This article is part of a larger series on How to Do Payroll.
Learning how to process payroll in Nebraska is a pretty straightforward process. Most of the laws align well with federal laws, and there are no local taxes levied by cities or municipalities in the state as there are in other states.
If you’re familiar with Nebraska payroll, here’s a breakdown of the changes since our last update.
- State Income Tax: Pay close attention to the updated rates, as Nebraska has cut income tax rates across all levels and has a schedule for subsequent annual cuts through 2027.
- Minimum Wage: While the minimum wage in Nebraska remains unchanged at $9.00 per hour, there is a ballot initiative in 2022 that will, if it passes, incrementally increase the minimum wage annually until it reaches $15.00 per hour in 2026.
However, there are still nuances that may trip up even the most seasoned payroll professionals. The best way to ensure accuracy with your Nebraska payroll and avoid costly fines is to use a payroll service, like QuickBooks Payroll. With it, you can onboard new employees, pay via direct deposit from the employee’s first paycheck, and file payroll taxes. Sign up today and get 50% off for 3 months.
Step-by-Step Guide to Running Payroll in Nebraska
It is relatively simple to handle Nebraska payroll because it doesn’t have special taxes or many state-specific forms. Here’s a quick guide on how to do payroll in Nebraska.
Step 1: Set up your business as an employer. Get your company’s Federal Employer Identification Number (FEIN). If your company is brand-new, you may need to apply for a FEIN. This is a simple process that can be completed online via the Electronic Federal Tax Payment System (EFTPS). If your company already has one, keep the FEIN handy. Your company’s FEIN is required to pay federal taxes.
Step 2: Register with Nebraska. Any company that pays employees in Nebraska must register with the Nebraska Department of Revenue. You must also register with the Nebraska Department of Labor. Both registrations are required to accurately withhold payroll taxes.
Step 3: Create your payroll process. When you join an established company, you may have inherited a payroll process. But if your company is new, you will need to create your payroll process from scratch, which includes deciding when and how you’ll pay employees, the payroll forms that need to be collected, and the taxes that need to be paid, among others. Overall, you can opt to do payroll yourself (not recommended), set up an Excel payroll template, or sign up for a payroll service.
Step 4: Have employees fill out relevant forms. You must collect forms from all of your new employees during onboarding. All employees must complete I-9 verification no later than their first day on the job. Every employee must also have a completed W-4 on file. Beginning Jan. 1, 2020, employees must also complete Nebraska Form W-4N. This form was created when the federal W-4 was changed so that employers have more clarity on what allowances employees wanted to take.
Step 5: Review and approve time sheets. Regardless of how frequently you run payroll, you’ll want to begin this step several days before your payroll is due. If there are any issues with employee time sheets, you have time to coordinate with the employee and get a fix. Whether you use paper time sheets or time and attendance software, review time sheets for accuracy. With paper time sheets, it’s a good idea to have your employees sign them, verifying that they agree on the accuracy of the hours. With electronic time and attendance systems, the software provides options for an electronic signature or other verification methods.
Step 6: Calculate employee pay and taxes. You will simplify your life and reduce mistakes if you use a standard process and payroll software to calculate pay and tax withholdings. There are many ways to calculate payroll, and it’s up to you to decide which is best for you. Nebraska has a progressive income tax, so your employees might have deductions at different rates.
Nebraska Income Tax Withholding Rates for 2022
Single or married filing separately
Married filing jointly and surviving spouses
Head of household
$32,211 and over
$64,431 and over
$47,761 and over
Important Note: These rates are going to change every year for the top tax bracket as follows:
- 2023 earnings: 6.64%
- 2024 earnings: 6.44%
- 2025 earnings: 6.24%
- 2026 earnings: 6%
- 2027 earnings and beyond: 5.84%
Step 7: Pay employee wages, benefits, and taxes. Most companies today use direct deposit to pay their employees, but paying via cash (not the best way) and paper check are also options. Make sure that you are paying your employees at least the Nebraska minimum wage of $9 per hour, which is higher than the federal minimum wage. You can pay your federal and Nebraska state taxes online. If you use a benefits provider, it should work with you to make deductions simple, automatic, and electronic.
Step 8: Save your payroll records. As with most business records, you want to keep copies for at least a few years. If you ever need to refer to a pay stub, you want to know where to find it and that you have it readily available. Sometimes former employees might allege they were underpaid and, without proper records, you may not be able to rebut their claims. Nebraska has no additional rules for document storage or retention, so follow federal guidelines.
Step 9: File payroll taxes with the federal and state government. All Nebraska state taxes need to be made to the applicable state agency on the schedule provided, usually quarterly, which you can do online at the Nebraska Department of Revenue website. To pay federal taxes, you can make those payments online using the EFTPS on one of the following two schedules:
- Monthly: When the IRS assigns you a monthly schedule, you need to deposit employment taxes on payments made during a calendar month by the 15th of the following month.
- Semiweekly: When the IRS assigns you a semiweekly schedule, you must deposit employment taxes for payments made Wednesday, Thursday, and Friday by the following Wednesday, and for payments made Saturday, Sunday, Monday, and Tuesday, by the next Friday.
Please note that reporting schedules and depositing employment taxes are different. Regardless of the payment schedule that you are on, you only report taxes quarterly on Form 941 or annually on Form 944.
Step 10: Complete year-end payroll reports. At the end of the year, you will need to first complete all W-2 forms for your employees and 1099 forms for your independent contractors. Both forms must be in the hands of the individuals no later than Jan. 31 of the following year.
Here’s a free checklist you can download and use to make sure you don’t miss any steps doing Nebraska payroll.
Learn more about doing payroll yourself in our guide on how to do payroll. It has a free checklist you can download to make sure you don’t miss any steps.
Nebraska Payroll Laws, Taxes & Regulations
Nebraska mirrors federal regulations. To make sure that your company adheres to all laws and regulations, it’s a good idea to speak with an employment law expert in your area. To ensure you maintain payroll compliance, review the ins and outs of doing payroll in Nebraska below.
With few exceptions, most employers in the US must pay Federal Insurance Contributions Act (FICA) taxes. The current FICA tax rate for Social Security is 6.2% and 1.45% for Medicare. Beyond federal taxes, Nebraska levies state taxes on businesses and employees. Businesses must calculate and withhold the correct amount of tax from employees and pay a percentage from their own bank accounts.
Employer Unemployment Taxes
All businesses in Nebraska must pay State Unemployment Tax Act (SUTA) taxes. The current rate for negative-rated employers and all new construction employers is 5.4% of the first $9,000 of each employee’s taxable income. For existing businesses not in the construction industry, the rate is 1.25%. Businesses that pay SUTA in full and on time can claim a tax credit of up to 5.4% on their Federal Unemployment Tax Act (FUTA) taxes.
To learn more about FUTA requirements, check out our guide on FUTA and Form 940.
Nebraska businesses with one or more employees must carry workers’ compensation insurance. Workers’ comp premiums will vary depending on the industry in which your company operates. Exceptions to this requirement include:
- Railroad employees
- Independent contractors
- Domestic workers
- Some agricultural businesses
- Sole proprietors
For employees, income taxes are a big item to keep in mind as more employers allow remote work. If an employee lives in Nebraska but works in another state, they may have to pay Nebraska state income tax, as the state does not currently have reciprocity with any other state. This could cause some employees to pay more in taxes. For most employees, you will need to deduct state income taxes from each paycheck.
Nebraska Minimum Wage
Nebraska raised its minimum wage to $9 per hour in 2016—more than the $7.25 federal minimum wage. For tipped employees, companies must pay at least $2.13 per hour. If an employee’s tips plus the cash wage do not equal $9 per hour, the business must make up the difference.
Note that the present minimum wage remains unchanged, but if a ballot measure passes in November 2022, the Nebraska minimum wage will increase as follows:
- Jan. 1, 2023, through Dec. 31, 2023: $10.50 per hour
- Jan. 1, 2024, through Dec. 31, 2024: $12.00 per hour
- Jan. 1, 2025, through Dec. 31, 2025: $13.50 per hour
- Jan. 1, 2026, and onward: $15.00 per hour
If you have employees who are eligible for overtime pay, you must calculate their overtime as 1.5 times their regular rate. An employee is eligible for overtime if they have worked over 40 hours in a workweek.
Need help calculating overtime for your employees?
Nebraska requires that companies pay employees regularly but does not describe a minimum schedule—and neither does federal law. However, Nebraska law states that if an employer intends to change a pay schedule, they must give all affected employees at least 30 days’ notice.
Regardless of the pay schedule your company uses, you must have regular and consistent paydays. You cannot move the days around to help with your cash flow. As a result, if you pay your employees on alternate Fridays, you must stick to it—unless you provide affected employees with the requisite 30 days’ notice.
You also have several options for paying your employees: cash, paper check, direct deposit, and pay card.
If you need to pay an employee and aren’t currently using a service, use one of our recommended ways to print a free payroll check.
Pay Stub Laws
Nebraska law requires employers to provide employees with a pay stub on each regular payday. Employers may provide the pay stubs to the employee by mail, email, paper copy, or through a payroll software. The pay stub must clearly state:
- Company name
- Hours the employee worked
- Wages earned
- Deductions made
To create your own pay stubs, use our free pay stub template to help you get started.
Nebraska Paycheck Deductions
Besides the deductions listed above, your company cannot deduct additional amounts from an employee’s paycheck unless an employee approves the deduction in writing and the deduction is:
- Mandated or permitted by local law or approved by a court
- Required costs for tools, uniforms, or other necessary equipment
- To repay loans made by your company to the employee
- To recover stolen property of the business
Terminated Employees’ Final Paychecks
Many states distinguish between paying an employee’s final paycheck after they quit versus after they resign. Nebraska does not, making your job easier and less confusing. For any employee who was fired, laid off, or quit, you need to pay them their final paycheck on the next regular payday or within two weeks of their last day, whichever comes first.
Nebraska HR Laws That Affect Payroll
Nebraska’s HR and employment laws align with federal regulations. For your company to remain compliant, consider some specific requirements regarding your employees.
Nebraska New Hire Reporting
Nebraska requires that employers submit new hire information to the Nebraska Department of Health and Human Services. You must report within 20 days the employee’s name, address, and Social Security number. You must do this for all new employees and rehired or recalled employees, including temporary and seasonal staff.
Nebraska Child Labor Laws
Nebraska generally follows the Fair Labor Standards Act (FLSA) child labor laws. Under the FLSA, there are restrictions for workers under the age of 18.
Nebraska allows for people as young as 14 to work up to eight hours per day and 48 hours per week. Stricter limitations exist around school days, where children 14 and 15 cannot work before 6 a.m. or after 10 p.m. and not more than three hours per day and 18 hours per week.
See our article on hiring minors for more information.
Nebraska follows federal guidelines and does not require meal or rest breaks for employees, but the state does require payment for brief breaks. These would include getting water or going to the restroom. The exception to this rule is for employers who operate assembly plants, workshops, or mechanical businesses. These employers must provide one paid 30-minute break to all employees working eight hours or more in a day.
Time Off & Leave Requirements
Nebraska Payroll Forms
Payroll forms can vary from state to state, and some have their own W-4. Fortunately, Nebraska only has two state-specific forms:
- W-4N: Employee withholding form for Nebraska residents
- 9N: Employee withholding form for nonresidents
Federal Payroll Forms
Here is a complete list and location of all the federal payroll forms you should need.
- W-4 Form: Provides information on employee withholdings so you can properly calculate and withhold federal and state income taxes
- W-2 Form: Used to report total annual wages for each employee
- W-3 Form: Used to report total annual wages for all employees
- Form 940: To calculate and report unemployment taxes due to the IRS
- Form 941: Used to file quarterly income tax
- Form 944: Used to file annual income tax
- 1099 Forms: Provides information for non-employee contract work
For a more detailed discussion of federal forms, check out our guide on federal payroll forms you may need.
Nebraska Payroll Tax Resources
- Nebraska Department of Revenue provides many forms, information on the latest laws and regulations, and other employer-specific information.
- Tax withholdings often trip up employees processing payroll; reviewing comprehensive information on Nebraska’s income tax withholding requirements may help you.
- For answers to questions about workers’ compensation coverage, Nebraska’s Workers’ Compensation Court offers guidance.
Nebraska payroll is relatively easy compared to some states. There are only two state-specific forms and no local taxes, so you’ll just have to stay informed of state-specific payroll and HR laws.