How to Set Up Payroll and HR, and Hire Your First Employees

What is the step-by-step checklist for setting up payroll for a first hire?

FederalVaries by state

Short answer: Form your entity, get an EIN, open a state withholding account (if your state taxes wages) and a state unemployment account, line up workers' comp if your state requires it at your headcount, collect the new hire's forms, report the hire to the state within 20 days or sooner, give any required wage notice, then run payroll, deposit taxes electronically and file quarterly and year-end returns.

Work through the steps in this order. Each one feeds the next (for example, the state accounts ask for your EIN).

1. Form the business with the state (LLC or corporation) if you haven't already. The IRS says corporations and LLCs should register with the state before applying for an EIN, or the EIN may be delayed. See IRS: Get an EIN.
2. Get a free EIN from the IRS. It goes on Forms 941, 940 and W-2.
3. Register for state income tax withholding with your state revenue agency, unless you're in one of the nine states with no wage income tax (see state withholding).
4. Register for state unemployment insurance (SUTA) with your state workforce agency.
5. Buy workers' comp if required. Most states require it from the first employee; a few start at 3 to 5 employees (see the next sections).
6. Collect new-hire paperwork: federal Form W-4, your state's withholding form if it has one, Form I-9, an E-Verify case where your state or a federal contract requires it, and a direct deposit authorization if you offer it.
7. Report the new hire to your state's new-hire directory within 20 days, or sooner if your state sets a shorter deadline.
8. Give a written wage notice stating pay rate, payday and deductions where your state requires one (an offer letter can do this; it's good practice everywhere).
9. Put up required posters: federal, plus your state's labor, unemployment and workers' comp posters.
10. Choose a pay schedule that meets your state's pay-frequency rule, and confirm your federal deposit schedule (new employers are generally monthly depositors in year one).
11. Run payroll gross-to-net, then deposit federal taxes by EFT (EFTPS, IRS Direct Pay or your IRS business tax account) and pay state withholding on its schedule.
12. File returns: Form 941 quarterly, state withholding and unemployment reports, then W-2s, W-3, Form 940 and your state's annual reconciliation by its January deadline.

Sources: IRS Employment Tax Due Dates; HHS ACF OCSS: New Hire Reporting; SBA: Register with state agencies.

How do I get an EIN, and does it cost anything?

Federal

Short answer: Apply online with the IRS. It's free, and if approved the number is issued right away. Never pay a website to get one.

Key points from IRS: Get an EIN (page last reviewed Oct 16, 2026):

• Cost: free. The IRS warns about sites that charge a fee.
• Who applies: the responsible party (or an authorized representative), who needs an SSN or ITIN.
• Online hours (Eastern): Monday–Friday 6:00 a.m. to 1:00 a.m. the next day; Saturday 6:00 a.m.–9:00 p.m.; Sunday 6:00 p.m.–midnight.
• Session limits: you can't save a session, and it times out after 15 minutes of inactivity. One EIN per responsible party per day.
• Paper option: Form SS-4 by phone, fax or mail is for applicants who can't use the online tool.

A single-member LLC that has employees reports wages and employment taxes under its own name and EIN, even though its income goes on the owner's Schedule C (IRS: Single member LLCs).

How do I register for state withholding and unemployment tax?

Varies by state

Short answer: In most states you open two free accounts before your first payroll: a withholding account with the state revenue (tax) department and an unemployment insurance account with the state workforce or labor agency. The nine states with no wage income tax need only the unemployment account.

How it usually works

• Withholding account: registered online with the state revenue department, often on the same application used for sales tax. You'll typically need your EIN, legal and trade name, address, owner or officer details, start date and business type. Some states issue the account number on screen; others mail it.
• Unemployment account: registered with the state workforce agency. You become liable once you meet the state's test; the federal benchmark that most states follow is paying $1,500 or more in wages in a calendar quarter, or having at least one employee in 20 different weeks of a year Check confirm your state's liability test with its UI agency.. Nearly any business with a regular employee meets it in the first year.
• No-income-tax states (2026): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no wage income tax, so there's no withholding account (Tax Foundation: State individual income tax rates and brackets, 2026, published Feb 17, 2026). Fifteen states use one flat rate in 2026, including Ohio's new 2.75%.
• Order of steps: federal EIN, then state withholding (skip in no-wage-tax states), unemployment insurance, any state disability or paid-leave program and local taxes, workers' comp, and new-hire reports. A few states combine registrations (Oregon, for example).
• Local accounts: a few states also have city, county or school-district wage taxes that need their own registration (see employee-paid state taxes).

Look up your state: the box below has your state's revenue registration and unemployment account links from our Business Foundation state data. The SBA also keeps a state registration guide.

Do I need workers' comp before my first hire?

Varies by state

Short answer: In most states, yes: more than 30 states require coverage from the first employee. A handful start at 3, 4 or 5 employees, Kansas uses a payroll test, Texas lets most private employers opt out, South Dakota doesn't mandate it, and Wyoming requires it mainly for hazardous work.

How it usually works (our Business Foundation state data, checked Oct 2026)

• Construction often has a lower threshold (frequently 1 employee) even in 3-to-5-employee states Check construction rule in your state..
• Monopolistic states: in North Dakota, Ohio, Washington and Wyoming you buy coverage from the state fund (or self-insure where allowed), not a private insurer.
• Who counts differs: some states count part-timers, family members and corporate officers; some let owners opt out.
• Penalties for going uninsured are usually daily fines and can include criminal charges and personal liability for injured workers' claims.
• Paying someone on a 1099 doesn't by itself remove them from the count if they're really an employee.

Look up your state: DOL OWCP: State workers' compensation officials, or pick it here:

What forms does a new employee fill out on day one?

FederalVaries by state

Short answer: Federal Form W-4, your state's withholding form if it uses one, Form I-9 Section 1, and a direct deposit form if you pay that way. You then complete I-9 Section 2, run E-Verify where required, and report the hire to the state.

Sources: IRS Pub. 15 (2026); USCIS: Complete and Correct Form I-9.

What changed on the 2026 Form W-4?

Federal

Short answer: The 2026 W-4 adds a Step 4(b) deductions worksheet with lines for expected qualified tips and overtime, a checkbox to claim exemption, and a $2,200-per-child amount in Step 3. Employees should use the 2026 version.

Changes reported for the 2026 form (released December 2025):

• A 15-line Step 4(b) Deductions Worksheet on its own page, with new lines for qualified tips (line 1(a)) and qualified overtime (line 1(b)).
• "Optional" removed from the Step 4 heading.
• A checkbox to claim exemption, replacing writing "Exempt."
• Step 3 child tax credit amount raised to $2,200 per child.
• The form is now 5 pages.

Source for the change list: PayrollOrg, Dec 11, 2025 (a trade association); get the official form at IRS Form W-4.

One rule employers trip on: don't cut an employee's withholding on your own because you expect them to qualify for the overtime deduction. Withholding changes only when the employee turns in an updated W-4 using Step 4(b) (IRS FS-2026-13).

Does my state have its own W-4 form?

Varies by state

Short answer: Many states that tax wages have their own withholding certificate; others let you use the federal W-4. The nine no-income-tax states need none. Use your state revenue department's current-year form and tables.

How it usually works

• The state form usually asks for filing status and allowances or exemptions, and the allowances drive a per-allowance subtraction in the state's withholding formula.
• If an employee doesn't turn one in, states generally tell you to withhold as single with no allowances Check rule in your state's withholding instructions..
• Some states require you to send the revenue department copies of certificates that claim many allowances or claim exemption above a wage level.
• State tables change, sometimes mid-year when a legislature changes rates after the tables were published. Check the revenue department's withholding page each January and after any tax law change.

Look up your state: your state revenue department's withholding page (linked in the box below) has the certificate and the current tables. The IRS keeps a list of state government websites.

How do Form I-9 and E-Verify work?

FederalVaries by state

Short answer: Every new hire, citizens included, completes Form I-9: the employee does Section 1 by the first day of paid work, and you finish Section 2 within 3 business days. E-Verify is voluntary under federal law for most private employers, but federal contracts and a growing list of state laws require it.

Form I-9 basics

• Section 1 by the first day of paid work; Section 2 no later than the 3rd business day after work for pay starts (USCIS).
• Keep it while the person works for you, then for the later of 3 years from hire or 1 year after the last day worked. Never send it to USCIS or ICE (USCIS M-274 §10.0).
• The current form's expiration date was extended to 05/31/2027 (USCIS: Form I-9 Related News). The newest edition is reported as dated 01/20/25.
• Remote document review by live video is allowed only for employers in good standing with E-Verify. The employee sends copies, you review them, hold a live video call where they show the same documents, keep clear copies, and check the "alternative procedure" box. If a hiring site offers it, offer it to all employees at that site (USCIS: Remote Examination).

E-Verify (federal)

E-Verify is free. To enroll you choose an access method, sign the Memorandum of Understanding, enter company information and print the signed MOU (E-Verify: Enrolling). E-Verify cases are commonly said to be due by the 3rd business day after the employee starts, and E-Verify may not be used to pre-screen applicants. Federal contractors whose contracts include FAR clause 52.222-54 must use it (FAR 52.222-54).

State E-Verify laws (as of Oct 2026)

Indiana's 2026 law (Senate Enrolled Act 76, effective July 1, 2026) bars knowingly employing unauthorized workers but does not require E-Verify; using it is one way to show reasonable diligence (per a law-firm summary). State lists change often; sources here are payroll-vendor summaries of state laws Check each state's statute or labor department..

If you hire in more than one state, enrolling in E-Verify from day one is the simplest way to cover every state's rule and it unlocks remote I-9 review.

Look up your state: E-Verify's state laws page and your state labor department.

How and when do I report a new hire to the state?

FederalVaries by state

Short answer: Report each new or rehired employee to your state's new-hire directory within 20 days of hire, or sooner if your state sets a shorter deadline. Your payroll provider may file it for you.

Federal rules (HHS ACF OCSS: New Hire Reporting; ACF: New hire reporting for employers):

• Federal law (42 U.S.C. 653a) sets 20 days as the maximum; states may require less.
• Required data: employer name, address and FEIN; employee name, address, SSN and date of hire.
• Reports feed the National Directory of New Hires for child support enforcement.
• Multistate employers may report all new hires to one state where they have employees, after registering with HHS, reporting electronically at most twice a month and 12–16 days apart.

How states differ: some set a shorter deadline, some ask for extra fields (date of birth, state UI number, medical-insurance availability), some cover rehires after a set absence, and some require reporting independent contractors. Penalties for not reporting are usually small per-report fines Check your state's deadline, fields and penalty..

• Shorter deadlines (examples): 7 days in Alabama and Maine; 10 in Georgia and Vermont; 14 in Massachusetts, Rhode Island and South Carolina; 15 in Iowa and Mississippi.
• Contractor reporting: about a dozen states, often above a dollar amount, such as California, Iowa and Massachusetts (over $600), Connecticut (over $5,000), Maine and New Hampshire (over $2,500) and West Virginia ($2,500 or more).

Look up your state: ACF: State new hire reporting contacts and program requirements.

What written wage notice do I have to give, and can I pay by direct deposit?

Varies by state

Short answer: Federal law requires no hiring notice of pay, but many states require a written notice of pay rate, payday and deductions at hire, advance notice before a pay cut, and an itemized pay statement each payday. Direct deposit is allowed everywhere, but most states don't let you require it without conditions.

How it usually works

• At hire: states that require a notice usually want the rate and basis of pay, the regular payday, and sometimes the employer's legal name and address, normal hours and deductions. Some apply only above a headcount.
• Before a change: many states require written notice before a pay cut (often one pay period or a set number of days ahead); raises usually need no notice.
• Each payday: most states require an itemized statement of gross pay and deductions; some spell out every field.
• Direct deposit: many states allow mandatory direct deposit only with conditions (a free alternative such as a pay card, the employee's choice of bank, at least one free withdrawal) Check your state's direct deposit rule..
• Pay transparency: as of October 2026, 14 states and DC require a pay range in job postings: Colorado, California, Washington, New York, Hawaii, Maryland, Illinois, Minnesota, New Jersey, Vermont, Massachusetts, Virginia (July 1, 2026, all employers, per Virginia DOLI), Maine and Connecticut, with size cutoffs from none to 50 employees; Delaware follows September 26, 2027. Rhode Island and Nevada require disclosure only on request. The full table is in the HR rules guide (pay transparency).

A practical approach everywhere: put pay rate, pay basis, payday and deductions in a written offer letter for every hire.

Look up your state: your state labor department (find it through the DOL list of state labor offices).

How often do I have to pay employees?

FederalVaries by state

Short answer: Federal law sets no pay frequency. Most states require a regular payday at least twice a month, often allowing monthly pay for exempt staff; about 11 require weekly pay for some workers, mostly manual laborers; and a handful set no rule beyond paying on the schedule you announced.

• Federal: the DOL's state payday table lists no federal requirement; minimum wage and overtime must be paid on the regular payday for the period (DOL WHD: State payday requirements, table dated Jan 1, 2023).
• Weekly for some workers: California, Connecticut, Iowa, Massachusetts, Michigan, New Hampshire, New York, Rhode Island, Vermont and Virginia, plus Puerto Rico.
• No general frequency rule: Alabama and Florida set none; North Carolina specifies none; Nebraska lets the employer designate paydays; South Carolina requires only notice of pay terms; Pennsylvania has no entry in the DOL table. Montana presumes semimonthly if no period is set.
• Many states allow different schedules for exempt employees, and some let bonuses and commissions be paid less often if set in advance. The DOL table was last revised January 1, 2023 Check your state's current rule, since the table may be out of date..

Choosing a schedule within your state's rule is mostly about cash flow and admin time. Fewer pay periods means fewer payroll runs, but your federal deposit schedule depends on your tax liability, not your payday frequency (see deposit schedules).

Look up your state: DOL WHD: State payday requirements.

What is the minimum wage I have to pay?

FederalVaries by state

Short answer: The federal minimum is $7.25 an hour (since July 24, 2009). You pay the highest of the federal, state and local rates that apply. In 2026, 30 states and DC set a higher rate, ranging up to $17.13 in Washington; 20 states sit at the federal $7.25.

• 19 states raised their rates on January 1, 2026 (NELP). Announced for 2027: California $17.40 (January 1, CA DIR), Michigan $15.00 (January 1, DOL), Alaska $15.00 (July 1, 2027, Alaska DOLWD) and Washington $17.73 (January 1).
• Georgia and Wyoming list $5.15 in state law, but the federal $7.25 applies to FLSA-covered employers.
• The FLSA limits tip pools to employees who customarily receive tips; some states add rules on tip pools and tip certification.

Sources: DOL WHD Minimum wage; DOL Fact Sheet #15; Ballotpedia 2026 minimum wage summary; CDLE COMPS Order poster; CA DIR minimum wage FAQ; Alaska DOLWD wage and hour; NELP: Raises from coast to coast in 2026; DC DOES Office of Wage-Hour Compliance.

Look up your state: DOL State Minimum Wage Laws and DOL Minimum Wages for Tipped Employees (effective July 1, 2026).

Should I pay hourly or salary, and what does exempt vs. nonexempt mean?

FederalVaries by state

Short answer: "Exempt" means exempt from overtime. To be exempt under the federal white-collar rules, an employee generally must be paid a salary of at least $684 a week ($35,568 a year) and do qualifying duties. Everyone else is nonexempt and gets time-and-a-half over 40 hours, whether you pay them hourly or by salary. Several states set a higher salary floor.

Salary vs. hourly is how you pay; exempt vs. nonexempt is whether overtime law applies. A salaried employee below the threshold is still owed overtime.

DOL announced the technical amendment removing the 2024 rule on May 14, 2026 (published May 15, 2026, FR Doc. 2026-09839). The salary test alone doesn't make a job exempt; the duties have to qualify too, and the notes behind this guide don't cover the duties tests, so check DOL guidance or an employment attorney for borderline roles.

State floors (6 states above $684/week, January 1, 2026): where a state sets a higher floor, the higher figure applies.

The New York, Alaska and Maine figures come from a law-firm chart (Littler, Jan 2026); other states use the federal $684.

Sources: DOL news release, May 14, 2026; Federal Register 2026-09839; Dinsmore summary.

What time and pay records do I have to keep for hourly workers?

Federal

Short answer: For every nonexempt worker, keep hours worked each day and week, pay rate, straight-time and overtime earnings, deductions, total wages and pay dates. No particular form is required, but you must track hours.

Required items under 29 CFR Part 516 (DOL Fact Sheet #21, revised July 2008):

• Full name and SSN; address; birth date if under 19; sex and occupation
• The day and time the workweek begins
• Hours worked each day and each workweek
• Basis of pay and regular hourly rate
• Straight-time earnings and overtime earnings
• Additions to and deductions from wages
• Total wages per pay period, pay date and period covered

Keep payroll records 3 years and time cards and wage-rate tables 2 years under the FLSA. IRS employment tax records must be kept at least 4 years, and OSHA injury logs 5 years. Many states set their own retention periods for wage and unemployment records (often 3 to 5 years), so keeping everything at least 5 years is a common safe practice (IRS: Employment tax recordkeeping; OSHA Recordkeeping) Check your state's retention period..

Is this worker an employee or a 1099 contractor?

Federal

Short answer: The IRS weighs behavioral control, financial control and the type of relationship; no single factor decides. The DOL uses a separate "economic reality" test for wage-and-hour law, and that rule is in flux in 2026. If you control how and when the work gets done, the worker is likely an employee. Many states use their own, often stricter, tests for unemployment and workers' comp.

IRS common-law test (IRS: Independent contractor or employee):

• Behavioral: do you control, or have the right to control, what the worker does and how?
• Financial: do you control pay method, expense reimbursement and tools?
• Type of relationship: written contracts, benefits, permanence, and whether the work is a key part of your business.

Either side can file Form SS-8 for an IRS ruling, which may take at least 6 months.

DOL status (October 2026): the 2024 six-factor rule is still in the CFR but isn't being enforced (Field Assistance Bulletin 2025-1, May 2025). A proposed rule published Feb 27, 2026 (91 FR 9932) would return to a test built on two core factors: control over the work and the worker's opportunity for profit or loss. Comments closed Apr 28, 2026. No final rule was confirmed.

States: some states apply an "ABC" test for unemployment or wage law that treats more workers as employees than the IRS test does Check which test your state uses.. Ask your state workforce agency before treating a regular worker as a contractor.

Sources: DOL WHD misclassification rulemaking; DLA Piper, Mar 2, 2026; SBA Office of Advocacy, Mar 3, 2026.

For true contractors, the 1099-NEC threshold is $2,000 for payments made in 2026 (up from $600), indexed for inflation from 2027 (IRS 1099-MISC/NEC Instructions).

What can I legally deduct from a paycheck?

FederalVaries by state

Short answer: Deductions required by law (taxes, court-ordered garnishments) are always allowed. Under federal law, other deductions can't cut a nonexempt worker's pay below minimum wage or eat into overtime owed. Most states add rules: many require signed written authorization, and some ban deductions for shortages, breakage or uniforms altogether.

Federal floor: a deduction for something that mainly benefits the employer (tools, uniforms, cash shortages) can't take pay below $7.25 an hour or reduce required overtime pay (DOL WHD FLSA).

How states usually differ

• Written authorization: many states require it in advance, stating the reason and amount; some require it for each deduction.
• Shortages, breakage, damage: some states ban these deductions; others allow them with notice, only down to minimum wage.
• Recovering overpayments and advances: usually allowed with notice or authorization.
• Final paycheck: some states limit what can be taken from final pay.

Look up your state: your state labor department (DOL list of state labor offices).

What is the order of steps to get from gross pay to net pay?

FederalVaries by state

Short answer: Start with gross pay, subtract pre-tax deductions, figure federal income tax withholding (Pub 15-T), subtract the employee's 7.65% FICA, figure state and local withholding if your state taxes wages, subtract any employee-paid state insurance and post-tax deductions, and what's left is net pay. Separately, you owe employer FICA, FUTA and SUTA on top.

1. Gross pay: hours x rate (plus 1.5x for overtime hours), or salary per period, plus tips, bonuses, commissions.
2. Pre-tax deductions (for example, qualifying benefit contributions).
3. Federal income tax withholding from the employee's W-4, using the IRS Pub 15-T percentage method.
4. Employee FICA: 6.2% Social Security (to the wage base) + 1.45% Medicare (+0.9% over $200,000).
5. State and local income tax withholding, using your state's tables or formula (none in nine states).
6. Employee-paid state programs where they apply (state disability, paid family leave, or employee unemployment contributions).
7. Post-tax deductions (for example, authorized repayments, garnishments).
8. Net pay to the employee.
9. Employer taxes on top: matching FICA, FUTA, SUTA and any employer share of state programs.

What are the 2026 FICA rates and the Social Security wage base?

Federal

Short answer: For 2026, Social Security is 6.2% from the employee and 6.2% from the employer on the first $184,500 of wages; Medicare is 1.45% each with no cap. Withhold an extra 0.9% Additional Medicare Tax on an employee's wages over $200,000 in the year, with no employer match. The 2027 wage base is $192,300.

Qualified tips and overtime still owe FICA even though employees may deduct them on their income tax returns.

Sources: SSA wage base (lists $192,300 for 2027); IRS Topic 751; IRS Pub. 15 (2026).

How do I figure federal income tax withholding with Pub 15-T?

Federal

Short answer: Use Worksheet 1A of IRS Pub 15-T: annualize the period's wages, adjust for the employee's W-4 Steps 2–4 and the standard deduction amount, look up the annual table, then divide back down to a per-period amount.

Worksheet 1A steps for 2020-and-later W-4s (IRS Pub 15-T):

1. Annualize the period's taxable wages (for example, weekly x 52).
2. Adjust: add W-4 Step 4(a) other income; subtract Step 4(b) deductions; subtract $12,900 if married filing jointly or $8,600 otherwise. Use zero for this subtraction if the Step 2 box is checked.
3. Look up the adjusted annual wage in the annual percentage-method table for the employee's filing status and compute the tentative annual withholding.
4. Divide by the number of pay periods in the year.
5. Subtract Step 3 credits (per period).
6. Add any Step 4(c) extra withholding.

Bonuses and other supplemental wages can instead be withheld at a flat 22% (37% over $1 million) (IRS Pub. 15 (2026)). The 2026 bracket amounts themselves are in the Pub 15-T tables and aren't reproduced here.

How do I calculate state income tax withholding?

Varies by state

Short answer: Use your state revenue department's current tables or formula with the employee's state (or federal) withholding certificate. Nine states have no wage income tax; about 15 use a single flat rate; the rest use graduated brackets.

How it usually works (2026)

• No wage income tax (9): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
• Flat rate (about 15 states, Tax Foundation count for 2026): subtract the state's standard deduction and allowance amounts for the pay period, then multiply by the rate.
• Graduated rates: annualize wages, subtract deductions and allowances, apply the brackets, divide by pay periods, the same pattern as Pub 15-T.
• Supplemental wages: many states publish an optional flat rate for bonuses.
• Rates change: several states cut rates for 2026, and a few changed rates after their tables were published, which can leave published tables out of step with the law for part of a year. Check the revenue department's withholding page for revised tables before each year's first payroll Check your state's current tables..
• Working in one state, living in another: reciprocity agreements between some neighboring states change which state you withhold for. That's worth a CPA's look.

Sources: Tax Foundation: state income tax rates; CBS News on 2026 state income tax cuts.

Look up your state: the box links your state revenue department, which publishes the tables.

What are FUTA and SUTA, and what do they cost per employee in 2026?

FederalVaries by state

Short answer: Employers alone pay these in almost every state. FUTA is 6.0% on the first $7,000 per employee, effectively 0.6% ($42 max) after the state credit. SUTA wage bases for 2026 run from $7,000 to $78,200, and new employers usually get a fixed starting rate usually about 1% to 4% until they have a claims history.

• FUTA: 6.0% gross, less up to a 5.4% credit for state UI paid on time. For 2025, California (1.2%) and the U.S. Virgin Islands (4.5%) were the credit-reduction jurisdictions (DOL notice, Federal Register Jan 12, 2026). For 2026, DOL's potential list (Jan 15, 2026) names California and the Virgin Islands; the final list comes after Nov 10, 2026. Employers in a credit-reduction state pay more FUTA, figured on Schedule A of Form 940.
• SUTA: you move to an experience rate after one to three years, depending on the state. Some states add surcharges or administrative assessments.
• File Form 940 by January 31 (February 10 if all FUTA was deposited on time). Deposit FUTA once the accumulated amount is over $500.

Sources: IRS Topic 759; Instructions for Form 940; Federal Register: FUTA credit reductions for 2025; DOL FUTA credit reductions; DOL ETA: Significant Provisions of State UI Laws, January 2026.

Look up your state: your state's UI agency (box below) posts the current wage base and new-employer rate.

Which states take other payroll taxes out of employee pay?

Varies by state

Short answer: Some states run disability or paid family and medical leave insurance funded by payroll contributions, a few collect unemployment tax from employees, and some cities and counties levy their own wage taxes. Where they apply, you withhold them alongside income tax.

How it usually works (2026)

• 2026 rates confirmed on state pages: New York PFL 0.432%, up to $411.91 a year (NY PFL); New Jersey TDI 0.19% employee and FLI 0.23% on wages up to $171,100 (NJ Labor); Washington PFML 1.13% (1.2% in 2027), with no employer share under 50 employees (WA Paid Leave); Maryland 0.9% split from Jan 1, 2027, half rate under 15 employees (Maryland FAMLI).
• Other 2026 rates (EY): California SDI 1.3% with no cap; Rhode Island TDI 1.1%; Hawaii TDI up to 0.5%; Oregon 1.0%; Colorado, Massachusetts and Minnesota 0.88%; Connecticut 0.5%; Delaware 0.8%; Maine 1.0%; DC 0.75% employer-paid. Most cap wages at $184,500.
• Who pays (employee, employer or split) and the wage cap differ by program.
• Payroll software for your state normally handles these; check that yours does before your first run.

Sources: EY: 2026 state disability and paid leave rates; New America: paid leave explainer.

Look up your state: your state labor department and revenue department; for local taxes, your city or county finance office.

Can you show a worked paycheck example?

FederalVaries by state

Short answer: Illustrative only: a single employee earning $1,000 a week has $76.50 of FICA withheld. In a hypothetical state with a flat 4% income tax on wages after a $200 weekly deduction, state withholding is $32, leaving $891.50 before federal income tax. The employer adds $82.50 of FICA and FUTA, plus SUTA at the state's rate.

Illustration only. The federal lines use real 2026 rates; the state lines use made-up round numbers, not any real state's rates. Your payroll software or the official tables control. Assumptions: weekly pay, $1,000 gross, single, no pre-tax deductions, first weeks of the year.

Employee side

Federal income tax set-up (Pub 15-T): $1,000 x 52 = $52,000 annualized; minus $8,600 (single, Step 2 unchecked) = $43,400 adjusted annual wage. Look up $43,400 in the 2026 single annual table in Pub 15-T, compute the tentative annual withholding, divide by 52, and subtract that from $891.50 to get take-home pay.

Employer side (on top of the $1,000)

So in this illustration the early-year cost of the employee is about $1,109.50 a week before workers' comp and benefits. Swap in your state's real withholding formula, SUTA rate and wage base to get your own numbers.

What free tools can help me check my payroll math?

FederalVaries by state

Short answer: The official tables are the free tools: IRS Pub 15-T for federal withholding and your state revenue department's withholding tables or formula. The IRS also offers an Income Tax Withholding Assistant spreadsheet for employers.

• IRS Pub 15-T and IRS Pub 15 (Circular E)
• Your state revenue department's withholding page (see the state withholding answer)
• IRS Income Tax Withholding Assistant for Employers

No vetted free Excel payroll template was identified in the research for this guide. If you build your own spreadsheet, test it against a payroll service's calculator or your CPA before relying on it.

Can a sole proprietor or single-member LLC owner put themselves on payroll?

Federal

Short answer: No W-2 for you. A sole proprietor or single-member LLC owner (taxed as a disregarded entity) takes draws, reports the business's profit on Schedule C, and pays self-employment tax and quarterly estimates on that profit.

• An SMLLC that hasn't elected corporate status is disregarded: its activity goes on the owner's Form 1040, usually Schedule C, and the owner pays self-employment tax like a sole proprietor (IRS: Single member LLCs).
• Self-employment tax is 15.3% (12.4% Social Security up to $184,500 in 2026, plus 2.9% Medicare), owed once net SE earnings reach $400 (IRS: Self-employment tax).
• Individuals expecting to owe $1,000 or more generally pay quarterly estimates; 2026 due dates are April 15, June 15 and September 15, 2026, and January 15, 2027 (IRS Form 1040-ES (2026)).

Draws aren't payroll, so there's no withholding or W-2 for the owner. Your employees, though, are on payroll under the LLC's own EIN.

How much salary does an S-corp owner have to pay themselves?

Federal

Short answer: Enough to count as "reasonable compensation" for the work you do, paid as W-2 wages before you take non-wage distributions. There's no fixed IRS dollar figure; the IRS looks at your duties, time, experience and what comparable businesses pay, and it can reclassify distributions as wages.

Factors the IRS lists (IRS: S corp compensation):

• Training and experience
• Duties and responsibilities
• Time and effort devoted to the business
• Dividend history
• Pay to non-shareholder employees
• Timing and manner of bonuses
• What comparable businesses pay for similar services
• Compensation agreements and use of a formula

Income produced by your personal services is wage income. This means a one-person S-corp still needs a payroll account, withholding, state registrations and W-2s for the owner. Because "reasonable" is a judgment call, setting the number is a good job for a CPA.

Health insurance for a more-than-2% shareholder: premiums paid by the S-corp go in W-2 Box 1 (subject to income tax withholding) but not Boxes 3 and 5 (no Social Security, Medicare or FUTA) when paid under a plan for all employees or a class of employees. The shareholder may take the self-employed health insurance deduction. More-than-2% shareholders can't use a QSEHRA, FSA or HRA.

S-corp owners who take W-2 wages can generally cover their personal income tax through extra W-4 withholding instead of quarterly estimates.

Am I a monthly or semiweekly depositor for federal payroll taxes?

Federal

Short answer: A new employer is generally a monthly depositor in its first calendar year. After that, your schedule depends on your Form 941 liability in the lookback period (for 2026, Q3 2024 through Q2 2025): $50,000 or less means monthly (due the 15th of the next month); more than $50,000 means semiweekly.

All federal deposits must be made by electronic funds transfer: EFTPS, IRS Direct Pay, your IRS business tax account, or a same-day wire. EFTPS is free; after you enroll online, the PIN arrives by mail in about 5–7 business days. A deposit due on a weekend or federal holiday moves to the next business day; a state-only holiday doesn't delay federal deposit dates.

Sources: IRS Topic 757 (lookback, $50,000, $100,000 and $2,500 rules confirmed Oct 2026); IRS Notice 931 (2026); IRS Employment Tax Due Dates; IRS Pub. 15 (2026); EFTPS.

When are Form 941, Form 940 and W-2s due?

Federal

Short answer: Form 941 is due April 30, July 31, October 31 and January 31 (10 extra days if all deposits were on time). Form 940 and W-2s/W-3 are due January 31. For 2026 wages, January 31, 2027 falls on a Sunday, so those move to the next business day.

Upcoming dates: Q3 2026 Form 941 is effectively due Monday, Nov 2, 2026 (Oct 31 is a Saturday). For Q4 2026, the weekend rule points to Monday, Feb 1, 2027, but the IRS's tax-year-2026 e-file due-date table prints Feb 2, 2027. The 2026 W-2/W-3, 1099-NEC and Form 940 are expected Monday, Feb 1, 2027; the IRS table still lists Form 940 as "TBD". With all deposits on time, Q4 941 and the 940 can be filed by Feb 10, 2027.

The SSA's free Business Services Online is the recommended way to e-file W-2s, and it generates the W-3 automatically. If you file 10 or more information returns in total (W-2s and 1099s counted together), you must e-file.

Sources: IRS Employment Tax Due Dates; IRS TY2026 94x e-file due dates; IRS Pub 15 (2026); Instructions for Form 940; IRS: E-file Forms 1099 with IRIS; IRS Pub 509.

What's new on the 2026 W-2 for overtime and tips?

Federal

Short answer: Starting with 2026 wages, report qualified overtime in W-2 Box 12 code TT, qualified cash tips in code TP, and employer Trump account contributions in code TA. Box 14 splits into 14a (other) and 14b (tipped occupation code). FICA and income tax withholding still apply to overtime and tips.

• Qualified overtime is generally the half-time premium the FLSA requires; overtime paid beyond what the FLSA requires (including overtime that only a state's daily-overtime law requires) is excluded. Employers report the full qualified amount in code TT. Mistakes require a W-2c. Transition relief for separate reporting applied only to 2025 (IRS FS-2026-13).
• Employee deductions (which employees claim, not employers): up to $12,500 of qualified overtime ($25,000 joint) and up to $25,000 of qualified tips, 2025–2028, phasing out above $150,000 MAGI ($300,000 joint).
• Trump accounts: employers may contribute up to $2,500 a year per employee or dependent starting July 4, 2026 (IRS OBBB provisions).

If you have nonexempt employees who work overtime, confirm your payroll provider is filling in code TT. The W-2 layout details come from a trade-group summary of the draft form.

Sources: PayrollOrg, Jan 12, 2026; Warren Averett.

How often do I file and pay state withholding?

Varies by state

Short answer: Most states set your filing and payment frequency (quarterly, monthly or more often) by how much you withhold, and require an annual reconciliation with state copies of W-2s and some 1099s, usually due by January 31. Some states simply follow your federal deposit schedule.

How it usually works

• Frequency tiers: small withholders file quarterly; larger ones monthly; the largest semiweekly or on the federal schedule. The dollar breakpoints differ by state.
• Annual reconciliation: due around January 31 with W-2s (often electronic-only above a count).
• E-filing mandates: common above a dollar or payment-count threshold.
• Weekend rule: most states move a weekend due date to the next business day Check your state's rule..
• Separate obligations: a state may keep its own deadlines and penalties even when the IRS forgives a late federal deposit, so treat state dates as their own.
• Penalties: usually a percentage of the tax per month late, plus interest; responsible officers can be held personally liable for unpaid withholding in many states Check your state's rule..

Look up your state: your state revenue department's withholding page (box below).

When are state unemployment (SUTA) reports due?

Varies by state

Short answer: Nearly every state wants a quarterly wage report and payment by the last day of the month after each quarter (April 30, July 31, October 31, January 31), filed online with the state workforce agency. Many require a report even in quarters with no wages.

How it usually works

• The report lists each employee's wages for the quarter and figures the tax on wages up to the state wage base.
• E-filing is commonly required above a set number of employees, and many agencies now accept only online filing.
• Corrections are usually allowed for a set number of past quarters, and states require you to keep payroll records for several years (often 4 to 5).
• Claim notices for former employees usually must be answered quickly (often within 10 days), increasingly through the online SIDES system Check your state's response window..
• Each year the agency mails a rate notice; many states let you protest it or make a voluntary contribution to lower next year's rate.

Look up your state: your state UI agency (box below) or DOL's list of state unemployment agencies.

What does a year-end payroll checklist look like?

FederalVaries by state

Short answer: In January, file Q4 Form 941, Form 940, W-2s/W-3, 1099-NEC, your state's annual withholding reconciliation and the Q4 state unemployment report, and confirm next year's deposit schedule, SUTA rate and state withholding tables.

For 2026 wages (filed in early 2027):

1. Reconcile year-to-date payroll to your four Form 941s.
2. Check Box 12 code TT (qualified overtime) and TP (tips) amounts on W-2s.
3. Give W-2s to employees and file with the SSA (W-3): expected Feb 1, 2027.
4. File 1099-NEC for contractors paid $2,000 or more in 2026: expected Feb 1, 2027.
5. File Q4 Form 941 and Form 940: expected Feb 1, 2027 (Feb 10 if deposits were timely).
6. File your state's annual withholding reconciliation with state W-2s (and any 1099s it wants), usually by Jan 31 or the next business day.
7. File the Q4 state unemployment report.
8. Watch for your new SUTA rate notice and your state's 2027 withholding tables.
9. Collect new W-4s (and state certificates) from employees who want changes; keep records at least 4 years federally, longer where your state requires.

What is the penalty for depositing payroll taxes late?

Federal

Short answer: 2% if 1–5 days late, 5% if 6–15 days, 10% if more than 15 days, and 15% if still unpaid more than 10 days after the first IRS notice. The tiers don't stack.

Other federal penalties: late filing is 5% of unpaid tax per month up to 25%; late payment is 0.5% per month; a bounced payment is the greater of $25 or 2%; and missed W-2 or 1099 filings can cost up to $340 per return for returns due in 2027.

Sources: IRS Failure to Deposit Penalty; IRS Failure to File Penalty; Rev. Proc. 2025-32.

Can I be personally liable for unpaid payroll taxes?

FederalVaries by state

Short answer: Yes. The IRS Trust Fund Recovery Penalty makes anyone with authority over the money who willfully fails to pay over withheld taxes personally liable for 100% of the unpaid amount. Many states similarly hold owners and responsible officers personally liable for unpaid state withholding.

The penalty equals the full unpaid trust fund tax plus interest. It can be assessed on corporate officers, partners, sole proprietors, employees or agents who act willfully, and paying other bills instead of withheld taxes counts as willful (IRS: Trust fund recovery penalty). Using employees' withheld taxes as short-term cash flow is the classic way owners end up here. State personal-liability rules differ Check your state revenue department's responsible-person rule..

What happens if I misclassify an employee as a contractor?

Federal

Short answer: You can owe the employment taxes you should have withheld and paid, plus penalties and back wages. Relief options exist if you had a reasonable basis (Section 530) or if you voluntarily reclassify going forward (VCSP, Form 8952). States can add unemployment tax, workers' comp and wage-law liability.

From IRS: Independent contractor or employee:

• No reasonable basis: employer may owe employment taxes for the worker under IRC §3509. The reduced §3509 rates commonly cited weren't verified on an IRS page.
• Section 530 relief: possible if you had a reasonable basis, filed all required 1099s consistently and never treated similar workers as employees. It doesn't make the worker a contractor.
• Voluntary Classification Settlement Program: apply on Form 8952 to reclassify workers prospectively with partial relief.
• Worker's side: the worker can file Form 8919 to pay only the employee share of FICA.

Paying someone on a 1099 generally doesn't exempt you from state workers' comp or unemployment rules if the worker is really an employee. If you have several long-term "contractors," a CPA or employment attorney review is worth it.

What other payroll mistakes trip up small employers?

FederalVaries by state

Short answer: Besides late deposits and misclassification, the frequent ones are S-corp owners taking no salary, not tracking hourly workers' time, missing a state's final-paycheck deadline, skipping new-hire reports or a required E-Verify case, using last year's 1099 threshold, and assuming an IRS penalty waiver also clears state penalties.

In many states, vacation pay owed under your own written policy counts as wages at separation, so write the policy carefully and follow it Check your state's vacation-payout rule..

What are my options for handling payroll and HR?

Short answer: You can do it yourself, use payroll software where you file the taxes, use full-service payroll that files for you, join a PEO (co-employment), use an ASO (outsourced admin, you stay the employer), use an employer of record, hire fractional HR, or hire an in-house HR person. Most small firms start with full-service payroll software.

Sources: Patriot; HireInSouth on TriNet; Deel pricing; Dover (June 2026); BLS OEWS: HR specialists.

Which payroll or HR model makes sense at my headcount?

Short answer: As a rough rule: 1–3 employees in one state can work DIY or with basic software; up to about 25, full-service software; 10–49 with benefits needs, consider an IRS-certified PEO; 25–50, add fractional HR; 50 and up, hire in-house HR. These are judgment-based guidelines, not rules.

Federal law also adds obligations as you grow: 15 employees for Title VII/ADA, 20 for ADEA and COBRA, 50 for FMLA and the ACA employer mandate (EEOC coverage; DOL FMLA; IRS ALE rules). Many state laws start lower; some anti-discrimination laws apply from the first employee.

Multistate note: a business paying workers in more than one state needs a plan that includes multistate payroll (see the provider comparison).

Sources: NAPEO statistics; Dover; Rework (Aug 25, 2026).

When does doing payroll myself make sense?

Short answer: When you have one to three employees in a single state, a simple pay structure, and you'll reliably hit deposit and filing dates. Every late deposit costs 2–15%, so if you're likely to miss dates, the software fee is cheaper.

DIY means you personally handle everything in this guide: W-4 and state forms, Pub 15-T and state tables, EFTPS deposits, Forms 941 and 940, state withholding and UI returns, W-2s and new-hire reports. It gets harder fast with workers in more than one state (two withholding systems, two UI accounts, possibly local taxes) or with mid-year state table changes.

What is a PEO, and how is it different from payroll software?

Short answer: A PEO becomes a co-employer of your staff and takes over payroll, payroll taxes, benefits administration, workers' comp administration and much of HR. You still run the business and direct the work. Payroll software only runs payroll; you stay the sole employer.

What the industry reports (NAPEO, the PEO trade association, so read these as advocacy figures): 502 PEOs serve about 233,000 client businesses, and NAPEO says clients have about 12% lower turnover and a 27% return from cost savings (NAPEO).

Things to weigh before joining:

• Pricing is usually per employee per month and mostly quote-only (see the provider sections).
• Leaving is work: when you exit a PEO, state UI accounts, workers' comp and group health come back to you, which can raise costs and create coverage gaps (Rework, Aug 25, 2026).
• Certification matters: choose an IRS-certified PEO (next section).
• State rules: some states license or register PEOs Check whether your state does..
• ASO alternative: if you want the outsourced administration without co-employment, ask about an ASO model (TriNet calls its version HR Plus).

What is a CPEO, and why should my PEO be one?

Federal

Short answer: A CPEO is a PEO the IRS has certified. With a CPEO, the CPEO alone is liable for federal employment taxes on the wages it pays your workers, so if it fails to pay, the IRS can't come after you for those taxes. With a non-certified PEO, courts have held clients liable even after they paid the PEO.

Key facts:

• Origin: voluntary IRS certification created by the Tax Increase Prevention Act of 2014 (IRC §7705). Eligibility requires a business entity, a US location, and a history of financial responsibility and tax compliance (IRS CPEO).
• Liability shift: under §3511 the CPEO is solely liable for federal employment taxes on wages it pays.
• Wage bases: successor-employer treatment means Social Security and FUTA wage bases don't restart if you join mid-year.
• Credits: clients keep certain credits; ADP (a vendor) notes eligibility for WOTC and the R&D credit is preserved.
• Requirements on the CPEO: annual CPA-audited GAAP financials, positive working capital, CPA-attested assertions by responsible individuals, and an annual surety bond up to $1 million.
• Reach: as of Jan 2021, 124 PEOs were certified, covering more than 69% of PEO worksite employees.

Check status on the IRS's CPEO public listings, which publish active, suspended and revoked lists updated by the 15th of the first month of each quarter.

Sources: Journal of Accountancy, Jul 2021; ADP.

What is ESAC accreditation?

Short answer: ESAC (the Employer Services Assurance Corporation) is a private accreditation for PEOs that adds an outside check on financial and operational standards. It's separate from IRS certification; many PEOs advertise both.

Look up a PEO at peoreliability.org/find or esac.org. ADP TotalSource and Justworks both say they are ESAC-accredited (ADP; Justworks). The research notes don't describe ESAC's specific standards, so ask the PEO for its accreditation details.

What is an employer of record (EOR), and when would I use one?

Short answer: An EOR legally employs a worker on your behalf and handles that worker's payroll, taxes and compliance. Small US businesses mostly use EORs to hire people in other countries without setting up a local entity. It's expensive per person.

Deel lists EOR from $599 per employee per month, its US PEO from $125, and contractor payments from $49 a month (Deel pricing, retrieved Oct 24, 2026). For workers in the US, a PEO or regular payroll is the usual route.

What does fractional HR cost, and when do I need it?

Short answer: Fractional HR is a part-time senior HR person on retainer. Rates reported in June 2026 run $75–$250 an hour, $1,500–$4,000 a month for a part-time retainer, about $4,800 a month near full-time, and $2,000–$15,000 for projects. It typically fits companies with 25–50 employees.

Source: Dover (June 2026). Dover is a recruiting-software company, and these are national figures.

How do the major payroll and PEO providers compare on price?

Short answer: Among published prices, Patriot ($37 + $5), Square ($35 + $6), Wave ($40 + $6), Gusto Simple ($49 + $6, single state only) and OnPay ($49 + $6, multistate included) are the lowest-cost full-service options. ADP, Paychex, Paycor, Paylocity, Rippling, TriNet and Insperity mostly quote prices individually.

"Not stated" means the research notes didn't say either way; ask the vendor, and confirm the provider files in every state (and locality) where you have workers.

How should I read online reviews of payroll companies?

Short answer: Treat each review site as one-sided. G2 and Capterra mostly collect solicited reviews from business admins and rate most providers 4.1–4.9 out of 5. Trustpilot draws more employees and angry ex-customers and rates several big names under 2. The useful signal is complaint themes that show up across sites.

Recurring complaint themes across providers: hard-to-reach support, billing after cancellation, and slow resolution of tax notices. BBB ratings weren't retrieved for most providers. No published 2025–2026 outages or IRS enforcement actions were found for Gusto, OnPay, Patriot, Square or Wave, which means none turned up in the research, not that none exist.

What does Gusto cost, and is it a good fit?

Short answer: Gusto's published plans (Oct 24, 2026) are Simple at $49/month + $6/person, Plus at $80 + $12, and Premium at $180 + $22. Simple covers one state only, so a business paying workers in more than one state needs Plus or higher. Business users rate it highly; Trustpilot reviewers mostly don't.

Pricing (retrieved Oct 24, 2026) — Gusto pricing

Health insurance administration is included with no extra fee. A third-party source reports a Contractor Only plan at $35/month + $6/contractor and add-ons such as HR Resources at $50 + $5/person (HireInSouth, not Gusto's own page).

Best fit: small single-state employers on Simple; multistate employers on Plus.

Reputation:

• G2: 4.6/5 (about 13,144–13,600 reviews, retrieved Oct 24, 2026) (G2).
• Trustpilot: 1.9/5 (Poor), 2,547 reviews (retrieved Oct 24, 2026), split between 63% 5-star and 30% 1-star. Complaint themes reviewers raised: scripted support, long waits, identity verification on each call, late or failed payrolls, blocked accounts, unresolved multistate tax issues. Some reviews were misfiled reviews meant for Gousto, a meal-kit company (Trustpilot Gusto).
• No notable incidents were found in the research.

What does ADP RUN cost, and is it a good fit?

Short answer: ADP RUN is quote-only, with four tiers for 1–49 employees (Essential, Enhanced, Complete Payroll & HR Plus, HR Pro). Essential has been reported at about $79/month + $4/employee, but that figure comes from a competitor. ADP's PEO, TotalSource, is IRS-certified and ESAC-accredited.

• Pricing: quote-only. Essential reported at ~$79/mo + $4/employee (Gusto guide on ADP pricing).
• PEO: ADP TotalSource has been an IRS CPEO since 2017 and is ESAC-accredited (ADP).
• Best fit: owners who want a large, established provider with a path to a certified PEO.

Reputation:

• G2: 4.7/5 (6,616 reviews, retrieved Oct 24, 2026) (G2).
• Trustpilot: 1.2/5 (Bad), 3,135 reviews (49% 1-star) (retrieved Oct 24, 2026). Themes: hard to reach a person, login loops, charges after cancellation including collections, and price increases; one reviewer reported a Form 941 misfiling (Trustpilot ADP).
• Incident (2016): fraudsters used client registration codes that had been posted publicly to create accounts and steal W-2 data. ADP said its own systems weren't breached (Trend Micro, May 2016).

What does Paychex Flex cost, and is it a good fit?

Short answer: Paychex doesn't publish prices. A third-party estimate (June 18, 2026) puts the entry tier around $39/month + $5/employee and its PEO at $100–$250 per employee per month. Paychex now owns Paycor.

• Pricing: Paychex's own page lists packages (Basic, Foundations, Advanced, Complete) without prices, and was running a promotion deferring payment until April 2027 (Paychex). Third-party estimates: entry ~$39 + $5; Pro ~$47 + ~$3; Enterprise ~$95 + ~$3; PEO $100–$250/employee (EightX, June 18, 2026).
• Ownership: Paychex completed its acquisition of Paycor on April 14, 2025 (about $4.1B, $22.50/share) (Paychex newsroom).
• Best fit: owners who want a national provider with a PEO option; get a written quote.

Reputation:

• G2: 4.1/5 (1,752 reviews, retrieved Oct 24, 2026) (G2).
• Trustpilot: 1.7/5, 869 reviews (90% 1-star) (retrieved Oct 24, 2026). Themes: support access, missed or duplicate payrolls, undisclosed fees, and difficulty closing accounts including 401(k)s; a reviewer reported a state tax filing error that led to penalties (Trustpilot Paychex).
• Litigation: a consumer lawsuit was filed over a 2024 data incident (E.D. Pa., No. 5:25-cv-02908, reported June 6, 2025). An earlier proposed class action was voluntarily dismissed with no settlement, according to Paychex. Outcome of the newer suit wasn't in the research (Bloomberg Law).

What does QuickBooks Payroll cost, and is it a good fit?

Short answer: QuickBooks Payroll (now branded "Workforce") is sold bundled with QuickBooks accounting: $88/month + $6.50/employee with Simple Start, $125 + $6.50 with Essentials, and $203 + $10 for Workforce Premium with Plus (Oct 24, 2026). It fits businesses already running their books in QuickBooks.

A promotion offered 50% off for 3 months (QuickBooks pricing).

Tax penalty protection (Elite tier only): up to $25,000 a year toward penalties and interest. It excludes the taxes themselves, misclassification, wage-law violations, and notices you forward more than 15 days after the notice date (Intuit).

Reputation: Capterra 4.5/5 (997 reviews, retrieved Oct 24, 2026); complaint themes are support quality and rising prices (Capterra). No notable incidents were found in the research.

What does Rippling cost, and is it a good fit?

Short answer: Rippling starts at $8 per employee per month plus a base fee it doesn't publish, and is priced by module on a quote. It also offers a PEO. It suits companies that want one platform for HR, IT and payroll and expect to add modules.

• Pricing: from $8/employee/month plus undisclosed base; modular quote; 6 months free for eligible VC-backed startups. Rippling supports importing year-to-date payroll when switching (Rippling pricing).
• Best fit: growing companies wanting an integrated platform; budget for costs rising as modules are added.

Reputation:

• Capterra: 4.9/5 (4,886 reviews, retrieved Oct 24, 2026); reviewers complain that costs rise with modules and about hidden fees (Capterra).
• Trustpilot: 4.6/5 (2,597 reviews, retrieved Oct 24, 2026) (Trustpilot Rippling).
• Litigation: Rippling sued Deel in March 2025, alleging a corporate spy; Deel countersued in Delaware in April 2025. The Wall Street Journal reported on Jan 23, 2026 that the U.S. Attorney for the Northern District of California issued grand jury subpoenas. No charges were reported, and the allegations are unproven (PYMNTS, Jan 2026).

What does OnPay cost, and is it a good fit?

Short answer: OnPay is $49/month + $6/worker (Oct 24, 2026), with multistate payroll and all federal, state and local filings included. That makes it one of the lowest-cost published options for a business with workers in more than one state.

• Included: multistate payroll, all federal/state/local filings, W-2s and 1099s; benefits administration free. HR add-on $15 + $2/worker (OnPay pricing).
• Contract: month-to-month. Patriot, a competitor, says on its own comparison page that OnPay bills for every employee on file whether or not they're paid (Patriot comparison, vendor-authored).
• Best fit: small multistate employers who want flat, published pricing.

Reputation (retrieved Oct 24, 2026): G2 4.8/5 (419 reviews) (G2); Trustpilot 3.8/5 (311 reviews), with reviewer complaints about slow ticket resolution and difficulty canceling (Trustpilot OnPay). No notable incidents were found in the research.

What does Patriot Software cost, and is it a good fit?

Short answer: Patriot Basic ($17/month + $4/worker, you file the taxes yourself) is the lowest published price. Patriot Full Service ($37 + $5/worker) is among the lowest full-service prices, but Square's full-service base ($35 + $6/person) is lower (both Oct 24, 2026). Add $12/month for each additional state. Pricing and terms here come from Patriot's own comparison page.

• Included in Full Service: tax filing with a filing guarantee. Patriot says its plans are month-to-month and bill only for workers you actually pay (Patriot's own comparison page, vendor-authored).
• Multistate: add $12/month for each added state.
• Best fit: cost-focused small employers, including DIY-leaning owners on Basic.

Reputation (retrieved Oct 24, 2026): Capterra 4.8/5 (3,966 reviews), with reviewer complaints about a roughly 4-day processing lead time and limited reporting (Capterra); Trustpilot 4.7/5 (3,446 reviews) (Trustpilot Patriot). No notable incidents were found in the research.

What does Square Payroll cost, and is it a good fit?

Short answer: Square Payroll is $35/month + $6/person for full service, or $6/person with no base fee for contractor-only (Oct 24, 2026). It includes multistate payroll, automatic tax filing and tip tracking, which suits restaurants and shops already using Square.

• Extras: paper W-2 mailing $3/form; support Monday–Friday 6 a.m.–6 p.m. Pacific (Square).
• Best fit: tipped and retail businesses on Square's point-of-sale system.
• Reputation: G2/Capterra and Trustpilot figures weren't retrieved; no notable incidents were found in the research.

What does Wave Payroll cost, and is it a good fit?

Short answer: Wave Payroll is $40/month + $6/employee and $6/contractor (Oct 24, 2026). Since April 2, 2025, its tax-filing service covers all 50 states. It suits very small businesses already using Wave's accounting.

Source: Wave. Ratings weren't retrieved, and no notable incidents were found in the research.

What does Justworks cost, and is it a good fit?

Short answer: Justworks offers payroll-only and a PEO. A competitor's March 27, 2026 article lists payroll at $50 + $8/employee, PEO Basic at $59–$79 per employee per month, and PEO Plus at $99–$109. Justworks' own pricing page didn't show figures when checked.

• Pricing: Gloroots, Mar 27, 2026 (a competitor); Justworks pricing.
• Certification:
• Best fit: small companies wanting a PEO with published-range pricing.

Reputation (retrieved Oct 24, 2026): G2 4.6/5 (1,127 reviews) (G2); Trustpilot 2.3/5 on only 38 reviews (a small sample), with reviewers citing tax filing errors, held pay and benefits errors (Trustpilot Justworks).

What does Insperity cost, and is it a good fit?

Short answer: Insperity is a PEO with no public rate card. A third party reports $150–$210 per employee per month (about 2–6% of payroll) plus $500–$2,000 onboarding, with a 5-employee minimum for HR360 (Aug 25, 2026). It raised prices on new and renewing accounts in January 2026; its Q4 2025 results showed elevated healthcare claims.

• Pricing: Rework, Aug 25, 2026 (third party).
• Certification: IRS CPEO since June 2017 (PW Chamber).
• Financial context: Q4 2025 adjusted EBITDA of −$13M, driven by elevated healthcare claims; about 312,377 average worksite employees; price increases on new and renewing accounts in January 2026; renegotiated UnitedHealthcare contract (Yahoo Finance).
• Best fit: employers with 5+ staff who prioritize benefits and full HR support and can absorb a higher per-employee fee.

Reputation (retrieved Oct 24, 2026): G2 4.3/5 (429 reviews) (G2); Trustpilot not retrieved. 401(k) litigation: Reliance Trust paid $39.8M in 2020 to settle ERISA excessive-fee and self-dealing claims over the Insperity 401(k) plan; the Insperity entities had been dismissed from the case in 2019 (PlanSponsor).

What does TriNet cost, and is it a good fit?

Short answer: TriNet is quote-only. Its own illustrative example is $150 per employee per month, and it says the fee doesn't rise when you give raises. It offers both a PEO and an ASO version (HR Plus) where you remain the employer. The research gathered little reputation evidence, so check reviews and references yourself.

• Models: PEO (co-employment: payroll, tax, benefits admin, workers' comp admin, HR) or HR Plus (ASO). TriNet added Payroll Pro and People Pro packages in June 2026 (HireInSouth).
• Certification: IRS CPEO approval July 1, 2018 (TriNet).
• Best fit: companies choosing between co-employment and keeping employer status with outsourced admin.
• Pricing caveat: the $150 figure is TriNet's own illustration, reported by a third party (HireInSouth), not a quote. Get a written quote and ask which services and fees it includes.
• Exit risk (applies to any PEO): leaving a PEO hands state UI accounts, workers' comp and group health back to you, which can raise costs and leave coverage gaps (Rework, Aug 25, 2026).

Reputation (retrieved Oct 24, 2026): BBB A+, accredited since Nov 4, 2025 (BBB TriNet). That is the only reputation signal in the research: no G2, Capterra or Trustpilot ratings and no complaint themes or incident searches were gathered for TriNet, so don't read the A+ as a full picture.

What do Paycor and Paylocity cost, and who are they for?

Short answer: Both are quote-only HR/payroll platforms aimed at larger small businesses. Third-party estimates put Paycor from about $99/month + $6/employee (June 9, 2026) and Paylocity's core at about $5 per employee per month (Aug 13, 2026). Paylocity targets 50–5,000 employees and typically uses annual auto-renewing contracts.

Sources: Pin; Noon AI. Both rated 4.3/5 by People Managing People (Jan 5, 2026) (PMP).

What does Deel cost, and is it a good fit?

Short answer: Deel lists EOR from $599 per employee per month, a US PEO from $125, and contractor payments from $49 a month (Oct 24, 2026). It's built for companies with international workers or contractors.

• Pricing: Deel pricing.
• Best fit: businesses hiring abroad or paying many contractors.
• Reputation: Trustpilot 4.6/5 (9,733 reviews, many invited; retrieved Oct 24, 2026) (Trustpilot Deel).
• Litigation: see the Rippling section; Deel is the defendant in Rippling's March 2025 suit and countersued in April 2025. Grand jury subpoenas were reported in January 2026; no charges were reported and the allegations are unproven (PYMNTS).

What security and controls reports should I ask a payroll provider for?

Short answer: Ask for a SOC 1 Type 2 report (controls over payroll calculations and tax withholding) and a SOC 2 Type 2 report (data security and related controls). Type 2 means the controls were tested over a period, not just at one point in time.

Ask what period the report covers and whether the auditor noted any exceptions. Source: I.S. Partners.

What should a payroll tax-filing guarantee cover?

Short answer: Get it in writing and read the exclusions. Ask who pays penalties caused by the provider's errors versus yours, what the annual cap is, how fast you must forward a tax notice, and whether state and local filings are covered too.

Example of fine print: QuickBooks' Elite penalty protection covers up to $25,000 a year in penalties and interest but not the taxes themselves, misclassification, wage-law violations, or notices forwarded more than 15 days after the notice date (Intuit). Patriot's Full Service includes a tax filing guarantee (Patriot).

Remember that for federal employment taxes, only a certified PEO shifts legal liability off you; with any other provider, the IRS can still hold you responsible.

What contract terms should I check before signing?

Short answer: Check term length, auto-renewal, the renewal price, notice required to leave, and any cancellation or exit fees. Several providers are month-to-month; some platforms use annual auto-renewing contracts.

• Patriot and OnPay: month-to-month, per Patriot's own comparison page (Patriot, vendor-authored).
• Paylocity: typically annual and auto-renewing; get the renewal rate in writing (Noon AI).
• Insperity: onboarding fees reported at $500–$2,000 (Rework).
• Billing after cancellation is a recurring complaint across several providers' reviews, so get cancellation steps in writing.

Vetting checklist:

1. Is the PEO on the current IRS active CPEO list?
2. Is it ESAC-accredited?
3. Which SOC reports, for what period, and any exceptions?
4. Who pays penalties from errors, and what's the cap?
5. Does it file in every state and locality where you have workers?
6. Contract term, renewal price and notice period to leave?
7. Can you export pay history, W-2 data and tax filings (for example, as CSV)?

Can I get my data out, and can I switch providers mid-year?

Short answer: Yes, but confirm two things first: that you can export complete pay history and tax filings, and that the new provider will import your year-to-date figures so W-2s and wage bases come out right. Leaving a PEO mid-year is more involved because UI accounts, workers' comp and health coverage come back to you.

• YTD import: Rippling, for example, supports importing year-to-date payroll when switching (Rippling).
• Leaving a PEO: state UI accounts, workers' comp and group health return to the company, which can raise costs and create a coverage gap (Rework, Aug 25, 2026). Line up workers' comp and health coverage before the exit date.
• Joining a CPEO mid-year: successor-employer treatment means wage bases don't restart (Journal of Accountancy).

Switching at a quarter start, or better at January 1, keeps the Forms 941 and state returns cleaner. That's general practice, not a rule.

What does an HR specialist earn?

Short answer: Nationally, BLS put the median pay for human resources specialists at about $72,910 a year and HR managers at about $140,030 (May 2024 data, via the Occupational Outlook Handbook). Local pay varies widely, so check your metro area in BLS's free OEWS data.

Notes on the data:

• BLS doesn't have an "HR generalist" category; it uses HR specialist and HR manager.
• For your metro area, use the BLS OEWS data tool and pick your area and occupation. Mean and median figures aren't directly comparable.

When should I hire a full-time HR person instead of using fractional HR?

Short answer: Around 50 employees is the usual point, per a June 2026 industry guide. That's also when FMLA and the ACA employer mandate begin, which adds leave and benefits administration. Between about 25 and 50, fractional HR is the common bridge.

Compare the cost: a part-time fractional retainer runs $1,500–$4,000 a month ($18,000–$48,000 a year), versus a national median of roughly $72,910 in salary for an HR specialist (BLS, May 2024) before benefits and payroll taxes. Sources: Dover (June 2026); DOL FMLA; IRS ALE.

What do SHRM-CP and PHR certifications mean when hiring HR?

Short answer: They're professional HR credentials. SHRM-CP and SHRM-SCP come from SHRM; the PHR comes from HRCI. A credential shows tested HR knowledge, which matters most for a first HR hire who will work without a senior HR person above them.

SHRM's 2026 exam fees (SHRM):

Testing windows: May 1–July 15, 2026 and Dec 1, 2026–Feb 15, 2027. The research notes don't include PHR fees or requirements.

A first HR hire who handles more than one state should know each state's wage, leave and final-pay rules; ask about that experience in the interview.

Where do I find a local HR networking group?

Short answer: SHRM has local chapters across the country and state councils in most states. Local chapters are a good place to post HR job openings and find fractional HR consultants.

Find yours with SHRM's chapter directory.

Where can I post a job for free?

Varies by state

Short answer: Every state runs a public workforce system where employers can post jobs, usually free, and local American Job Centers help with recruiting and screening. State vocational rehabilitation agencies help employers hire people with disabilities.

How it usually works

• Each state's workforce agency runs a job bank (the name varies by state) and local American Job Centers that offer employer services such as job fairs and screening.
• Some states also administer hiring incentives and on-the-job training funds through the same agencies.
• Local SHRM chapters and trade associations are other channels, especially for HR and skilled roles.

Look up your state: find your state job bank and nearest American Job Center through the DOL-sponsored CareerOneStop.

How do I run a legal background check on a job applicant?

FederalVaries by state

Short answer: If you use a background check company, the federal FCRA applies: give a stand-alone written disclosure, get written authorization, and if you may reject someone based on the report, send a pre-adverse action notice with a copy of the report and a rights summary, then a final adverse action notice. Some states and cities add their own notice and timing rules.

FCRA steps (FTC: Background checks):

1. Disclosure: a stand-alone written notice that you'll get a background report (not buried in the application).
2. Authorization: the applicant's written permission.
3. Certify to the background check company (consumer reporting agency) that you'll comply.
4. Pre-adverse action notice: before deciding against the person, give a copy of the report and "A Summary of Your Rights Under the Fair Credit Reporting Act."
5. Adverse action notice: after deciding, tell them, including the agency's contact information and their right to dispute and to a free report within 60 days.

State and local laws can limit what you may consider (for example, older convictions, arrests without conviction, or credit history) and when in the process you may ask. Check your state's rules and the next section before you set your process Check your state's background-check limits..

Do ban-the-box or fair-chance laws apply to my business?

FederalVaries by state

Short answer: Maybe. The federal Fair Chance Act covers only federal agencies and federal contractors. About 15 to 16 states plus DC have fair-chance laws that cover private employers, usually barring criminal-history questions on the initial application; many cities and counties add their own.

• States reported to cover private employers: CA, CO, CT, HI, IL, ME, MD, MA, MN, NJ, NM, NY, OR, RI, VT, WA, plus DC.
• Typical rule: no conviction question until after a conditional offer or first interview; some laws add an individualized assessment and notice before rejecting someone.
• Local laws: many cities and counties (for example New York City, Philadelphia, Los Angeles) go further; a few states preempt local rules.
• FCRA rules (previous section) still apply everywhere.

Look up your state: the NELP fair-chance state and local guide (an advocacy group's tracker; confirm with your state labor department).

What should go in an offer letter?

Varies by state

Short answer: At minimum, the pay rate and basis (hourly or salary), the payday and how you'll pay, and any deductions. That covers the written wage notice many states require. Add start date, title, normal hours, and whether the role is exempt or nonexempt.

Offer letter checklist:

• Job title and start date
• Pay rate and basis (hourly or salary), and exempt or nonexempt status
• Normal hours
• Payday and pay period, and place or method of payment (for example, direct deposit)
• Deductions, including insurance
• Any bonus or commission terms, set in advance
• Vacation, holiday and sick pay policy, if you offer it (in many states, amounts owed under your policy count as wages at separation)
• At-will statement, if you rely on at-will employment (Montana is the notable state that limits it)

Some states have specific notice forms or require the employer's legal name, address and phone; some treat an employee handbook as a contract unless it has a clear disclaimer. For anything beyond these basics, such as non-competes (which several states ban or limit), an employment attorney is the right resource.

Look up your state: your state labor department (DOL list of state labor offices).

What is a complete new-employee onboarding checklist?

FederalVaries by state

Short answer: Before day one, send the offer letter and confirm workers' comp. On day one, collect the W-4, any state withholding form, I-9 Section 1 and direct deposit details. Within 3 business days, finish I-9 Section 2 and any required E-Verify case. Within 20 days (or your state's shorter deadline), file the new-hire report. Make sure posters are up.

Use the DOL Poster Advisor for federal posters; most state labor departments offer theirs free. For minors, see the DOL state child labor tables.

Are there apprenticeship programs or tax credits for hiring apprentices?

FederalVaries by state

Short answer: Registered Apprenticeship programs are run through DOL and state apprenticeship agencies, and roughly 15 to 20 states offer a state tax credit or tuition support for apprentices. South Carolina's $1,000 per apprentice per year (up to 4 years) is one example.

• Federal: start at Apprenticeship.gov for employers; it connects you to your state apprenticeship office and community colleges.
• State credits: DOL keeps a list of state tax credits and tuition support. Examples reported include South Carolina ($1,000 per registered apprentice per year, up to 4 years, if employed at least 7 months that year) and credits in states such as Alabama, Maryland, Connecticut, Illinois, Montana and New York.

Sources: SC Works Apprenticeship Tax Credit.

Can I still claim the Work Opportunity Tax Credit (WOTC)?

Federal

Short answer: Not for new hires right now, as far as the latest sources show. WOTC lapsed for hires after December 31, 2025, and as of a May 13, 2026 Congressional Research Service report (and news coverage through September 2026) it had not been renewed. Congress has extended it retroactively before, so check its status before you hire.

When available, WOTC was 40% of up to $6,000 of first-year wages (a $2,400 maximum, up to $9,600 for certain veterans) across 10 target groups. During the lapse, states may process but not certify applications (CRS via EveryCRSReport, May 13, 2026; DOL ETA: WOTC).

Where can I get free one-on-one business advice?

Short answer: SBA-funded Small Business Development Centers (SBDCs), SCORE mentors, Women's Business Centers and Veterans Business Outreach Centers all offer free, confidential advising, with offices or virtual service in every state.

• SBDCs: usually hosted by universities and colleges; find yours at America's SBDC.
• SCORE: free volunteer mentoring for the life of the business; find a mentor.
• All SBA resource partners near you: SBA local assistance finder.
• Women's Business Centers: SBA WBC program.
• Veterans Business Outreach Centers: SBA VBOC program.

What state resources help new employers?

Varies by state

Short answer: Most states have a small business office or online "one stop" that walks through registrations, a labor department that answers wage-and-hour questions, a free OSHA on-site consultation program for small employers, and workforce agencies with employer services.

• Registrations: your state's business portal or revenue department (box below).
• Wage and hour questions: your state labor department (DOL list of state labor offices).
• Free safety help: OSHA's On-Site Consultation Program is free and confidential for small businesses in every state (OSHA consultation); 22 State Plan states run their own OSHA programs for private employers (OSHA State Plans).
• Hiring help: state workforce agencies and American Job Centers (CareerOneStop).

What free federal resources help with payroll?

Federal

Short answer: The IRS Small Business and Self-Employed Tax Center, Pub 15 and 15-T, a free recorded IRS small business tax workshop, and the Taxpayer Advocate Service for problems you can't resolve with the IRS.

• IRS Small Business and Self-Employed Tax Center
• IRS Pub 15 (Circular E) and Pub 15-T
• IRS Virtual Small Business Tax Workshop
• Taxpayer Advocate Service, an independent organization within the IRS
• For tax questions beyond payroll mechanics, CPAs, Enrolled Agents and attorneys have unlimited rights to represent you before the IRS (IRS: preparer credentials)

Which federal agencies handle payroll and hiring rules?

Federal

Short answer: The IRS (EIN, withholding, deposits, Forms 941/940), SSA (W-2 filing), DOL (minimum wage, overtime, posters), USCIS and E-Verify (I-9), HHS (new-hire reporting rules), EEOC (discrimination) and OSHA (safety).

Which state agencies will I deal with, and how do I find mine?

Varies by state

Short answer: Most employers deal with five kinds of state agency: the revenue department (withholding), the workforce agency (unemployment insurance), the new-hire reporting directory, the labor department (wages, child labor, posters) and the workers' comp board or commission. The box below links yours where our state data has them.