How to Do Payroll in Excel: 7 Simple Steps (+ Video & Template)

To add a column, choose the column letter (e.g., G, H, or I) you want your new column to come before. Right-click your mouse and then select “Insert.” Enter a header title in row 3 of your new column (for example, “Local NYC Tax”) and input the rates for applicable employees in the succeeding rows. Go to all the month tabs (from “January Payroll” to “December Payroll”), including the “Year-to-Date Payroll” tab, and enter a new column between columns N and Q (the tax columns). Label this “Local NYC Tax.”

When adding a column, simply highlight the column you want a new one to be in front of and right-click and select Insert.

To delete columns, highlight the column you want to remove, right-click your mouse, and then select “Delete.” The rules are the same if you delete a column from the “Set Up Employee Data” tab. If you remove a column from one of the payroll tabs, including the “Year-to-Date Payroll” and the “Set Up Employee Data” tabs, then you must delete it from the others.

For example, if you delete the “State Income Tax Rate” in column F of the “Set Up Employee Data” tab, you need to remove the “State Income Tax Rate” column (column Q) in all of the payroll month tabs and the “Year-to-Date Payroll” tab. If not, you’ll receive error messages—and your formulas won’t work.

Don’t delete the Social Security and Medicare columns in the “Set Up Employee Data” tab—although, you can change the tax rates if the IRS amends these.

When adding and deleting columns, consider whether you can simply change some of the existing column labels in the Excel spreadsheet. Aside from cutting down on errors, this will save you time from having to change multiple tabs.

To help, I added two columns (columns N and O) in the “Set Up Employee Data” tab and labeled each “Other Deductions.” Just double-click on the description and overwrite it with a label that more appropriately reflects your needs.

You can use the “Other Deductions” columns in the “Set Up” tab to input miscellaneous deductions specific to your company.

The “Other Deductions” columns can be easily personalized, so you don’t have to change any other tabs to match. Note that there’s only one “Other Deductions” column in the payroll month tabs, and the data that reflects there is the sum of columns N and O in the “Set Up Employee Data” tab. If you need to add more columns for deductions in the “Set Up” tab, follow the directions above for adding columns.

Although the “Set Up” tab has two “Other Deductions” columns, the monthly payroll tabs sum them up in one column.

Enter your employees’ full names under column A in the “Set Up Employee Data” tab. To do payroll in Excel, you need to re-enter their names on the payroll month tabs. When you do, ensure that it matches the name you entered in the “Set Up” tab. If there are differences in spelling and formatting, the monthly and annual payroll tabs will not be able to make automatic calculations.

When you have new hires, enter their details in the “Set Up Employee Data” tab after the existing employees; information will be auto-transferred to other tabs when you input their names.

In column B of the “Set Up Employee Data” tab, enter each hourly employee’s straight-time hourly rate (excluding overtime). Leave this cell blank for salaried employees.

In column C of the same tab, input each salaried employee’s annual salary. For example, if your staff earns $50,000 a year, enter “50,000.”

In column D, labeled “# of Pay Periods in Year,” enter the applicable pay period based on your payroll schedule or how often you pay employees.

• If weekly, input “52” (52 weeks in a year)
• If biweekly, input “26” (computed as: 52 weeks ÷ two weeks per pay period = 26)
• If monthly, input “12” (12 months in a year)
• If semimonthly, input “24” (computed as: 12 months ÷ two pay periods per month = 24)

Enter each employee’s federal and state income tax rates in columns E and F, respectively. To find the applicable rates, use the W-4 forms collected from employees when they joined your company. The tax rates depend on the number of allowances your employees entered (usually based on the number of dependents) and their filing status—like married, single, or head of household. Generally, the more allowances employees claim, the lower their tax rates.

Columns A through F in the “Set Up Employee Data” tab don’t have any formulas in the cells. Use your payroll records to ensure you enter accurate information.

If your payroll process includes withholding local taxes, you should have already added a column for it. If yes, input the applicable local tax rates. If not, check Step 1 for instructions on how to add a new column. Don’t forget to do the same for each of the payroll month tabs and the “Year-to-Date Payroll” tab.

Don’t change the Social Security and Medicare tax rates in columns G and H, respectively. These Federal Insurance Contributions Act (FICA) rates are predetermined by the IRS.

• Social Security
• Medicare

For Social Security, the tax rate is 6.2% of the employee’s gross salary. Keep in mind that Social Security maxes out if an employee earns $176,100 (in 2025 or $168,600 in 2024) in wages before the end of the year. If you have employees earning more than that, you need to stop withholding the 6.2% tax once their YTD earnings exceed that amount.

For example, if your employee meets the $176,100 earnings threshold for Social Security in April, delete all the formulas under “Social Security Tax” (column N) in payroll month tabs May through December for the employee. Note that because the Social Security tax rate is 6.2% of wages, the maximum amount any employee will pay annually in 2025 is $10,918.20 ($176,100 maximum x 0.062). For the year 2024, the maximum amount is $10,453.20 ($168,600 maximum x 0.062).

To help check your employees’ total earnings, look at column M (labeled “Year-to-Date Gross Pay”) in the “Year-to-Date Payroll” tab of the Excel payroll template. This column shows the employees’ YTD gross wages. Simply deduct all YTD nontaxable income (column I) from this amount to find the taxable gross income.

For Medicare, the tax rate is 1.45% on an employee’s first $200,000 in wages and an additional 0.9% if the earned wages exceed $200,000 in a calendar year. This increases the total Medicare tax to 2.35% for those individuals. If you have employees who reach this threshold, you need to change the formulas in the “Medicare Tax” column (column O) on all of the payroll month payroll tabs following the month the employee reached $200,000 in gross pay.

To further clarify, look at the screenshot below, specifically the formula field. Let’s say that the first employee on your list reached the threshold in March. To reflect the new tax rate, go to the “Medicare Tax” column of the April payroll tab. In the cell that applies to the employee, which in this example and in the below screenshot is the first one after the “Medicare Tax” title, delete the Vlookup function or the “((VLOOKUP(B4,’Set Up Employee Data’!A:O,8,FALSE)))” part of the formula. Replace it with “2.35%.”

This will overwrite the link to the employee’s Medicare tax rate (which is 1.45%) on the “Set Up Employee Data” tab. Don’t forget to go to the May to December payroll tabs and update the employee’s Medicare Tax rate formula.

If your employee reaches the $200,000 wage threshold for Medicare, check and revise the formula in the “Medicare Tax” column on applicable payroll month tabs.

The template contains several columns for the different types of benefits you may offer employees, such as health, dental, vision, and 401(k) plans. For each benefit applicable to your business, enter the employees’ premium per pay period in columns I through L of the “Set Up Employee Data” tab.

There are columns for you to withhold premium deductions for common insurance benefits.

You can also use columns M, N, and O for garnishments and other employee deductions. After entering the benefits and deduction details on the “Set Up Employee Data” tab, the template will automatically populate the appropriate fields when you input the employees’ names in column B of the monthly payroll tabs.

Relying on your employees to keep track of their PTO is not a good strategy. To help you monitor this, the payroll Excel template has an optional PTO calculation tool.

If you decide to use this, check the last three columns in the “Set Up Employee Data” tab that pertain to PTO. In column P (“Enter Annual PTO Hours”), input the total PTO hours employees are entitled to in a year.

You don’t need to fill column Q (“Auto Calculation-PTO Hours Taken”) since the template will automatically pull the total PTO hours each employee has used from the “Year-to-Date Payroll” tab. The same goes for column R (“Auto Calc-PTO Hours Remaining”) because it contains a formula that deducts the actual PTO taken from the employee’s annual entitlement.

Note that you have to separately track the actual PTO hours that each employee has taken for the applicable payroll period of every pay run. Input the data in column F (“PTO Hours Taken”) of the monthly payroll tabs and the “Year-to-Date Payroll” tab will sum up all PTO hours per employee.

There’s a section for PTO tracking. It will update as you enter paycheck details each period.

For accurate employee paychecks, enter the correct number of straight-time hours in column E and overtime hours in column G of the monthly payroll tabs. For straight-time hours, this is usually 40 hours or fewer. For overtime, the template calculates pay at a rate of 1.5 times your regular pay rate using the number of hours you specify. However, this can change depending on the labor laws of the state where your business operates.

Don’t edit the straight-time and overtime hourly rates listed in columns C (“Straight-Time Hourly Rate”) and D (“Overtime Hourly Rate”) of the monthly payroll tabs as these contain Excel payroll formulas and will update automatically. So, whenever you enter your employees’ names under column B of the monthly payroll tabs, the straight-time hourly rates automatically carry over from the “Set Up Employee Data” tab.

The overtime rate in column D is based on the straight-time hourly rate you enter in column C with a formula that simply multiplies it by 1.5 (time and a half).

When doing payroll in Excel, don’t forget to review your state laws on overtime rates. For state-specific guidelines most relevant to your business, check out our state payroll guides.

Federal law generally requires you to pay employees overtime for any hours worked over 40 in a consecutive seven-day period. However, if your business operates in California, you may need to make adjustments because of its rule that employees who work over 12 hours in one workday are entitled to double-time pay. So, any time worked between eight and 12 hours must be paid at a rate of 1.5 times and any hours over 12 must be paid at twice the straight-time rate.

In this case, you need to add new columns to all of the payroll month tabs and the “Year-to-Date Payroll” tab to capture the double overtime rate and the overtime hours that will apply to this rate. Check Step 1 for instructions on adding new columns. You also have to add the overtime formula and check if the other cells in all 13 tabs have the required Excel functions, are linked to applicable cells or tabs, and show the correct details. If you’re wondering what formula to input to the new double overtime rate column, use: C4*2.

If you decide to pay an employee bonus, you must withhold payroll taxes similar to the way you do with regular wages. In this payroll Excel template, just enter the bonus amount in column H, and it will be included in the taxable gross income.

For reimbursements of expenses that employees incurred during business travel, note that these transactions are generally not taxable. This is because you are simply reimbursing the money employees used to pay for business expenses; therefore, the employee didn’t actually receive any new income.

In this case, you don’t need to withhold payroll taxes. Instead, enter the amount you need to reimburse to the employee in column I of the applicable monthly payroll tab. There are formulas in place that will disregard this amount when calculating taxes to withhold and pay.

Bonuses and other non-taxable income should be entered in column H.

Salaries in column J of the monthly payroll tabs are automatically pulled from the “Set Up Employee Data” tab. Once the template has the employee’s annual salary and your total number of pay periods in the year, the column will automatically reflect the employee’s salary for the period. In calculating the per-period salary amount, note that the cells in column J have formulas that simply divide the annual salary by the number of annual pay periods you entered on the “Set Up Employee Data” tab.

Similar to column J, the “Straight-Time Pay” column (K) of the monthly payroll tabs also contains automated formulas. It has two parts: the number of straight-time hours worked multiplied by the straight-time hourly rate and the number of PTO hours taken multiplied by the straight-time hourly rate. This helps ensure that you’re paying employees all of the money they’re due, especially PTO hours.

Overtime pay is simple in that it’s calculated using the number of overtime hours you entered in column G and the hourly overtime rate in column D of the monthly payroll tabs. If you have overtime hours listed in column G, there should be a corresponding dollar amount in column L.

Gross pay (column M) is the total income an employee is due before deductions and taxes. In this payroll Excel template, it’s calculated by adding columns J through L, plus columns H and I, of the monthly payroll tabs. These columns contain the employees’ per period salary, straight-time pay, overtime pay, bonuses and commissions, nontaxable income, and reimbursements.

FICA taxes are labeled as “Social Security Tax” (column N) and “Medicare Tax” (column O) of the monthly payroll tabs. These columns are linked to the “Set Up Employee Data” tab, automatically pulling the applicable tax rates from there. The cells then multiply the rates by the employee’s gross pay minus any nontaxable income, such as reimbursements.

As an employer, you are responsible for withholding federal income taxes from your employees’ paychecks. You might also have to withhold additional amounts—depending on the state. In the monthly payroll tabs, columns P and Q (labeled “Federal Income Tax” and “State Income Tax,” respectively) calculate taxes based on the tax rate information you provided in the “Set Up Employee Data” tab.

Benefits are reflected in column R on each monthly payroll tab, which sums all premiums showing in columns I through L on the “Set Up Employee Data” tab. The amounts should be fixed from one pay period to the next, but you can update the amounts in the “Set Up Employee Data” tab if they ever change. If you do happen to change the benefit deductions for a particular employee, you need to overwrite the benefit deduction formulas for the prior months first and then overwrite it with the actual dollar amounts.

Other deductions should be handled the same way as benefits. Note that the “Other Deductions” column (column S) in the monthly payroll tabs consists of garnishments and other deductions detailed in the “Set Up Employee Data” tab. On the other hand, the “Total Deductions” (column T) is the sum of all taxes withheld, premiums collected for benefits, and other deductions.

The “Net Pay” column (column U) contains the amount you need to pay employees through check, direct deposit, or pay card. This amount is calculated automatically by subtracting the employee’s total deductions (column T) from their gross pay (column M).

Setting up a payroll spreadsheet in Excel beats having to use a calculator to manually compute the applicable salaries, taxes, and deductions. You can take advantage of Excel formulas and commands to automate some of the computations (such as Social Security and Medicare taxes) and customize how you want the data to be accessed or appear in Excel tabs or spreadsheets.

No, it doesn’t have a built-in payroll template. You have to create an Excel spreadsheet with

Excel payroll formulas to automate the calculations.

It can be a good option for some employers with a small workforce (up to 10 employees). However, while Excel provides ease in managing employee and payroll-related data, I only recommend it for very small businesses that have simple payroll and tax calculation needs.