It’s 2023—and if you’re part of your company’s Human Resources department, it’s time to refine your payroll knowledge!

Human resources is mainly responsible for overseeing a business’s manpower. That means managing employee performance and fulfilling all obligations coupled with ensuring workers get properly compensated.

Understandably, the words “burden” and “payroll” don’t seem the least bit enticing when combined together. But, by taking the time to learn its definition and the impact it has on your operations, you’ll come to understand its significance.

A payroll burden pertains to the sum of all payments that you cover for your employees. 

Most payroll burden costs are government-mandated. 

Meanwhile, contributions to employee insurance are handled at the employer’s discretion.

Examples of payroll burden include federal and state unemployment taxes, social security and Medicare taxes, and company-funded employee benefits such as meals, uniforms, equipment, travel allowances, and paid time off.

these are responsibilities that you shoulder as an employer when you hire workers to do a certain job

They perform tasks to help keep your company well-oiled and running, and so the least you could do is toensure their taxes are secured and well taken care of.

Payroll burden helps employers gauge their labor costs. 

It serves as a reference in determining the expenses and liabilities that come with hiring an employee.

Your employees are a part of your financial responsibilities for as long as they are employed in your company. That said, it is best to evaluate each employee’s labor costs from a long-term perspective.

Since taxes and employee benefits comprise a typical 

, dutifully fulfilling this type of operating cost also indicates the legitimacy of a business.

Calculating your payroll burden likewise gives you an in-depth look into thelucrativeness of your business. Will hiring additional staff be more beneficial to your operations, or will it potentially topple the balance of your expenditure?

Is it the proper timing to expand your workforce, or should you shift your focus to other important aspects of maintaining your business?

Does the payroll burden percentage and calculation differ internationally?

Some countries have much higher payroll costs than the US.

 Understanding how payroll burdens differ globally will benefit your business if you decide to employ workers internationally.

You have to factor in the living expenses, labor tax rates, and social benefits in each country where you plan to hire additional workers.

For instance, Brazil’s average payroll burden from 2019 to 2022 reached 73.3%. One of the main reasons behind the high payroll costs is their government’s objective to fund more social welfare programs to improve living conditions for the masses.

When it comes to paid time off and benefitslike travel allowances, Sweden and Japan have some noteworthy standards. Sweden offers parents as many as480 days of paid parental leave. Meanwhile, Japan includes a commuting allowance in employee paychecks.

Here is a table comparing the differences in global labor tax percentages, according to the 

. It can take up to 38% to 50% of the workers’ salaries. High income taxes are the result of the added taxes on fuel, tobacco, and alcohol, which, in turn, are used by the Belgian government to finance programs for education, healthcare, and social welfare.

Colombia, on the other hand, has had a 0.0% 

 on average for single workers from 2000 to 2021. Simply put, an average single worker in Columbia gets the full 100% of their salary after taxes and deductions.

Japan’s tax system is progressive, just like in most countries. Tax rates increase depending on the salary of the employee. Workers earning $15,000 or less are taxed at 5%, while those whose earnings range from $26,000 to $70,000 have 20-23% applied taxes.

Japanese workers who earn $140,000 to $310,000 pay taxes that take around 40-45% of their salaries. Between the US and the UK, the former has different rates for federal and state taxes. The latter imposes progressive tax rates on Northern Ireland and England. Scotlandhas tax rates that differ from the rest of the UK.

The majority of states in Mexico impose a significantly low income tax rate on employees, with the lowest being 3%.

The simplest way to calculate your payroll burden is to 

divide the indirect costs per employee by the direct payroll or employee costs

. Indirect costs refer to the taxes and benefits paid per employee, while direct costs are your employee’s gross salary.

, get the total number of hours worked in a given pay period, then multiply it by their hourly rate.

, first you need to get their total annual wage. There are 52 weeks in a year, and let’s assume your employees must complete a fixed 40 hours of work per week. Multiply that number of hours by 52 weeks, and you will get 2,080 hours in total.

split the fixed 2.9% tax rate for Medicare and 12.4% for Social Security tax

When calculatingFUTA, note that there is a fixed 6% rate and a wage base of $7000. SUTA is also dependent on which state you are based in, so make sure you are complying with the correct rules and regulations.

In some states, employers and employees share the payments for SUTA taxes.

 will include paid time off (PTO), additional training costs, insurance, and 401(k) matching.

It is important to record all PTOs per employee and indicate which employees are subject to additional training or seminars if provided by your company. The same practice applies to their insurance and retirement plans.

Here is a sample breakdown of how to calculate your payroll burden:

Then add up your indirect employee costs: $9,000 + $2,000 = $11,000

And finally: $11,000 / $75,000 x 100 = 15% payroll burden percentage

In the example, the employee earns an annual gross pay worth $75,000. Their annual taxes amount to $9,000, with additional benefits costing $2,000 more. When combined, their indirect employee costs are $11,000. Divide that amount by her gross wage to generate the payroll burden percentage of 15%.

All in all, is a payroll burden truly as dreadful as its name indicates? Well, a better way to go about it is to think of the payroll burden as a feat that only a dependable and dutiful employer can do.

Running a business is no cakewalk, let alone ensuring all employee salaries, benefits, and taxes are properly compensated and accounted for. 

Hence, careful and advanced planning in managing your payroll burden allows you to equip your business financially and keep your employees satisfied and happy.

Payroll burden is the sum total of all employee costs that is covered by an employer.

It includes FUTA and SUTA, social security and Medicare taxes, and company-funded employee benefits.

Calculating a company’s payroll burden effectively sheds light on labor costs and helps employers gauge the profitability of their business in the long run.

Payroll burdens differ per country because of the differences in income tax rates and benefits implemented.

To determine a business’s payroll burden percentage, get the sum of indirect costs per employee (taxes and benefits), divide it by the direct cost per employee (gross wage), and multiply the result by 100.

Payroll burden encompasses all payments or costs covered by employers. Learn how to calculate your payroll burden percentage here.

What is Payroll Burden & How to Calculate it in 2023

A purchase invoice keeps track of all sales generated by a business. It especially comes in handy when a company is generating a steady increase in revenue.

When the cash flow is consistent and inventories are emptied quickly, the business is on a positive trajectory. 

The higher the sales, the more crucial it is to record all transactions carried out in the business.

If you’re still wondering how a purchase invoice aids in tying everything together and providing a viable reference to boost ROI further, read on and find out!

A purchase invoice is a document issued by a business whenever a buyer purchases their goods or services.

 This document is also important for collecting payments for utility bills, rent, and other services carried out by the business for their customer.

Purchase invoices are typically created in conjunction with purchase orders. They provide a summary of all the goods or services purchased by the customer and indicate the amount the buyer has to pay.

The importance of a purchase invoice is not just limited to representing successful transactions. 

In the section below, you can find out why every seller or business must always issue a purchase invoice!

A purchase invoice effectively demonstrates a business’s legitimacy and integrity.

 It signifies that a seller is operating their business with the utmost compliance with legal guidelines and obligations.

Invoices are legally binding, which can be useful to ensure customers pay on time.

 Without an invoice, it would be difficult to guarantee that buyers would fulfill their financial obligations to the seller or vendor.

If a buyer fails to send payment or an issue arises during the transaction, a purchase invoice serves as a valid contract that protects the business and regulates any potential losses.

#2. Distinguishing Legitimate Businesses from Scammers

 They can imitate legitimately operating businesses to convince customers to send them money.

When a business issues purchase invoices for all their transactions, it acts as evidence that their services and products are authentic. It instantly sets them apart from fraudsters.

All invoices should indicate a specified date and time. 

The date and time show the deadline for a customer to fulfill their payment in full.

For example, a virtual assistant agency caters to multiple clients and has organized each client’s payment schedule and invoicing period.

A purchase invoice makes it easier to monitor when a client has made their payment. At the same time, it serves as a guide for the agency to check if any payments need 

Purchase invoices are also crucial for regulating taxes and cash flow.

 For example, keeping a record of all issued invoices makes it easier to compute the exact amount of taxes that the business is obligated to pay.

In the same manner, invoices are key factors in managing inventories. It segregates fast-selling products from those that are not. More importantly, a purchase invoice ensures that there is a balance between the acquisition and sale of goods.

Building trust is pivotal in any buyer-seller relationship.

 One way to establish trust between both parties is by consistently issuing proof of payment.

In short, an invoice that records all transactions denotes how both sellers and buyers abide by the prices of goods and payment terms they agreed upon.

Purchasing invoices contain important buyer and seller information, such as their contact information and address.

 If any concerns arise during the transaction, these details help pinpoint the source.

For instance, if a seller finds that they have not yet received payment from the buyer, they can double-check the payment information they provided. Or they can also confirm with the buyer if they sent the money using the payment channel displayed in the invoice.

Is a Purchase Invoice the Same as a Purchase Order?

In short, a purchase invoice isn't the same as a purchase order.

If a purchase invoice is sent by the seller, then a purchase order is sent by the buyer.

 Purchase orders specify the type of goods or services that they want to purchase from the seller. It also includes the exact number of items that they wish to buy, the description of these goods, the payment terms, and the date of the purchase.

A purchase order is typically sent first since it shows the final list of products and services to be purchased. 

The seller then verifies with the buyer all the details in the purchase order before responding with the correct invoice.

Below is a list of the key similarities that are found in purchase orders and purchase invoices:

And here is a list of information that differentiates purchase invoices from purchase orders:

The following are the most essential items to include in your purchase invoice:

Your invoice must contain your name, business address, and contact information. It must also include your client’s name, address, and contact details.

The buyer and seller information shows that you are transacting with a real individual or entity, 

in the same manner that it reinforces your legitimacy as a 

The invoice date and number enable faster tracking of payments and sales.

The invoice number is important for managing your inventory and following up on payments. There are two most common ways to generate or write an invoice number.

 assigns a number to each invoice by following a numerical order. It is recommended that you include the name of your client in the invoice number, especially if you are following this format: JOHNSMITH_001.

 includes the date when the invoice was created, along with the invoice number. For example: YYYY-MM-DD—INVOICE SEQUENCE NUMBER or 20230102.

Itemize the products purchased by your customer in your invoice.

 Here, you need to specify the description of each item or product, the number of products that your customer wishes to purchase, and the corresponding price for each item.

Finally, you must provide the subtotal of all the procured items.

Payment terms describe the payment methods you accept to receive payment from your customer.

 Try to discuss your preferred payment channels with your customer to prevent any transaction issues or misunderstandings.

Some of the most common and preferred payment channels include

Online payment (PayPal, Apple Pay, Stripe)

As the seller, you will be the one to set the deadline or due date for when your buyer must fulfill their payments. You can also negotiate and discuss payment terms that work best between you and your customer.

Additional notes may be in the form of a thank you note or even instructions for the product.

 The latter is common in consumable or perishable goods like food (how and when it is best to consume it) or fragile items that need extra care in handling.

You can also use this part of the invoice to note any adjustments in the pricing or the payment or leave a simple ‘thank you’ note.

How to Make a Purchase Invoice Effortlessly

Did you know that invoice template generators come in handy when it comes to managing all customer orders and payments? Why use software such as Word or Excel to create invoices when a generator can do it all much faster and more efficiently?

Invoice template generators have all the necessary details prepared for you.

 Creating a purchase invoice using a template takes less than five minutes!

All you have to do is follow these easy steps:

Choose a template for your purchase invoice.

Fill in all the required fields with the necessary information.

Once you’re done, you can download your desired document instantly and forward it to your clients via email in a 

All in all, think of a purchase invoice as your ticket to proving yourself as a trusted business name and establishing a solid protection against scams and potential disputes.

Although making purchase invoices on your own can be difficult, you can also use free templates to generate invoices.

And while the term ‘keeping receipts’ has taken on a whole new meaning in this day and age, it still retains the same meaning when you are selling any type of service or goods. Keep your invoices (or receipts) as they will prove useful to you when the time comes.

Every business or seller must have a purchase invoice, which serves as proof of a successful transaction.

A purchase invoice is important in earning customer trust, attaining legal rights and protection, and improving your business’s long-term growth.

A purchase order is different from a purchase invoice as it’s issued by a buyer in procuring goods.

A solid purchase invoice typically contains the buyer and seller’s information, the type and quantity of products to be purchased and the total amount to be paid.

Creating a purchase invoice is relatively hard if you do it on your own, but it can be better with the help of an invoice template generator.

Learn the importance of creating purchase invoices, how they save you from legal disputes, and how to create them with an online generator!

The Ultimate Guide on Purchase Invoices [2023]

Filing taxes as a freelancer can be tricky, particularly if you have just transitioned into the world of being an independent contractor.

Freelancing does not spare you the responsibility of paying taxes. In fact, one of the challenges of being an independent contractor is shouldering the combined tax rates that are normally split between employers and employees.

As such, if you are new to the world of freelancing and are determined to know the scope of your tax paying duties, then give this ultimate guide to freelance tax a read!

Freelance tax, more formally referred to asself-employment tax, is owed by 

It comprises their Social Security and Medicare taxes, along with their estimated income taxes that they must pay ahead of time.

Employers and employees each share a 6.2% rate for Social Security taxes and a 1.45% rate for Medicare taxes. Independent workers, however, will have to cover the combined Social Security and Medicare tax rates shared between employers and their staff.

In other words,freelancers are obligated to pay 12.4% in Social Security and 2.9% in Medicare taxes, thereby yielding a total of 15.3% in self-employment tax.

Freelancing can take on different business structures, namely 

sole proprietorship, partnership, LLC (Limited Liability Company)

. A freelancer’s business structure of choice determines the nature and extent of their tax liabilities.

 is the easiest business entity for freelancers. Most freelancers are sole proprietors because they do not need permission from the government and are not obligated to cover fees just to be one.

A partnership means that the freelancing business is 

. All parties involved in the partnership share the profits along with the contributions needed to shoulder the business expenses.

LLC (Limited Liability Company) can either be a single-member or multi-member LLC.

a combination of sole proprietorship and partnership

, although the LLC is recognized as a separate and legal existence apart from the business owners. Limited liability companies entail a broader range of benefits and liabilities, such as the capability to own bank accounts and properties, hire personnel, and file or face lawsuits.

A corporation is the most costly and complex of all four structures. 

Independent contractors in a corporation are called shareholders. This structure is ideal if the goal is to entice investors to shell out money to help grow the business.

Freelancers who fail to file their tax returns or pay their taxes will be charged a 

 The penalty can cost between 5% to 25% for unfiled taxes and 0.5% to 25% for unpaid taxes. These penalties are added to the total amount of taxes owed by the independent contractor.

Listed below are some helpful tips to help avoid incurring penalties and ensure you don’t miss anything in your tax reports:

As a self-employed worker, you must file your 

 individual taxpayer identification number

 is highly recommended if you want to track your income and expenses effectively. It means accounting for both income that is yet to be received and expenses that have not yet been incurred within the year in your revenue.

 to record and track all your expenses and invoices.

 enables a systematic and innovative alternative to monitoring your finances. When choosing accounting software, some key features worth considering include the capability to integrate online banking features or link your credit card, invoicing templates, a built-in tax calculator, and a user-friendly interface for easy account updates.

If you’re not keen on using software, spreadsheets are a good alternative. You can easily create expense reports and enable easy collaboration with shareholders or co-members in managing your income and finances.

Since self-employment taxes are to be filed quarterly, you have to repeat the process four times in a given tax year to account for the four quarters.

The following are the estimated quarterly tax deadlines for the year 2023:

 covers September 1 to December 31 2023; 

Hiring a professional to aid you in accounting and filing your freelance tax is a great choice

 if you are employing staff or have adopted the corporation structure for your freelancing services.

Maximizing the expertise of a certified public accountant (CPA) enables you to file your business taxes accordingly while complying with the regulations set by the IRS and the respective state where you operate your services.

Freelancers are also entitled to certain deductions in their taxes, which fall under the following categories:

Your home office includes all equipment used for your freelance work, such as your laptop or PC, work desk, printer, etc.

The condition for deducting tax dues through home office expenses is that the space, utilities, and equipment included in 

your home office must be used exclusively for your self-employment work

. You may not use the same space in your home simultaneously for other home activities.

You can deduct home office expenses once or depreciate computer costs as a larger asset and claim the costs later on.

All travel and meal expenses included in your tax report must be 

directly related to the operations and expansion of your freelancing venture

For instance, if you travel to your work location or have lunch and dinner with your clients, you can deduct your travel and meal expenses from your tax dues.

The key to using education as a viable basis for tax deductions is it should be significant to the nature of your work. Specifically, the subject you are studying should be 

instrumental in expanding the skill set you use in operating your business

It may be acquiring certifications or licenses or enrolling in courses that branch out your expertise in your niche. In this case, you can account for the costs of enrolling in additional courses and acquiring certifications and add them to your tax deductions.

50% or half of the self-employment taxes may be deducted as business expenses on income taxes. 

That means you can deduct half of the self-employment tax you owe on your 

Tax deductions for self-employed workers fall under Social Security and Medicare taxes. The coverage that employees and employers normally split is covered altogether by freelancers or self-employed individuals, making taxes a heavier financial burden.

If you reach a specific income threshold, you are also required to pay 

Here is a table enumerating the different income thresholds if you are self-employed:

Working as a freelancer entails double the effort to ensure you get a steady stream of clients and projects to keep the money coming in.

Are you spending money to promote your business, either through running ads on social media or using traditional marketing methods? If so, then you can 

keep a record of all expenses involved in promoting your services

Enumerated below are some tips you can incorporate to make 

 Check your net profit and net loss to verify whether you are liable to pay income and self-employment taxes. Also, depending on your freelancing gig’s business structure, you may or may not be entitled to certain tax deductions or exempted from additional paperwork.

#2. Consider the pros and cons of freelancing

. Freelancing comes with inconsistent income, shouldering most expenses like repairs, equipment, and utilities, and the absence of employee benefits. Assess whether you can handle the combined perks and responsibilities of an employer and employee, and if you can flexibly adapt to the tax obligations of freelancing.

While self-employed individuals are not eligible for employee benefits such as health insurance or retirement benefits, you can set up a pension fund to save up for your retirement. Freelancers are entitled to State Pension, but you can also set up a private pension to get more benefits.

Yes. According to the IRS, freelancers are 

considered self-employed and must therefore file taxes as business owners

#2. How do I report freelance income in the USA?

Use Schedule C (Form 1040) to report income and losses incurred as an independent contractor or sole proprietor.

 If your income as a freelancer yields an amount that is less than $400 when expenses are deducted from it, then you have to report your freelance tax on Schedule SE.

#3. What forms do freelancers need to submit?

Freelancers are to submit their Schedule C Tax Form 

to report all freelance income earned within the year, along with a 

 on a Schedule C attachment if a freelancer's client pays them $600 or more for their services.

Generating income as a freelancer or independent contractor does not make you exempt from paying taxes. 

As such, it is your responsibility to know how much taxes you owe, when to file them, and what deductions are applicable to your taxes.

Understanding the different structures that are applicable to your freelancing work likewise presents you with more options on how you can make the most out of the freelance work setup.

Freelance taxes are taxes owed by freelancers, independent contractors, or self-employed individuals.

It covers Social Security and Medicare taxes, and comprise a significantly larger combined percentage of 15.3%.

Freelancing can take on four different business structures, namely, sole proprietorship, partnership, LLC, and corporation.

Read this easy-to-follow article and learn about the scope and requirements of filing freelance tax as a self-employed contractor.

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