November 28, 2022
How to Do Payroll in Minnesota: What Every Employer Needs to Know
Minnesota’s income tax withholdings are complex, with special taxes for entertainers, a different rate for supplemental pay, and more. It also varies rates according to the portion of salary for which you’re calculating taxes, with part of a salary (the first $30,000+ for some filers, for example) under one rate and the remainder under different rates. It has state unemployment insurance and workers’ compensation requirements as well. If you need help running your Minnesota payroll, consider using payroll software like . It files and pays your Minnesota payroll taxes and covers any penalties you are charged if its reps make a mistake (it’ll cover your mistakes too if you opt for a premium plan). You can pay employees via direct deposit or check, and same-day payment options are available as well. Sign up for a free trial or discounted rate. Step-by-Step Guide to Running Payroll in Minnesota Step 1: Set up your business as an employer. At the federal level, you need your Employer ID number (EIN) and an account in the Electronic Federal Tax Payment System (EFTPS). Step 2: Register with the State of Minnesota. To register for a Minnesota tax ID, you need your EIN, contact information, officers’ names and Social Security numbers, and your NAICS code. Then, create an account with Minnesota e-Services to file payments. You need a Minnesota Unemployment Insurance Employer Account to file and pay state unemployment insurance taxes (SUTA). Step 3: Set up your payroll process. You’ll need to decide on a payday schedule that ensures employees are paid at least monthly. You’ll also need to determine how you’ll pay them, the process you’ll follow to collect and submit payroll forms, and when you’ll start processing payroll before payday. Step 4: Collect employee payroll forms. These forms are best filled out during employee onboarding. Forms include the W-4, I-9, and direct deposit authorization. For Minnesota, employees need to fill out a Form W-4MN. North Dakota and Michigan residents need to file a Form MWR if they’d like to be exempted. Step 5: Collect, review, and approve time sheets. It’s important to track employee hours if you have hourly or nonexempt employees. Be sure overtime is accurately recorded, as this is taxed at a different rate. Step 6: Calculate payroll and pay employees. When it comes to calculating payroll, you can use software, a calculator, or even a preset Excel template. Minnesota offers a formula that you can program into your software to calculate withholdings. When you finish determining gross and net pay, deductions, taxes, etc., you’ll be ready to pay employees; direct deposit and paper check are the most common methods. Step 7: File Minnesota payroll taxes with the federal and state government. Follow the IRS instructions for federal taxes, including unemployment. Most often, you will need to file and pay Minnesota taxes and unemployment insurance electronically. Minnesota Income Taxes: If you paid less than $500 in withholdings in the previous year, you can submit your returns as an annual filer by Jan. 31 of the following year, or by the last day of the month in which you exceed $500. Otherwise, follow the quarterly schedule, just as you do for SUTA. Your payments, however, are due more frequently, depending on how much you owe. If you are a seasonal employer, check the Minnesota Dept. of Revenue for your options. SUTA: These payments are due quarterly. File them through the Employer Self-Service System. Log on to the Minnesota UI website to get instructions on file formats. If the due date for a report or tax payment falls Saturday, Sunday, or a legal holiday, reports and payments are considered on time if they are received on or before the following business day. Step 8: Document and store your payroll records. Minnesota requires you to keep records on employees for at least three years. Information should include contact information for you and your employee, pay stub information, a record of free meals, and proof of age of minors. Federal law requires you to keep payroll tax records for at least four years. Step 9: Do year-end Minnesota payroll tax reports. Send the federal Forms W-2 (for employees) and 1099 (for contractors) to your workers by Jan. 31 after the year for which you’re reporting. You’ll also have to send copies and summary pages of each to the IRS. Download our free checklist to help you stay on track while you’re working through these steps: Minnesota Payroll Laws, Taxes & Regulations No matter what state you are in, most businesses must pay Federal Insurance Contributions Act (FICA) taxes. The current FICA tax rate for Social Security is 6.2% and 1.45% for Medicare. Both you and the employee will pay these taxes, each paying 7.65% for the combined taxes. Federal unemployment taxes are 6% of each employee’s check, up to the first $7,000—employees don’t pay this, you do. Minnesota Taxes Minnesota’s state income taxes are a little more complex, as the rate changes for portions of an employee’s income. However, it supplies withholding forms, formulas, and an online calculator to help you determine how much to pay. State Income Taxes If you withhold federal taxes, you must withhold state taxes. Minnesota requires you to withhold for family members, students, and agricultural workers as well if they are employees. If you give wages in the forms of goods or services, then that counts as income for withholding. Corporate officers are also subject to withholdings. There are exceptions for interstate carrier companies and interstate air companies. Nonresident entertainers are subject to a special tax that requires withholdings. There are also special considerations for royalties from mining companies, pensions, surety deposits, and construction contractors. Get the details in the Minnesota Income Tax Withholding and Tax Tables booklet. Minnesota’s state income taxes run from 5.35% to 9.85%, depending on filing status and wages. You may end up applying different rates to the same employee. For example, an employee earning $50,000 a year is taxed 5.35% on the first $41,050 (for married filing jointly), and 6.8% on the rest. You’ll calculate withholdings based on status and allowances as noted in the Form W-4MN. Do not use the Federal W-4 form. If an employee does not complete the state W-4MN, withhold taxes at single filing status with zero allowances. Minnesota also requires that you apply a 6.25% withholding rate to supplemental payments like overtime, commissions, or bonuses. You need to pay electronically if: You withheld $10,000 or more in Minnesota income tax during the last 12-month period ending June 30 You are required to electronically pay any other Minnesota business tax to the Minnesota Department of Revenue You use a payroll service company If you’re required to pay business taxes electronically for one year, you must continue to do so for all future years. Reciprocity Agreements Minnesota has reciprocity agreements with Michigan and North Dakota. If you have employees that are residents of these states, they need to fill out a Form MWR, Reciprocity Exemption/Affidavit of Residency. Then, you do not need to withhold taxes for Minnesota but rather their home state. Seasonal Businesses If you consistently withhold taxes in the same three quarters but not in all four in a calendar year, you may qualify for a seasonal deposit and filing option. This will allow you to only pay during the quarters in which you pay wages. You need to apply to the state to qualify. Learn more on the Minnesota Department of Revenue website. Unemployment Insurance Minnesota charges SUTA taxes. Any employer with one or more employees doing paid work needs to pay unemployment insurance. Most wages, including paid time off, are included. Excluded wages include retirement, sick pay under some circumstances, reimbursements, and royalties. Excluded employees include corporate officers (including family members) with more than 25% ownership and employees of churches and religious organizations. Minnesota’s unemployment taxes are complex and determined each year. The taxable wage base is 60% of Minnesota’s average annual wage, and in 2022, that’s $38,000. The base tax rate runs 0.5% to 1% and is determined each year by the Minnesota Unemployment Insurance Trust Fund—for 2022, it’s 0.1%. The experience rate is the same as it was in 2020 and is maxed out at 8.9%. New employer rates vary from 1% to 8.9%, depending on the industry. Workers’ Compensation Insurance Minnesota requires you to pay workers’ compensation insurance, even if you have only one part-time employee. This includes minors and noncitizens. You must purchase through an insurance company. Minnesota does not allow private companies to pay medical bills directly for a workers’ compensation-qualifying injury. Minimum Wage Laws in Minnesota Minnesota rates for large employers ($10.33 per hour) are higher than those of smaller employers ($8.42 per hour), but the training wage is the same for both. There are no tip credits toward the minimum wage, and wages apply to all hours worked. Large employers are those with gross revenue of more than $500,000 in a year. Exemptions include: Executive, administrative, or professional workers Babysitters Volunteers of nonprofit organizations Farmworkers on a salary of a certain amount or who are under 18 in certain situations Taxi drivers Employees subject to the provisions of the U.S. Department of Transportation, like drivers, drivers' helpers, mechanics, and loaders Minnesota Overtime Regulations Overtime starts for hours in excess of 48 in a workweek and is 1.5 times the employee’s regular rate of pay. Hours spent on call and employee waiting time count as hours worked for overtime requirements. The exemptions are the same as for minimum wage. Different Ways to Pay Employees You can pay wages by cash or check. If an employee agrees, you can pay by direct deposit or payroll card. Payroll cards must meet the requirements outlined in Minnesota Statute 177.255. These include such things as: The employee must own the card account. The card cannot be linked to a form of credit. Neither you nor the card issuer can deduct any amounts from the card. You must receive authorization from the employee to electronically deposit the funds. You must give the option for them to have the money deposited without requiring a fee for them to access. You cannot pressure an employee to take direct deposit or pay cards. In addition, you need to provide the employees (upon request) with the records of deposits. Pay Stub Laws Pay stubs must be issued each payday and include: Employee name Hourly rate of pay (if applicable) Total number of hours worked by the employee Total amount of gross pay earned by the employee during that period Deductions Net pay after deductions Date the pay period ends Legal name (and the operating name, if different) of the employer Minimum Pay Frequency Employees in Minnesota must be paid at least once every 31 days, and all commissions must be paid at least once every three months. You need to pay new employees on the first regular payday if the wages are earned during the first half of a 31-day pay period. Public service corporations like utilities need to pay employees at least semimonthly. Paycheck Deduction Rules You can deduct money for the following reasons: Union-agreed deductions Payback for employer loans Court-ordered withholdings Pension or retirement funds Retirement Health benefits Uniforms or equipment (up to $50), must be paid back when the employee leaves You cannot deduct wages for broken equipment, lost money, or other losses, unless the employee has been found liable in court or has authorized you to deduct from their wages. Final Paycheck Laws If an employee is fired or laid off, you must pay them within 24 hours of the employee’s demand for payment. If the employee was in charge of money or property, you may take up to 10 days after the separation to audit accounts before paying. If an employee quits, then you must pay all the wages due by the next payday, unless the next payday is less than five days after the employee quits. Then, you have until the second payday or 20 days after the employee quits. Accrued Paid Time Off You are not required to provide paid vacation time, but if you do, it should be agreed upon in the employment contract. In addition, once you grant this, you must pay employees any accrued leave if they leave your company. So, in essence, use-it-or-lose-it policies aren’t allowed. If your policy doesn’t outline how the time off is accrued and it’s not clear whether they’ve actually earned it, you will have more leeway. Minnesota HR Laws That Affect Payroll Unlike its tax withholdings, Minnesota’s HR laws are not that difficult. Below are the highlights: Minnesota New Hire Reporting You need to report newly hired, rehired, and returning-to-work employees to the Minnesota Department of Human Services within 20 days of hire. There are three ways to file: Online at Minnesota New Hire Reporting Employer Registration. If you choose to report electronically, you need to do this twice a month, not more than 16 days apart. Mail to Minnesota New Hire Reporting Center, P.O. Box 64212, St. Paul, MN 55164-0212 Fax to 800-692-4473 Lunch & Other Break Time Requirements You must provide your employees with restroom breaks within every four hours of work, and a meal break of at least 20 minutes for lunch every eight hours of work. Breaks less than 20 minutes must be counted as hours worked and need to be paid. Hiring Minors When you hire minors, you must keep a copy of their proof of age as part of your payroll records. Proof can be a birth certificate, driver’s license or permit, an age certificate issued by the school, or a Form I-9. Children under 14 cannot be employed except as newspaper carriers (if over 11), in agriculture (if over 12 and with parent permission), as actors or models, or as referees in youth athletics (if over 11 and with parent permission). Per Minnesota law, children under 16 cannot work over 40 hours a week or eight hours a day, except in agricultural operations. They cannot work before 7 a.m. or after 9 p.m. or during school hours on school days (unless they have an employment certificate from the school). To maintain compliance with federal law, however, don’t schedule them to work past 7 p.m. on a school day. Rules for large employers: If you generate annual sales revenue of over $500,000, you cannot employ minors under 16 later than 7 p.m., more than three hours a day, or more than 18 hours a week. Minors 16 and 17 cannot work later than 11 p.m. on evenings before school days or before 5 a.m. on school days unless they have their parent’s permission. With permission, they can work as late as 11:30 p.m. or as early as 4:30 a.m. Minors cannot work: Serving alcohol With hazardous materials or explosives Operating power-driven machinery On or near construction sites For information on federal child labor laws, check out our guide to hiring minors. Minnesota Family Leave Act Minnesota does not have a state family leave act. You must, however, comply with the federal Family and Medical Leave Act (FMLA). The FMLA requires you to provide up to 12 weeks of unpaid leave in a 12-month period for bonding with a new child, dealing with serious health conditions, or, in some cases, dealing with emergencies from a family member in military duty. The federal FMLA applies to employers who had at least 50 employees in 20 weeks of the current or previous year. Learn more about FMLA in our article about federal labor laws. Paid Sick & Parenting Leave For leave purposes, Minnesota does not consider you an employer unless you employ 21 or more employees at least one site. Employees qualify for leave after they have worked at least 12 months before the leave request at an average of one-half the full-time equivalent for the employee’s job position. Voting & Jury Leave You need to provide employees enough time off, with pay, to vote in elections. Elections include primaries and general elections for national or state officials. You do not have to pay employees for time spent on jury duty, but you cannot penalize or fire an employee for complying with a summons or serving on a jury. Payroll Forms Like most states, Minnesota has online filing for most of its tax and payroll forms. However, it does have some options for mailing in limited cases. Minnesota State W-4 Form Starting in 2020, Minnesota uses its own form for income tax allowances. Employees need to fill out a Form W-4MN in addition to the federal W-4. You need to send copies of the W-4MN to the Minnesota Department of Labor and Industry if: Your employee claims more than 10 withholdings Your employee claims to be exempt from Minnesota withholding and you reasonably expect the wages to exceed $200 per week (this does not apply to North Dakota or Michigan residents filing the Form MWR) You believe your employee is not entitled to the number of allowances they’ve claimed Other Minnesota State Payroll and Tax Forms Form MWR: For Michigan and North Dakota residents working in Minnesota who want to waive withholding Minnesota state taxes Minnesota New Hire form: If you do not file online Find other forms on the Department of Revenue website. Federal Payroll Forms W-4 Form: To help employers calculate taxes to withhold from employee paychecks W-2 Form: Reporting total annual wages earned (one per employee) W-3 Form: Reports total wages and taxes for all employees Form 940: Reports and calculate unemployment taxes due to the IRS Form 941: Filing quarterly income and FICA taxes withheld from paychecks Form 944: Reporting annual income and FICA taxes withheld from paychecks 1099 Forms: Providing non-employee pay information that helps the IRS collect taxes on contract work For a more detailed discussion of federal forms, check out our guide on federal payroll forms you may need. Minnesota Payroll Tax Resources/Sources Unemployment Insurance Employer Handbook: Takes you through the laws and procedures from registering to reporting, plus who is covered and how benefits work Checklist for Hiring an Employee: All the steps for hiring a new employee, from registering an employer to filing withholdings Minnesota Department of Revenue Business Page: Lists the tasks and links for withholding as well as business tax resources Workers’ Comp webpage: Information about workers’ compensation, including resources, training, and insurance carrier lookup Minnesota Income Tax Withholding Booklet: Takes you from registering your business to amending returns, plus has a formula for programming withholdings into your payroll program Bottom Line Minnesota taxes incomes on a graduated basis, with different rates on different portions of an employee’s salary. It also has separate rates for overtime, and even for non-resident entertainers. This can get intimidating, but the state offers tax tables, formulas, an online calculator, and even free courses to get you on the right track.
November 28, 2022
How to Do Payroll in Tennessee: What Every Employer Needs to Know
Learning how to do payroll in Tennessee is pretty simple since there are no state-specific regulations. Tennessee also does not have income taxes or any local taxes, and in return, no state W-4 tax withholding form for you to process. While Tennessee payroll is one of the simplest in the country, mistakes can still happen. To avoid those, consider using . It files and pays your payroll taxes and covers any penalties you may incur from its mistakes. You can pay employees by direct deposit or paper check, and same-day payment options are available. Sign up for a free trial. Here’s a checklist to help you process your Tennessee payroll. Step-by-Step Guide to Running Payroll in Tennessee Tennessee follows federal guidelines for payroll, making the process straightforward—you won’t have to juggle between federal and state rules to ensure your business is in compliance. Most small business owners find that calculating payroll taxes is the most challenging, especially attempting it by hand. Using , this calculation is done for you. Here is a basic guide to running payroll in Tennessee: Step 1: Set up your business as an employer. New companies may need to access the federal Electronic Federal Tax Payment System (EFTPS) to create a new Federal Employer Identification Number (FEIN). Your FEIN is required to pay federal taxes. Step 2: Register your business with the State of Tennessee. If your business is new, you need to register on the Tennessee Secretary of State’s website. Any company that pays employees in Tennessee must also register with the Tennessee Department of Revenue. Step 3: Create your payroll process. Establishing a standard payroll process starts with determining how and when employees are paid. A business that is already established probably has a process that you inherit, but it may need to be altered to better fit your needs. You can opt to process payroll by hand (you’ll need to learn the steps and laws inside and out), set up an Excel payroll template, or sign up for a payroll service to help you handle your Tennessee payroll. Step 4: Have employees fill out relevant forms. Every company that hires employees in Tennessee must collect certain forms during the onboarding process. Each employee must complete I-9 verification. New employees must also have a completed W-4 on file. There is no state W-4 since Tennessee does not have a state income tax. Step 5: Review and approve time sheets. To ensure smooth payroll processing, you’ll need a way to track employee time—many small business owners create their own time sheets or start with time and attendance software. If you have hourly or nonexempt employees, you’ll need to be diligent about collecting time records at least a few days before payroll is due. Reviewing the time sheets gives you time to speak with anyone who might have made mistakes. Step 6: Calculate employee gross pay and taxes. To do payroll in Tennessee, you’ll need to make numerous payroll calculations, including total hours worked (you can use our free time card calculator), gross pay, payroll deductions and tax withholdings, benefit premiums, etc. Step 7: Pay employee wages, benefits, and taxes. Most companies today pay all employees through direct deposit. But cash (there is a legal way to do it) and paper checks are also options. Tennessee does not have a state minimum wage, so the federal minimum wage of $7.25 per hour applies. You can pay your federal and Tennessee 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. Keeping your company business records is good practice. Tennessee does not require that your business keep any employment documents. The Fair Labor Standards Act (FLSA), however, does require businesses to keep certain records for at least three years. Step 9: File payroll taxes with the federal and state government. All Tennessee state taxes need to be paid to the applicable state agency on the schedule provided, usually quarterly, which you can do online at the Tennessee 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 following Friday. Please note that reporting schedules and depositing employment taxes are different. Regardless of the payment schedule you are on, you only report taxes quarterly on Form 941 or annually on Form 944. Step 10: Complete year-end payroll reports. Every year, you will need to complete payroll reports, including all W-2 Forms and 1099 Forms. You must provide these forms to employees no later than Jan. 31 of the following year. Tennessee Payroll Laws, Taxes & Regulations Calculating Tennessee payroll taxes and ensuring compliance with all federal and state employment laws are crucial to ensure a correct payroll on every occasion. To help you maintain compliance with payroll regulations, review information on Tennessee payroll laws, taxes, and regulations 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. Both the employer and the employee will pay these taxes, each paying 7.65% for the combined Social Security and Medicare taxes. Tennessee Taxes Like most states, Tennessee has certain taxes that companies must pay. Tennessee does not, however, levy local taxes or a state income tax on employees. Employer Unemployment Taxes All businesses in Tennessee must pay State Unemployment Tax Act (SUTA) taxes. The current wage base is $7,000 and rates range from 0.01% to 10.0%. All new employers in Tennessee will pay a SUTA rate of 2.7%. 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. Workers’ Compensation Tennessee requires every employer with five or more employees to carry workers’ compensation insurance. Workers’ compensation insurance provides benefits to employees who suffer on-the-job injuries and covers the cost of medical treatment and lost wages. Payments start on the fourth day of disability. Income Taxes Tennessee does not have state income tax. Tennessee Minimum Wage Tennessee does not have a state minimum wage, so the federal minimum wage of $7.25 is the default. Businesses must pay tipped employees at least $2.13 per hour, provided that their tips get them to the hourly minimum wage. If not, the company must make up the difference. Calculating Overtime Tennessee overtime rules follow the Fair Labor Standards Act requirements. Under the FLSA, all employers must pay employees 1.5 times their regular hourly wage for hours worked over 40 in a workweek. Paying Employees Tennessee law requires businesses with five or more employees to pay their workers at least once per month. Employers must also establish and stick to regular pay days. If a company pays workers just once per month, they must pay employees by the fifth day of the following month. When a company pays employees twice per month, Tennessee mandates that companies pay as follows: All wages earned before the first day of any month must be paid to employees no later than the 20th day of the following month All wages earned before the 16th day of any month must be paid to employees no later than the fifth day of the following month Companies may choose to pay employees more than twice per month. If they do, they need to establish regular pay days and must provide notice of any changes. Tennessee also allows employers to pay workers by one of the following methods: Cash Paper check Direct deposit Payroll card Pay Stub Laws Tennessee has no law requiring employers to provide a pay stub to their employees. Doing so, however, is a good business practice. We recommend including information like your employee’s name, pay rate, pay period covered, pay date, etc. Tennessee Paycheck Deductions According to the Tennessee Department of Labor & Workforce Development, businesses can only deduct wages from an employee’s paycheck if the employee has provided written consent. So, if you need to deduct any of the following from an employee’s pay, you must first get written consent from that employee: Cash shortages Broken, damaged, or stolen company property Returned checks Required uniforms or tools Please note that, according to the Department of Labor, a company cannot make deductions to an employee’s pay if those deductions would cause the employee to earn less than the federal minimum wage ($7.25 per hour) for that pay period. Terminated Employees’ Final Paychecks When an employee quits, resigns, is terminated, or discharged, Tennessee law mandates that the employee be paid their last paycheck no later than the next regular payday or 21 days after their final workday, whichever occurs last. Tennessee HR Laws That Affect Payroll Tennessee does not have many state-specific HR laws. You need to ensure that you are following the federal guidelines, which Tennessee law mostly follows. Tennessee New Hire Reporting Every employer in Tennessee must report new hires and any rehired employees to the Tennessee Department of Labor & Workforce Development within 20 days of their hire date. This report is used to enforce child support orders and must include the employee’s name, address, and Social Security number. Meals & Breaks You must give 30-minute unpaid breaks to employees scheduled to work six or more consecutive hours. This law does not apply to workplaces where the nature of the business provides an ample opportunity for workers to rest. Meal breaks are not required under Tennessee law, but if an employee does provide a meal break, it must be more than 20 minutes and does not have to be paid. Breaks of less than 20 minutes generally need to be paid breaks. Tennessee Child Labor Laws Children can begin working at age 14. For 14- and 15-year-old workers, they can only work three hours per school day and 18 hours per school week. When school is not in session, 14- and 15 year olds can work up to eight hours per day and up to 40 hours per week. There is no restriction on children 16 years or older. Time Off & Leave Requirements Tennessee does not have many state-specific time off and leave requirements. Employers must accommodate voting and jury duty and those of a certain size must provide maternity leave. Payroll Forms Tennessee does not have state payroll forms since the state does not levy income taxes. You should familiarize yourself with federal forms though. 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; summary form of W2 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 nonemployee contract work Tennessee Payroll Tax Resources Tennessee Department of Revenue provides many forms, information on the latest laws and regulations, and other employer-specific information. Tennessee Department of State Online Business Services has many great resources for new and existing businesses to help them navigate licensing, taxes, and employer requirements. Tennessee Department of Labor offers support and resources to help businesses ensure compliance with unemployment and workers’ compensation, plus other labor laws. Bottom Line It is relatively painless to navigate Tennessee’s HR laws as they follow federal regulations. Tennessee has no state income tax and no state payroll forms, making it one of the easiest states to pay employees. Even though it’s straightforward, we still recommend using payroll software to reduce mistakes and increase efficiency. Check out today for a free trial.
November 28, 2022
How to Do Payroll in New Hampshire: What Every Employer Needs to Know
Learning how to do payroll in New Hampshire is a breeze because the state doesn’t have income tax and local taxes. It also doesn’t require a state income deduction form, which is one less thing for you and your employees to worry about. While doing New Hampshire payroll is pretty easy, mistakes can still happen. To avoid those, you may want to check out , which files and pays your payroll taxes and covers any penalties you may incur from its mistakes. You can pay employees by direct deposit or paper check, and same-day payment options are available. Sign up for a free trial today. Here’s a checklist to help you stay on track: Step-by-Step Guide to Running Payroll in New Hampshire New Hampshire makes payroll easy for businesses by generally following federal guidelines. There are several steps you need to follow to set your business up for success, starting from setting yourself up as an employer by getting tax ID numbers to making calculations and paying employees. Here are the basic steps you should follow to run payroll in New Hampshire. Step 1: Set up your business as an employer. New companies may need to access the federal Electronic Federal Tax Payment System (EFTPS) to create a new Federal Employer Identification Number (FEIN). Your FEIN is required to pay federal taxes. Step 2: Register your business with the State of New Hampshire. If your business is new, you need to register on the New Hampshire Secretary of State’s website. Any company that pays employees in New Hampshire must also register with the New Hampshire Department of Revenue Administration. Step 3: Create your payroll process. Determining how and when you pay employees is crucial to creating a standard payroll process. If your business is established, you may have inherited a process, but you may want to change it to better fit your needs. You can opt to process payroll by hand, use Excel payroll templates, or sign up for a payroll service to help you handle your New Hampshire payroll. Step 4: Have employees fill out relevant forms. Every company that hires employees in New Hampshire must collect certain forms during the onboarding process. Each employee must complete I-9 verification. New employees must also have a completed W-4 on file. Step 5: Review and approve time sheets. The best practice is to collect time sheets several days before your payroll is due. Reviewing the time sheets from your nonexempt employees, hourly and some salaried, gives you time to speak with anyone who might have made mistakes. There are many ways to track employee time—some of which are free (i.e., free time sheets and free time and attendance systems like Homebase). Step 6: Calculate employee gross pay and taxes. There are numerous payroll calculations you’ll need to perform when doing your New Hampshire payroll. You’ll need to total employee work hours (our free time card calculator can help), gross pay, deductions and taxes withheld, benefits due, and final net pay. Step 7: Pay employee wages, benefits, and taxes. Most companies today pay all employees through direct deposit. But cash and paper checks are also options. New Hampshire does not have a state minimum wage, so the federal minimum wage of $7.25 per hour applies. However, under New Hampshire law, tipped employees who regularly receive more than $30 per month in tips must be paid at least $3.26 per hour, with the expectation that their tips make up for the minimum wage difference. You can pay your federal and New Hampshire state taxes online. If you use a benefits provider, it should work with you to make deductions simple, automatic, and electronic. Step 8: Save and file your payroll records. Keeping your company business records is good practice and New Hampshire law requires that employers keep some records. Businesses must keep the following for at least three years for each employee: Payroll details showing time worked, breaks, PTO, and amount paid Signed copy of each written notice to an employee regarding their pay rate, pay frequency, date of payment, and method of payment New Hampshire also requires that if a time sheet was appropriately altered, it must be signed by the employee and any software used to record time must not allow the employer to modify a time record without the employee’s knowledge. Step 9: File payroll taxes with the federal and state government. All New Hampshire state taxes need to be paid to the applicable state agency on the schedule provided, usually quarterly, which you can do online at the New Hampshire 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 following Friday. Please note that reporting schedules and depositing employment taxes are different. Regardless of the payment schedule you are on, you only report taxes quarterly on Form 941 or annually on Form 944. Step 10: Complete year-end payroll reports. Every year, you will need to complete payroll reports, including all W-2 Forms and 1099 Forms. You must provide these forms to employees no later than Jan. 31 of the following year. New Hampshire Payroll Laws, Taxes & Regulations Knowing how to calculate New Hampshire payroll taxes and ensure compliance with all federal and state employment laws is crucial to making sure your payroll is accurate every time. To help you maintain compliance with payroll regulations, learn more about doing payroll in New Hampshire 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. Both the employer and the employee will pay these taxes, each paying 7.65% for the combined Social Security and Medicare taxes. New Hampshire Taxes Like most states, New Hampshire has certain taxes that companies must pay. New Hampshire does not levy local taxes or a state income tax on employees. Employer Unemployment Taxes All businesses in New Hampshire must pay State Unemployment Tax Act (SUTA) taxes. The current wage base is $14,000 and rates range from 0.1% to 7.0%. All new employers in New Hampshire will pay a SUTA rate of 2.7%. Workers’ Compensation New Hampshire requires every employer with one or more employees to carry workers’ compensation insurance. Workers’ compensation insurance provides benefits to employees who suffer on-the-job injuries and covers the cost of medical treatment and lost wages. This protects you from potential lawsuits and other monetary damages. New Hampshire Minimum Wage New Hampshire does not have a state minimum wage, so the federal minimum wage of $7.25 is the default. For tipped employees who regularly receive over $30 per month in tips, businesses must pay them at least $3.26 per hour, provided that their tips get them to the hourly minimum wage. If not, the company must make up the difference. Calculating Overtime New Hampshire overtime rules follow the Fair Labor Standards Act requirements. Under the FLSA, all employers must pay employees 1.5 times their regular hourly wage for hours worked over 40 in a workweek. Paying Employees New Hampshire law mandates that employers pay employees at least every other week. The law breaks this down to provide for the following pay schedule options: Employees who are paid weekly must be paid within eight days of the end of the pay period. Employees who are paid every other week must be paid within 15 days after the end of the pay period. Employers can request a different pay schedule from the New Hampshire Department of Labor, which will review requests on a case-by-case basis. If a company wants to pay employees less frequently, it must provide the following information to the state: Method of payment Proposed frequency of payments Designated payday Employee classification Salary range of all employees FEIN New Hampshire also requires employers to pay workers by one of the following methods: Cash Paper check Direct deposit Payroll card Pay Stub Laws New Hampshire requires every business to give its employees access to pay stubs, including an itemized accounting of wage deductions at least once per month. Pay stub information generally includes: Employee name and ID Pay period Pay date Gross wages, including regular and overtime pay Tips, commissions, or other earnings Deductions Net pay New Hampshire Paycheck Deductions New Hampshire has an extensive law discussing wage deductions. A company cannot deduct any of the following from an employee’s pay: Cash shortages Broken, damaged, or stolen company property Returned checks Required uniforms or tools The law goes further to say that a company cannot deduct any amount from an employee’s pay, unless: Permitted by law The employee has consented in writing, and the consent covers one of the following items: Union dues Healthcare and retirement contributions Charitable contribution Payments to a bank account held by someone other than the employee Vehicle use Child care Parking fees Loan repayment to employer Accidental wage overpayment Educational payments Gym or fitness center memberships Additional reasons agreed upon by the employer and employee Please note that, according to the Department of Labor, a company cannot make deductions to an employee’s pay if those deductions would cause the employee to earn less than the federal minimum wage ($7.25 per hour) for that pay period. Employees’ Final Paychecks New Hampshire law sets requirements on employers to pay employees’ final pay based on how the employment relationship ended. The following chart breaks down the state requirements on when you need to pay an employee’s final wages after separation from employment with your company. New Hampshire HR Laws That Affect Payroll New Hampshire does not have many state-specific HR laws. Even though there are few, you still need to ensure that you are following the federal guidelines, which New Hampshire law mostly follows. New Hampshire New Hire Reporting Every employer in New Hampshire must report new hires and any rehired employees within 20 days to New Hampshire Employment Security. This report is used to enforce child support orders and must include the employee’s name, address, and Social Security number. Meals & Breaks You must give employees a 30 minute break if they are scheduled to work more than five consecutive hours. This break does not have to be paid unless the employee cannot completely escape work during this time. New Hampshire Child Labor Laws Children as young as 12 years old can work, provided that they have a Youth Employment Certificate. Children between 12 and 15 cannot work more than three hours on a school day and not more than 23 hours in a school week. They cannot work more than eight hours per non-school day and not more than 48 hours during non-school weeks. Children aged 16 and 17 do not need a Youth Employment Certificate to work, but they do need signed parental permission. These children are not restricted to hours per day but rather limited by the workweek hours and school days, as follows: Under no circumstances can a child aged 16 or 17 work more than six consecutive days. Time Off & Leave Requirements New Hampshire Family Leave New Hampshire follows the Family and Medical Leave Act (FMLA), which requires that all eligible employers provide up to 12 weeks of unpaid leave for employees who fall under a covered disability. This can include pregnancy and caring for an ill family member. The FMLA does not require that companies pay employees for this time off work, but it does require that employers keep the employee’s job, or a substantially similar one, available to them when they return. New Hampshire does not provide for any additional family leave under state law. New Hampshire does, however, require employers with at least six employees to provide pregnancy disability leave. An employee who cannot work because of pregnancy, childbirth, or a related condition, may take unpaid leave for as long as the person is disabled. The employer must keep the employee’s position or similar position available for them upon their return. Paid Time Off New Hampshire has no laws requiring employers to provide employees with paid time off (PTO). Companies in New Hampshire are free to create PTO policies and may include whether they pay out accrued and unused PTO when an employee leaves. New Hampshire does not require that companies do, so it’s a good practice to have this clearly defined in your company policy. The important thing is to follow the guidelines in your policy, or you can be held liable. Click below to see New Hampshire requirements for other types of leave. Payroll Forms New Hampshire does not have any state payroll forms because the state has no income tax. 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; summary form of W2 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 New Hampshire Payroll Tax Resources New Hampshire Department of Revenue provides many forms, information on the latest laws and regulations, and other employer-specific information. New Hampshire Department of State Online Business Services has many great resources for new and existing businesses to help them navigate licensing, taxes, and employer requirements. New Hampshire Department of Labor offers support and resources to help businesses ensure compliance with unemployment and workers’ compensation plus other labor laws. Bottom Line With no state income tax and no state payroll forms, New Hampshire is one of the easiest states to run payroll. For the most part, its HR laws follow federal regulations, making your job simple and straightforward. Still, payroll and tax calculations are complex. Partner with to increase your efficiency and reduce the chance of mistakes.
November 24, 2022
How to Do Payroll in Washington, D.C.: What Employers Need to Know
Learning how to do payroll in Washington, D.C., is fairly easy because it mostly follows general federal guidelines. You will be required to obtain a federal Employee Identification Number (EIN), state tax and unemployment IDs, and an employment services number. You can take proper precautions to remain in state payroll compliance by following our steps below (and downloading our free checklist to make sure you don’t miss anything). If you need help running your D.C. payroll, consider using payroll software like . It files and pays your payroll taxes in addition to other requirements, i.e., payments for D.C.’s employer-sponsored paid family leave program. You can pay employees via direct deposit or check, and same-day payment options are available. Sign up for a free trial or discounted rate. Running Payroll in D.C.: Step-by-Step Instructions Step 1: Register for a federal Employee Identification Number. Every employer, regardless of the state in which it resides, must register for an EIN. Also known as a Federal Tax ID number, it is used to identify you as a business. Also, create an account in the Electronic Federal Tax Payment System (EFTPS). Step 2: Obtain a State Tax and Unemployment ID. New businesses with employees in the District of Columbia must complete Form FR-500, the Combined Business Tax Registration Application. Once registered with the D.C. Office of Tax and Revenue (OTR), you will immediately be issued numbers for both your state tax and unemployment tax. Step 3: Register for an Employment Services number. Employers who pay wages in D.C. must register for an employer account with the Department of Employment Services Self-Service Portal (ESSP). After the registration is complete, you will receive an EIN and can begin to file wage reports and maintain your account online. Step 4: Register your payroll provider. If your business uses a third-party payroll provider, such as , you will be required to assign your agent as a third-party administrator and grant power of attorney (POA). This step can be done through the ESSP after you register for your Employment Services number (details in Step 3). Step 5: Collect employee documents. Before calculating payroll, you must collect the following forms from your employees, generally during onboarding: W-4 tax form D-4 tax form I-9 paperwork Direct deposit bank information Step 6: Collect time sheet records from your employees. Whether you pay W-2 employees or 1099 contractors, you must collect and approve their hours worked to submit payroll. Using time and attendance software or our free time card calculator can make this process easier by saving you time and ensuring accuracy—but you can also create your own time sheets using one of our free time sheet templates. Step 7: Process payroll and send payment to your employees. In D.C., you must pay your employees at least twice a month on a regular schedule. You can calculate payroll on your own, even using Excel, or have a payroll processing service calculate and submit the payroll for you. After processing your payroll, you must remit payment to your employees (cash, check, or direct deposit). Step 8: File Federal and D.C. payroll taxes. Your federal tax filing will depend on if your business is a sole proprietorship or LLC (Schedule C) or corporation (Form 1120 or 1120-S). Additionally, employers must file an Employer Withholding Tax Return, either FR-900A (annual filing) or FR-900Q (monthly and quarterly filing) with the District of Columbia. Step 9: Document and store your payroll records. The District of Columbia requires that employers store payroll records for up to three years. When documenting employee payroll you should include the following: employee name, address, Social Security number, rate of pay, exempt status, and the amount paid per pay period. Step 10: Process annual Federal payroll reports. The final step in payroll processing is to process your annual federal payroll reports. You will need to provide W-2s for all regular employees and 1099s for all independent contract employees. These forms must be sent to all employees by Jan. 31 of the following tax year. D.C. Payroll Laws, Taxes & Regulations Washington, D.C., employers are responsible for paying payroll taxes, as well as Social Security and Medicare taxes, paid under the Federal Insurance Contributions Act (FICA). The employer pays half of FICA (6.2% for Social Security and 1.45% for Medicare) and the other half is paid from the employee’s wages. There are also some state-specific payroll regulations to take note of, such as its progressive tax rates depending on salary—which is why it has the highest tax rate in the country. A few other things to consider include: Employers must withhold income taxes from any D.C. resident who works within the District of Columbia. D.C. has reciprocal agreements with Virginia and Maryland (these residents who work in D.C. have taxes withheld for their home states only). Employers are required to contribute 100% to the Paid Family Leave tax. Additionally, employers are required to file an Employer’s Quarterly Contribution and Wage Report (Form UC-30) each quarter. D.C. Income Taxes D.C has a progressive income tax with seven brackets ranging from 4% to 10.75%, depending on the annual amount of income. Paid Family Leave Taxes Private employers in D.C. are required to pay a 0.62% Paid Family Leave tax to fund the paid leave benefit. This tax is 100% employer-funded and cannot be deducted from an employee’s paycheck. The Paid Family Leave Act allows for: Two weeks to care for a pregnancy 12 weeks to bond with a new child 12 weeks to care for a family member with a serious health condition 12 weeks to care for the employee’s own serious health condition Unemployment Insurance (UI) Taxes Along with federal unemployment insurance taxes (FUTA), employers in D.C. are required to file D.C. unemployment insurance taxes. Unlike federal rules and those in other states, there is no minimum wage amount before UI taxes must be paid. This means that even if you have only one employee, no matter how much you pay them, you are liable for UI taxes. New employers in the District of Columbia are assigned a standard tax rate of 2.7%. This tax, paid on the first $9,000 of wages paid to each employee, funds the unemployment benefits used to pay workers who are no longer employed. Established employers are subject to a lower (or higher) tax rate depending on their experience rating. The experience rating is determined by: Whether a claim has been filed against an employer The amount of taxes paid The average amount of an employer’s taxable payroll (determined in three-year increments) Workers’ Compensation Insurance Any business operating in Washington, D.C., with one or more employees is required to carry workers’ compensation insurance to cover injuries or illnesses that are a direct result of an employee’s job. This coverage also applies to part-time staff, minors, and domestic workers who work a minimum of 240 hours in a quarter. Workers’ compensation is overseen by the Department of Employment Services, which issues certificates of compliance and enforces penalties on any company found to be noncompliant. Minimum Wage Laws in D.C. The minimum wage in the District of Columbia (as of July 1, 2022) is set at $16.10 per hour. The base minimum wage for tipped workers (such as restaurant employees) is $5.35 per hour, although if an employee’s tip earnings plus their base minimum wage do not equal the full minimum wage of $16.10 per hour (based on a full workweek), the employer must pay the difference. Salaried employees are entitled to receive pay equal to or higher than the minimum hourly wage requirement (minimum of $33,696 per year). The following jobs and groups are exempt from minimum wage requirements: White Collar – includes executive, administrative, and professional workers Outside Sales – any sales employee who works away from the office Child Care – applies only to those who babysit on an intermittent basis Minors – those under 18 years of age may be paid the federal minimum wage For a detailed list of those exempt from minimum wage regulations under D.C. Code § 32-1003 visit the Office of the Attorney General for D.C. D.C. Overtime Regulations Employers are required to pay overtime at the rate of time and a half after 40 hours of work in a seven-day workweek. The following workers are exempt from overtime regulations: Salaried Exempt Employees – includes executive, administrative, or professional Airline Employees – those who trade work days with other employees for the sole purpose of using the travel benefits provided Automobile Dealership Employees – any employee engaged in the selling of automobiles Parking Lot Attendants – any employee who works in a parking lot or garage Live-In Domestic Workers – any worker employed in a private household who lives on the premises Different Ways to Pay Employees in D.C. Employees in D.C. can be paid by the following payment methods: Cash Check Direct Deposit Pay Card Note: Employees may be paid by pay card so long as they have full access to their wages at a bank close to work without incurring a fee. D.C. Pay Stub Laws Under D.C. law, employers must provide a written statement (pay stub) to employees on or before each payday. The pay stub should include, at minimum, the following information: Net wages paid and hours worked Gross wages paid List of wage deductions Minimum Pay Frequency Employers are required to pay their employees at least two times per month (biweekly or semimonthly) on designated paydays. Payment can be made more frequently (daily, weekly) at the discretion of the employer. Additionally, payment must be made within 10 days of the end of the pay period, except where a written agreement between the employer and a labor organization is in place. Paycheck Deduction Rules An employer is required to include itemized deductions taken from the worker’s wages on every written pay statement (pay stub). Some deductions are required by law (garnishments, child support). No employer, however, may charge or deduct from an employee’s wages for the following: Breakages Walkouts Mistakes on customer checks Fines Assessments Charges, if the payment reduces the employee’s wage below the minimum wage requirement Uniforms Employers in D.C. are responsible for the cost of purchase, maintenance, and cleaning of uniforms required by the employer or by law, or they must pay the employee 15 cents per hour in addition to the minimum wage for the care of washable uniforms. Final Paycheck Laws in D.C. In Washington, D.C., if an employee is terminated, they must be paid by the next working day. If an employee quits, the employer must pay them by the next regular payday or within seven days of the resignation date, whichever is earlier. Because D.C. is an employment-at-will state, neither party is required to give notice of termination. D.C. Severance Pay Laws Washington, D.C., law does not require severance pay. However, if your company handbook or employment contract allows for severance pay, it must be paid out according to your company policy. D.C. HR Laws That Affect Payroll Most Washington, D.C., human resources laws follow federal guidelines. However, you should pay special attention to child labor laws, as they may differ from federal rules. Additionally, as part of the Tipped Wage Workers Fairness Amendment Act, businesses with tipped employees are required to work with a third party to process payroll. D.C. New Hire Reporting D.C. law requires that all employers report new hires, rehires, and temporary employees to a state directory within 20 days of hire. One exception to this is any Federal or District employee who performs intelligence or counterintelligence functions. New hires can be reported online with the Office of the Attorney General of D.C. Lunch & Other Break Time Requirements The District of Columbia does not have any meal or break time requirements in place. This means that an employer does not have to provide breaks to any employees. Accrued Paid Time Off (PTO) Employers are not required to provide paid (or unpaid) time off in the form of vacation or personal leave to employees. If a company chooses to provide PTO, it must abide by the regulations outlined in its paid time off policy, including how PTO is accrued and if it falls under a use-it-or-lose-it schedule. Unless otherwise stated in a company policy, an employer in D.C. is also not required to pay out accrued PTO or sick leave at the end of employment. Paid Sick Leave The Accrued Sick and Safe Leave Act requires all employers in the District of Columbia to provide paid sick leave to employees for their own or their immediate family members’ illnesses. The paid leave provided is based on the size of the employer’s business and is accrued as follows: Child Labor Laws When employing minors under the age of 18 in Washington, D.C., several rules must be followed: Additional laws include: Minors 14 and 15 years of age may not be employed in the following: The operation of any power machinery or the oiling, wiping, or cleaning of machinery Any construction site work, including office work performed on the actual construction site Minors under the age of 18 may not be employed in the following: Working in any quarry, tunnel, or excavation Operating any freight or nonautomatic elevator In any establishment that serves alcoholic beverages Work Permit for Minors When hiring minors, a D.C. Public Schools Office of Youth Engagement Official Work Permit and Child Labor Application must be obtained by the minor. Typically these are available at any public high school within the District. The minor will fill out the form, and once you’re ready to hire, simply fill out Section C of the application and provide a letter of intent to employ. The minor will then return the application to the school for authorization. The permit will be mailed to your office. Payroll Forms Payroll forms in the District of Columbia, beyond the federally required forms, consist of the D-4 form and Form UC30 for unemployment taxes. District of Columbia W-4 Form Employers in D.C. should collect W-4 forms from their employees. These are federally required forms used to determine the number of withholding allowances. Additionally, employers should collect a D-4 form from each employee. If an employee does not provide you with a D-4 form, then you are required to set the withholding allowances at zero for this employee. D.C. Unemployment Tax Forms Employers are required to file an Employer’s Quarterly Contribution Wage Report each quarter. Those with household help have the option to file annually. Form UC30 Employer’s Quarterly Contribution Wage Report Form UC30-H, Employers Annual Contribution Wage Report Reports are due on the last day of the month following the end of each quarter (April 30, July 31, Oct. 31, and Jan. 31). Annual reports are due on or before April 15. Federal Payroll Forms W-4 Form: To help employers calculate taxes to withhold from employee paychecks W-2 Form: Reporting total annual wages earned (one per employee) W-3 Form: Reports total wages and taxes for all employees Form 940: Reports and calculate unemployment taxes due to the IRS Form 941: Filing quarterly income and FICA taxes withheld from paychecks Form 944: Reporting annual income and FICA taxes withheld from paychecks 1099 Forms: Providing non-employee pay information that helps the IRS collect taxes on contract work D.C. Payroll Tax Resources/Sources Office of Tax and Revenue Department of Employment Services MyTax DC Department of Employment Services (Workers’ Compensation) Bottom Line Learning how to do payroll in Washington, D.C. is fairly simple, however, there are rules that must be followed to stay in compliance such as contributing to the Paid Family Leave tax, and certain labor laws that should be taken into consideration. Remember to register your business, establish your payroll accounts, and pay your employees promptly.
November 24, 2022
How to Do Payroll in Iowa: What Every Employer Needs to Know
Learning how to do payroll in Iowa involves following some common steps like registering for state unemployment insurance taxes (called SUTA) and workers’ compensation insurance. You’ll need to withhold money from employee paychecks for state income taxes and pay close attention to the calculations—they’re tiered and range from 0.33% to 8.53%. But that’s changing—more on that later. If you need help running your Iowa payroll, consider using payroll software like . It files and pays your payroll taxes and covers any penalties you are charged if its reps make a mistake (it’ll cover your mistakes too if you opt for a premium plan). You can pay employees via direct deposit or check, and same-day payment options are available as well. Sign up for a free trial or discounted rate. Step-by-Step Guide to Running Payroll in Iowa Below are the basic steps to handling payroll in Iowa, with an emphasis on the state’s regulations. Download our checklist to make sure you don’t miss a single step. Step 1: Set up your business as an employer. At the federal level, you need your federal employer identification number (FEIN) and an account in the Electronic Federal Tax Payment System (EFTPS). Step 2: Register with the State of Iowa. File your business with the Iowa Department of Revenue. You can do this online, but you’ll need your FEIN and to register for an Iowa state employer ID number. Next, register on the eFile & Pay website. You’ll also need an account on myIowaUI to pay SUTA. Step 3: Set up your payroll process. You can set any regular payday schedule as long as you pay at least monthly. You’ll also need to determine when you’ll collect payroll forms, how you’ll pay employees, and what and how often taxes will need to be filed. Step 4: Collect employee payroll forms. It’s best to fill out payroll forms during employee onboarding. Forms include W-4, I-9, and direct deposit information. For Iowa, employees need to fill out an Iowa W4. Employees who are Illinois residents and want to be exempt from Iowa taxes need to fill out Form IA 44-016. Step 5: Collect, review, and approve time sheets. Plan so that you have the time sheets approved to pay employees within 12 days of the end of the pay period. You can create your own time sheets or use a time and attendance system to help collect the information. Step 6: Calculate payroll and pay employees. You’ll need to familiarize yourself with tax rates and other information that you’ll need to do payroll calculations. You can either use a program like Excel to calculate your payroll or find a reputable payroll software vs doing it by hand. Step 7: File payroll taxes with the federal and Iowa state government. Follow the IRS instructions for federal taxes, including unemployment. File Iowa taxes and unemployment insurance on the eFile & Pay site by 4 p.m. on the due date. Iowa Income Taxes: To file and pay withholdings, use Form 44-095b. File according to the schedule below. For complete details, check the website. State Unemployment Taxes (SUTA): Pay SUTA each quarter via myIowaUI. Step 8. Document and store your payroll records. Iowa requires you to keep records on employees for at least five years. Information should include contact information, name, Social Security number, days and calendar weeks worked, and earnings for each period worked. Learn more about federal requirements in our article on retaining payroll records. Step 9. Do year-end payroll tax reports. You’ll need to send out year-end federal forms W-2 (for employees) and 1099 (for contractors) by Jan. 31 of the year following the one for which you’re reporting. You’ll also submit your copies and a Verified Summary of Payments Report (VSP) by Feb. 15 with the Iowa Department of Revenue. Iowa Payroll Laws, Taxes & Regulations No matter what state you are in, you must follow federal law for income taxes, Social Security and Medicare, and federal unemployment insurance (FUTA). Social Security and Medicare are 6.2% and 1.45% of each employee’s check, respectively; you’ll withhold the amounts each pay period and pay a matching amount from your own bank account. FUTA is generally 6% of each employee’s check, up to a maximum of $7,000. Iowa Taxes Iowa state taxes run 0.33% to 8.53%. Iowa has a reciprocity agreement with Illinois, which means that if you’re paying an employee who lives in Illinois while your business is based in Iowa, you’ll need to calculate taxes based on their residence—and vice versa. The unemployment insurance taxes are 0% to 9%, with a taxable wage base of $34,800. State Income Taxes Iowa has a tier-based income tax system. You can find tax tables online, or you can use the Iowa withholding formula for wages paid to determine how much you owe. Reciprocity Agreements Iowa has a reciprocity agreement with the state of Illinois. Any wages or salary paid to an Illinois resident working in Iowa is taxable only to Illinois and not to Iowa. You’ll need to have such employees fill out Form IA 44-016, Employee’s Statement of Nonresidence in Iowa. You do not need to submit withholdings for these employees. Unemployment Insurance You need to register and pay unemployment insurance if you have even one employee. You must register with the Iowa Workforce Development site at myIowaUI.org within 30 days of hiring employees. Iowa charges SUTA taxes on wages up to $34,800. The rates range from 0% to 9% with the new employer rate of 1% and the new construction employer rate of 7.5%. It’s divided into 21 ranks. Your rank is determined by your benefit ratio, which is your five-year average of payments charged divided by your five-year average annual taxable payroll. You can find the rate table on the Iowa Workforce Development (IWD) website. If any of your former employees use unemployment benefits within 40 days after the close of the calendar quarter, the IWD sends a notice of benefits paid to those employees and amounts due from you, if there are any. Workers’ Compensation Insurance All Iowa businesses that employ people must pay workers’ compensation with the following exceptions: Domestic and casual employees making less than $1,500 from their employer in the 12 consecutive months before the injury Agricultural employees in companies with a cash payroll of less than $2,500 in the calendar year before the injury People working for a relative Exchange labor in agriculture The president, vice president, secretary, or treasurer of a family farm corporation and their spouses, along with the parents, brothers, sisters, children, stepchildren, and their spouses Police officers and firefighters who are entitled to benefits under a firefighter pension fund Employees who are entitled to benefits under any rule of liability or method of compensation, for federal employees, established by the Congress of the United States You need to pay workers’ compensation insurance for your corporation officers. However, you can fill out Form 14-0061 to exempt up to four officers (president, vice president, secretary, and treasurer). The officers must sign it in front of witnesses. Corporate officers of family farms are exempt without having to fill out the form. You can purchase workers’ compensation insurance from a private insurance agency. If you wish to self-insure, you need to apply with the Iowa Division of Workers’ Compensation (DWC). A group of employers can form their own insurance association, combining resources to self-insure each member. Self-insurers appoint a representative who lives in Iowa and knows Iowa workers’ compensation laws. This person must be registered with the DWC. Look at Iowa Code 2016, Chapter 87.4 for details. Minimum Wage Laws in Iowa The minimum wage in Iowa is $7.25 per hour, which is aligned with the federal minimum wage. Employees who make more than $30 per month in tips may be paid as little as $4.35 per hour, as long as their tips bring them up to minimum wage (if not, you must make up the difference). Employers grossing at least $300,000 a year in sales or business must comply with the minimum wage law. Construction companies and public agencies, hospitals, medical centers, and schools must also comply. Iowa Overtime Regulations Iowa follows federal law for overtime, which states that for hourly and nonexempt salary employees, you must pay 1.5 (time and a half) of the regular salary rate for hours worked over 40 in a workweek. To ensure you’re always paying your employees accurately, check out our article on calculating overtime. Different Ways to Pay Employees Iowa lets you require direct deposit of wages if: Employees were hired after July 1, 2005 The cost of opening and keeping an account does not put the employee below minimum wage The employee is not charged for direct deposit There’s no union contract forbidding mandatory direct deposit Otherwise, you may pay in cash or check. To mail a paycheck, you must have the employee’s written consent. You can also pay wages with a prepaid debit card, also known as a pay card, by employee agreement if the funds are available on or before payday and the employee is not charged a fee to use their earnings. Pay Stub Laws Employees must get a pay stub each payday with the hours worked, wages earned, and deductions made on each regular payday. You can mail, email, or keep a printed copy that the employee can pick up during normal business hours. To mail a pay stub, you need the employee’s written consent. Minimum Pay Frequency Iowa lets you set the frequency of payments, but they must be at least monthly and regularly spaced. You must pay employees within 12 days (excluding Sundays and legal holidays) of the end of the pay period. If you have employees earning commissions, you can, by a written agreement, pay a credit toward wages earned on commission. These credits need to be paid at regular intervals of less than 12 months. Paycheck Deduction Rules Iowa allows deductions for taxes, garnishments, and (with employee agreement) employee benefits, like a 401(k), health insurance, and the like. You cannot deduct for cash shortages in the register, breakage or damages, lost or stolen property, or personal protective equipment. There are some exceptions to these rules. See Iowa Code Chapter 91A.5 for details. Final Paycheck Laws Regardless of whether an employee is fired or quits, they need to be paid by the next regular payday. If you provide paid vacation or sick leave as part of the employment contract, then whether or not you have to pay them for unused time is dependent on the wording of your contract. Be sure your contracts are clearly worded. Iowa HR Laws That Affect Payroll Iowa’s HR laws are simple, often defaulting to federal regulations. Iowa New Hire Reporting Report new hires within 20 days of hire or rehire. You’ll need to register on the Department of Human Services website and report there. Lunch & Other Break Time Requirements Like many states, Iowa does not mandate meal breaks. If you decide to allow breaks, you must pay employees for breaks shorter than 15 minutes, but not for meal breaks over 20 minutes if the employee is not working. Employees are allowed bathroom breaks. Labor unions and special industries like airline travel may mandate certain breaks. Additionally, minors younger than 16 must have a 30-minute break if they work five or more hours in a day. Paid Time Off & Sick Leave Iowa does not mandate paid time off or paid sick days. You need to establish these policies through an employment agreement. Iowa Family Leave Act Iowa follows the federal Family and Medical Leave Act (FMLA), which allows up to 12 weeks of leave in a year or 26 weeks for military caregiver leave. Our article about federal labor laws goes into deeper detail about FMLA. Time Off to Vote You need to provide eligible employees time to vote if they do not have three consecutive hours in the period between the time of the opening and the closing of the polls. Employees need to request this time off in writing before the date of the election, however, and it must be paid if they’re going during work hours. Hiring Minors Iowa law states that no child may work without compensation, not even as migratory labor. It takes a court order to get a work permit for a child 10 or under, and they can only work in very limited occupations. Children aged 14 to 15 must have a work permit. Those under 14 are limited to migratory work and certain street occupations like selling newspapers. For migratory work, their hours are limited to between 5 a.m. and 7:30 p.m. between Labor Day and June 1, and 5 a.m. to 9 p.m. the remainder of the year. For street work, the hours are between 4 a.m. and 7:30 p.m. when school is in session and 4 a.m. and 8:30 p.m. during the rest of the year. Children under 14 shall not work during school hours. Children aged 14 and 15 can work between 7 a.m. and 7 p.m. Labor Day through June 1, and until 9 p.m. during the summer. They can only work during school hours as part of a work-study program or if they are legally out of school or enrolled in school part-time. At this age, they can work in such jobs as: Retail or comparative shopping Foodservice, gas stations, or as cashiers Office and clerical work Artwork, modeling, entertaining Cleanup work and grounds maintenance Errand duty Kitchen work The list of prohibited occupations includes manufacturing, mining, construction, warehousing, and anything involving heavy machinery. While the list of occupations opens up for children aged 16 and 17, they still cannot work in occupations involving: Explosives Driving Logging Mining Meat slaughtering or meatpacking Demolition Power-driven machines for woodworking, metalworking, baking (except small appliances), construction, dry cleaning There are no restrictions on minors engaging in these activities: Volunteer work charity or public purpose Referees 12 or older working for a charitable organization, the government, or an organization recognized by the United States Olympic Committee The Iowa Summer Youth Corps Program Any recognized program of the Iowa National Service Corps for children over 14 Payroll Forms Most of Iowa’s payroll tax forms need to be filed electronically as stated in the instructions at the top of this article. However, there are some fillable PDFs online. Iowa State W-4 Form Iowa’s withholding exemption form is IA W-4: Employee Withholding Allowance Certificate. It should be filled out along with the federal W-4 form during an employee’s onboarding. Other Iowa State Payroll and Tax Forms IA 44-016: Employee’s Statement of Nonresidence in Iowa Form 44-095: Iowa Withholding Quarterly Tax Return and instructions Form 14-0061: Rejection of workers’ compensation, which exempts certain corporate officers from workers’ comp Find other payroll forms on the Iowa Department of Revenue Forms page. This page includes forms for individuals as well as businesses. Federal Payroll Forms W-4 Form: To help employers calculate taxes to withhold from employee paychecks W-2 Form: Reporting total annual wages earned (one per employee) W-3 Form: Reports total wages and taxes for all employees Form 940: Reports and calculate unemployment taxes due to the IRS Form 941: Filing quarterly income and FICA taxes withheld from paychecks Form 944: Reporting annual income and FICA taxes withheld from paychecks 1099 Forms: Providing nonemployee pay information that helps the IRS collect taxes on contract work For a more detailed discussion of federal forms, check out our guide on federal payroll forms you may need. Iowa Payroll Tax Resources/Sources Division of Labor/Child Labor: Summarizes and gives links to the state laws concerning hiring minors and instructions for children wanting work permits Iowa Department of Revenue: The go-to place for information on registering businesses and paying taxes of all types Unemployment Insurance Employer Handbook: For all the information you need about unemployment insurance Employee Wage Law FAQs: Directed toward employees but contains information and links to wage laws you should know Bottom Line Learning how to do payroll in Iowa is not unusually complex, although there are some rules and regulations to know. Iowa charges income taxes based on a tiered system—though that’s changing—and it has state unemployment insurance. Its workers’ compensation requirements can be fulfilled through a private insurance agency, by self-insuring, or by creating a co-op with other companies to self-insure. The time off and medical leave rules defer to federal law.
November 22, 2022
How to Calculate Vacation Accruals (+ Free PTO Calculator)
Small businesses that offer paid time off (PTO) must manage vacation accruals accurately—keeping track of how much PTO each employee has earned and when it was used—to avoid labor law violations. Our PTO accrual calculator lets you determine the appropriate accrual rate to use per pay period based on your business workdays, hours in a workweek, and annual vacation days. Step 1: Decide How Much PTO to Provide Employees Annually The first step to calculate PTO accrual is to determine how many days or hours per year you want to grant your employees. According to SHRM, the average number of PTO days granted depends on longevity with the company and ranges from 13 to 26, which may or may not include sick leave. That number reflects the fact that many firms tier their PTO programs—for example, giving new hires less time off, such as only one week off per year, while giving those with more years of service more time off, such as two or three weeks per year. To keep our math simple, we’ll use an example of two weeks (10 days of PTO per year). Step 2: Figure Out Your Standard Hours Worked Per Week While a 40-hour workweek is pretty standard, not every company has employees who work 40 hours per week. Some companies consider employees who work as few as 25 hours per week to be full-time and grant them PTO and vacation. If you use our calculator above, you can input your business’s actual workweek hours to get a more accurate accrual rate before you process your payroll. Step 3: Determine Total Annual Work Hours Available You then have to determine how many weeks per year your business operates so that you can calculate how many work hours per year employees are eligible to accrue PTO annually. This “hours per year” number is used as the denominator when calculating your PTO accrual rate. The standard available work hours per year used by human resources experts is 2,080. That’s equivalent to the number of weeks per year (52) multiplied by the number of hours the average employee works each year. What that means is that for every hour worked, the employee in this example would accrue 0.038 hours of PTO. If they worked on average 40 hours a week, or eight hours a day, the accrual rate would be: To calculate each employee’s PTO accrual rate correctly, you need to provide data for the variables described in the steps above. Your results may differ depending on rounding and how many decimal places are used in your calculation (we rounded to two digits in our examples). However, our calculator above only rounds up the result, not the interim calculations. Subtract Paid Holidays If your business provides paid holiday time off, you may want to subtract those days from the total so as not to allow employees to accrue paid time off on days they already are getting paid for as holidays. For example, if you give employees 15 paid holidays a year and consider each day to be worth eight hours, you’ll want to subtract those hours from the total work hours available each year. Step 4: Identify Your Business’ Start Date for Accruals Our calculator assumes a 365-day year. However, not all businesses start the year at the same point in time. While most small businesses use a calendar year, some use a fiscal year, whereas others use the employee’s hire date. While you don’t need this information for our basic calculator above, you do need it if you want to determine how much PTO or vacation time an employee has earned or taken during a year. Annual Accrual vs Lump Sum Most small businesses calculate PTO on a calendar year basis. In fact, if you grant PTO as a lump sum at the start of the year, you wouldn’t need to manage accruals at all. On the calendar, fiscal, or anniversary date, employees would receive their lump sum balance to use throughout the year. You would then merely subtract hours for each day they take off until their PTO or vacation time is used up. The three most common time frame options for granting and tracking PTO are: Step 5: Use the Correct Accrual Rate per Cycle To ensure you calculate employee PTO balances correctly, you have to apply the right accrual rate to the actual payroll processing cycle you use to pay employees. In fact, in some states, the accrual rate information regarding how much PTO and sick leave employees have earned must be printed on each pay stub. Other Considerations When Calculating PTO & Vacation Accruals Often, salaried employees are granted a fixed rate of paid time off based on their average workweek—it can be a number of hours or days a year, such as 40 hours a year, or five days off for vacation. State Laws Calculating PTO accruals and employee balances requires you to make sure that you consult federal and state labor laws. It also requires a few decisions, such as whether to include sick leave as part of PTO or not. It's best practice to track your sick leave accruals and balances separately from PTO available for vacation and other personal reasons. That’s because in some states, sick leave must be paid out upon termination, while PTO doesn’t have to be. Carry Over While last year’s PTO balance doesn’t affect this year’s accrual rate, it does affect the starting balance at the beginning of the year (calendar, fiscal, or anniversary), and the total balance of PTO your employee has available. More than three-fourths of companies offering PTO allow employees to roll over some amount. Part-time Employees vs Full-time Employees Since hourly employees don’t work fixed or standard hours, you may want to determine their accrual rate per hour worked, rather than providing them a fixed number of hours per year, as an example. Or, you may want to set your accrual rate to match what full-time employees receive, which will end up being less, as they work fewer hours. Negative Balances Another consideration when managing PTO accruals is determining whether you’ll allow your employees to have a negative PTO balance. That can happen, for example, if you offer two weeks of PTO a year and an employee wants to use it all in February. You’d need to track the PTO used before it’s been earned, resulting in a negative PTO balance for that worker. These considerations are important to document in your PTO policy, as well as in your employee handbook, to avoid confusion as well as potential litigation from workers who may feel their PTO isn’t being managed fairly. How a PTO Vacation Accrual Calculator Works Like any data tool, a PTO calculator is only as good as the data you key into it. That’s why we encourage you to consider all the variables described in the steps above, in addition to how much time you offer as PTO to your employees. And, consider whether full-time and part-time employees are eligible—and when. Once you determine your PTO accrual rate, you will need to plug that rate into your payroll software or provide it to your payroll service provider. In fact, the PTO accrual rate serves only one small part in determining how much employees will be able to use. Also included in an employee’s PTO balance is the amount they’ve used, the amount they have (or can roll over), and any amounts you might grant to new hires as a condition of their employment agreement. Here are some examples: Negotiated PTO: Perhaps your new hire negotiated an extra week of vacation to accept the job offer. You may need to accrue three weeks of PTO for that employee as opposed to the two weeks everyone else gets. Returning employee: Let’s say a great employee moved out of state and then moved back seven months later. You may want to reinstate their unused PTO. Employee on leave: When an employee takes parental leave for four months, some companies will allow that employee to retain their employment benefits during the time away from work. This may include PTO accruals as well as health insurance. Alternatives to Using a Vacation Accrual Calculator Instead of manually calculating PTO balances, you may want to consider software that does it for you. Whether you choose time and attendance software that provides an accruals feature or a full-service HR/Payroll software, there are many affordable options. Here are a few software we recommend that can help you manage your PTO accruals. Bottom Line A PTO accrual calculator helps you do the complex math required to determine how much PTO and vacation time employees earn each pay period. The data you need to know is how many hours employees are eligible to work each year, how many hours they work on average each week, and how many days, hours, or weeks of vacation time you provide them. You May Also Like… How to calculate overtime hours for hourly & salaried employees How to convert minutes for payroll How to calculate retro pay How to calculate bonuses How to do payroll
November 22, 2022
Employee Evaluation Form: Templates & What to Include
Employee evaluation forms are documents that give structure to your employee management and feedback process. These may be used regularly for annual performance reviews or as needed for performance improvement. Having a well-structured performance review template is important to ensure that you hit all necessary points for improvement while avoiding any issues of discrimination. Besides that, it allows you to record the conversation a supervisor has with their employee regarding performance. To help you out, we’ve created some generic templates depending on the nature of your employee’s role. This article will also cover what to include in your templates, along with some tips on how to get the most out of your employee evaluations. Downloadable Performance Review Templates You may use slightly different templates depending on the specific role or type of employee. Click through the tabs below for free downloadable templates for hourly and salaried workers, managers, and executives. Key Sections for Your Performance Review Forms When deciding what items should be on your evaluation form, ask the following questions: Who is performing the review? Depending on the relationship between the employee and evaluator, different questions or attributes may be measured. Some options for evaluators include managers, subordinates, and peers. What skills are you evaluating? Your company may be interested in a straight evaluation of goals or a broader evaluation of values or competencies. What you are evaluating will determine much of the content in your form. What kind of rating skills do you want to use? Many companies use a number system to quickly compute overall ratings. Common scales are three-point and five-point ratings but other ratings such as yes or no are used as well. Some key areas should be covered on all performance review forms. These include: Personal Information While the employee and manager’s name is essential for every evaluation form, you may also consider another unique identifier. Examples include badge number, employee identification number, and file number. Having another piece of personal information on the form not only allows you to account for an employee name change but will also help you input this information into your performance management system. Other personal information you should include is the date of review and job title. Current Goals/Objectives Employee evaluation forms should begin with goal setting, as this will help direct your employee toward a particular objective. If you are not currently using a performance management system, include the employee’s goals and objectives for the period that you are evaluating. This is crucial to ensuring you grade your employees on stated performance objectives. Ratings There are multiple ways to tangibly rate an employee’s performance. Some options are listed below. Scales: Scales have you judge a worker’s performance from low to high based on numbers. Most common scales are three, four, or five points. Free Form: Some employers may prefer reviews written in long form, where the employee and manager may answer a list of questions or provide a written response to how well they believe they or their employee have performed throughout the year. These performance forms may make it harder to compare employees, but it does allow the opportunity to get more in-depth responses. Acknowledgment/Signatures Having a place in your employee evaluation form for signatures is important for both sides to document the conversation. This helps avoid any issues or confusion in the future. The signatures do not indicate agreement with what was written about an employee, but simply represent an acknowledgment that the employee has received the form and had an opportunity to discuss the contents. Optional Sections for Your Performance Review Form The following sections are deemed to be optional because they don’t apply for every business, or your company may only want to review one of these items at a time. Employee Evaluation Forms Frequently Asked Questions (FAQs) Bottom Line Employee evaluations can be an integral part of employee management and a company’s overall success, as they help tie an employee’s performance to the company’s success. Using employee evaluation forms and performance review templates makes it easier to track company goals and employees’ performances over time.
November 22, 2022
How to Do Payroll for Small Businesses (+ Video Guide & Template)
Handling small business payroll includes having to consider everything from setting up your business as an employer to paying your employees, tax agencies, and other applicable entities. When learning how to do payroll, there are several steps you must follow to ensure that you’re fully compliant with federal and state laws. While small business owners tend to be well-versed in the product or service they offer, not everyone has the knowledge or time to tackle all payroll operations. For those small business owners, we recommend trying . It is an all-in-one payroll service that calculates payroll, files taxes and forms, and even offers HR tools. Click below to start a free trial. If you'd rather learn how to do payroll yourself, follow our eight steps below. We've also prepared an instructional video and a free downloadable checklist to help you. Step 1: Set Up Your Business as an Employer Assuming you’ve already established your business and applied for any required licenses, the first step in doing payroll is ensuring that your business has met all the legal requirements to operate as an employer. Consider any industry-specific payroll rules you may have to follow as well. Apply for a Federal Employer ID Number (EIN). Verify your state tax identification number is the same as your federal one; if not, determine whether you need to apply for one or if it’s automatically assigned. Sign up for an account with the Electronic Federal Tax Payment System. Start a bank account solely for payroll transactions (separate from your main business account). Sign up for any applicable state electronic tax payment accounts. Purchase workers’ comp insurance; most states require it. Step 2: Establish Your Payroll Process Now, you will need to make some decisions that will impact how you run payroll each period. You’ll need to determine what will work for your business so you can ensure your team is trained on the process properly. Looking to make your payroll process management more efficient? Check out our top tips for effectively managing your payroll. Explore the “why” behind each area. Be sure to consider the needs of both your employees and your business, in addition to any legal requirements. Pay schedule: Will you pay weekly, biweekly, or semimonthly? Types of employees (not contractors): Full time vs part time? Exempt vs nonexempt? Tracking work time: Will you need to track work hours? If so, how will you do it, and when will they need to be reported to you? Benefits: Will you be offering benefits? Who will pay for them? If employees are paying for them partially or in full, how will you manage the payroll deductions? Taxes: How often will you need to pay taxes, and which ones are you subject to? Will you need to pay state taxes? Local? Find out the rates in advance so you know how much to withhold. Payroll processing and calculations: Will you calculate and process payroll using Excel, by hand, with a calculator, or with a payroll service? Paychecks: Will you be cutting checks or paying via direct deposit? Pay cards? Cash? Step 3: Collect Your Employees’ Payroll Forms When Hired You’ll need some important payroll documents from your employees to run payroll properly—and these are best collected during their onboarding. These include tax and work authorization forms, which the employees need to sign. You’ll use the data on the forms described below to add the employee to your HR or payroll system if you have one. It’s a good idea to store this information as a paper document or an electronic personnel file. Also, you’ll need to register your employee in your state’s New Hire Reporting Program (generally within 20 days). Make sure that you report all new or rehired employees to your state. Payroll software, like QuickBooks Payroll, often files these reports automatically. The next steps will be a part of your regular payroll process, unlike the prior three, which you only need to do once. Step 4: Collect Time Sheets, Review & Approve Now you’re ready to start collecting data on your employees’ work time to help determine how much you need to pay them. You’ll need to find the total hours worked for the period if you’re paying hourly employees. Salaried employees typically receive the same pay each period, but you can still track their work hours for visibility if needed. Calculating hours worked is as simple as having the employee write down their start and end times each day and counting up the hours—lunch breaks are not counted in the total. Most businesses start with a simple time sheet. As they grow, they often move up to a time and attendance system or time clock to manage employee schedules, break time, and hours worked. Here’s an example of an electronic time sheet from one of our top-recommended free timekeeping vendors, . Step 5: Payroll Calculations Once you know how much an employee has worked for the pay period, you can start figuring out the important payroll calculations. That includes gross pay, taxes due, deductions for insurance premiums and other benefits, and final net pay. Calculating Gross Pay Calculating gross pay is as simple as adding up the straight time hours (up to 40 hours within a week) and multiplying by the employee’s hourly rate. Then, add up the overtime hours worked in the pay period and apply the employees’ overtime pay rate to those hours. Straight time is paid at the employee’s regular pay rate, while overtime is generally calculated at 1.5 times the regular rate of pay. Calculating Payroll Deductions & Taxes Doing payroll requires you to know in advance what payroll deductions you’re going to make. Deductions include federal and state payroll taxes, benefits you might offer, and things like unemployment insurance or Social Security. Here’s a list of potential deductions with links to more information such as determining what to deduct for each employee. If you use payroll software like QuickBooks Payroll, deductions are processed automatically. Examples are: Social Security and Medicare (FICA) Federal unemployment tax (FUTA) Deductions, based on: Benefits you offer employees, like health insurance Tax deductions based on employee tips Miscellaneous deductions such as a uniform expense To process those deductions, add up all the deductions for each employee to get a total; then subtract that total from the employee’s gross pay. Alternatively, you can list each deduction as a line item and subtract them one by one from the employee’s gross pay until you come up with a net pay amount. If you’re primarily struggling with the numbers side of payroll, our article on payroll calculations may be a better fit. Just be sure you also have a good grasp of the general steps you should take to run payroll. Free Payroll Calculators Use our calculators in the articles below to make doing payroll yourself even easier. Gross Pay Calculator Overtime Pay Calculator FICA Tax Calculator FUTA Tax Calculator Time Card Calculator PTO Accrual Calculator Employee Mileage Reimbursement Calculator Step 6: Pay Employees, Tax Agencies & Benefits Providers Once you subtract deductions from gross pay, you’ll know the net amount you need to pay each employee, including totals for employment taxes and benefits you need to pay out. Be sure to follow the pay schedule you initially set so employees always know what to expect (if you committed to paying wages every Friday, give yourself enough time to process). Taxes and benefit providers have their own due dates. Many employers are required to pay these expenses monthly, but it can vary. You’ll need to pay out the amounts you withheld from your employees’ paychecks in addition to any employer payroll tax and premium amounts your business owes. Step 7: Do Year-end Payroll Tax Reports As the end of the year draws near, you’ll need to prepare to distribute year-end payroll tax reports. Employees must receive their W-2 forms by Jan. 31 of the following year, and the forms must show their total earnings and taxes paid. If you’re paying independent contractors, you’ll need to prepare 1099-NEC forms instead; this will show earnings but no taxes. You can download these forms by clicking on the images. Step 8: Document & Store Your Payroll Records To remain compliant with federal labor laws, you’ll need to document specific data for each pay period. Retain payroll documents—like timecards, pay stubs, and any information regarding pay increases. If you’re using software like QuickBooks Payroll, the documents are already online or can be uploaded and attached to the employee record. If you’re maintaining documents manually, you’ll want to ensure they’re stored securely. If you’re still unsure about what payroll is, check out our guide to payroll for more information. Bottom Line Learning how to do payroll can be a pain. You have to make sure your business registers with all the right agencies. You’ll also need to fill out forms for each employee and purchase workers’ compensation coverage, all on a tight deadline (less than 20 days for most states by law). Even seasoned business owners can get overwhelmed by the complexities of payroll compliance. That is why simple software solutions are the easiest and most time-saving options for business owners overall.