or not, theft isn’t relegated to these two industries. Private medical practices also must combat theft—and it occurs way more often than you think. According to this Physicians Practice article …

  • Everything I Wish I’d Known Before Opening My PT Practice Image

    articleJul 30, 2018 | 18 min. read

    Everything I Wish I’d Known Before Opening My PT Practice

    A little more than three years ago, Kaci Monroe realized her dream of opening her own physical therapy private practice (to learn more about Kaci’s entrepreneurial journey, check out this blog post ). Since then, she’s grown her small, Bigfork, Montana-based clinic into a very successful—and very busy—operation. So busy, in fact, that she decided to open a second location this past year. Oh, and she also remodeled a house, had a baby, and sped her way …

  • The No-Stress Formula to Successful Hiring Image

    articleJan 25, 2016 | 2 min. read

    The No-Stress Formula to Successful Hiring

    Does the pressure of filling an open job position have you sweating bullets? Matching a candidate’s skills and abilities to a particular role is no easy feat, but my hiring process strategy can help you shed some of the stress. Physical therapists have a process for just about everything—except hiring. And not having a comprehensive hiring process can be costly for your practice—not only in terms of money, but also with respect to morale. After all, there’s …

  • The State of Rehab Therapy in 2018 Image

    downloadJun 28, 2018

    The State of Rehab Therapy in 2018

    To see results from our most recent industry survey, check out the 2019 State of Rehab Therapy Report. To say that the healthcare industry is complex would be an understatement. While the advent of technology has made care more precise, efficient, and collaborative than ever before, it has also put greater pressure on providers to deliver high-value care at scale. After all, big data makes it possible to not only develop the most effective, evidence-based best practices …

  • The State of Rehab Therapy in 2018 Image

    webinarJun 1, 2018

    The State of Rehab Therapy in 2018

    Falling reimbursements. Skyrocketing insurance premiums and copays. Crippling student loan debt. As a PT, OT, or SLP, sometimes it feels like it’s you against the world. After all, the challenges you face on a daily basis are many and complex. But, you’re not alone. In fact, we recently surveyed nearly 7,000 rehab therapy professionals on everything from payment rates and clinic budgets to education costs and salary, and we found some pretty strong—and surprising—trends. [video://]   Curious …

  • The Most Important Benefit for Your Employees Image

    articleJan 27, 2016 | 2 min. read

    The Most Important Benefit for Your Employees

    Ensure your employees stick with you by giving them what they desire most. Regardless of industry, top-notch employees are in high demand. When you find a quality staff member—whether that employee is a tech or therapist—you want to hang on to him or her. But retaining high-quality team members is tricky, and if you fail to do so, your business certainly will suffer. Nowadays, there’s a ton of talk about developing the most attractive benefit packages—that is, …

  • 8 Reasons You Should Attend Ascend 2019 Image

    articleJun 26, 2019 | 4 min. read

    8 Reasons You Should Attend Ascend 2019

    Great news! Ascend— the ultimate business summit for rehab therapists —is back. Last year, the fifth-annual event hit our hometown of Phoenix, Arizona, for two incredibly educational (and incredibly fun) days. This year—September 19–21, to be exact—Ascend is heading to the Land of 10,000 Lakes (that’s Minnesota, don’tcha know!) for another round of rehab therapy’s can’t-miss business conference. Seriously—you’ve gotta be there. Here’s why: 1.) You’ll earn CEUs. In addition to upping their business acumen, physical and …

  • Where Is My Money Going? 6 Surprising Hidden Costs of Running a Private Practice Image

    articleJun 9, 2016 | 7 min. read

    Where Is My Money Going? 6 Surprising Hidden Costs of Running a Private Practice

    You have to spend money to make money. This tenet of business is as true now as it was when my dad gave me a loan to cover the start-up costs for my lemonade stand back in third grade. And like many small business owners, I had a tough time forfeiting nearly half of my revenue to cover the cost of the lemons and sugar (it was a slow day on the cul-de-sac, and despite my best …

Achieve greatness in practice with the ultimate EMR for PTs, OTs, and SLPs.