As an employer, you need to deduct the correct amount of taxes from your employee’s wages, calculate your own taxes, deposit the payments and file returns on time.Federal payroll taxes come in two parts. First, Federal Insurance Contribution Act taxes that support Social Security and Medicare. They are 15.3% of every employee’s wages, half paid by the employee and half by the employer. If the employee is paid over $160,200, they’ll be charged more.Second, federal income tax, paid only by the employee, is based on the wages they’ve earned and From W-4 details.

State payroll taxes vary by location, and are only paid by the employee. In some states employees also pay unemployment taxes—the federal rate varies from 0.6 - 6% depending on variations in state law.

Minimum wage laws lay out the lowest amount of money employees may be paid. Every employee in the United States must be paid a minimum of $7.25 per hour, the federal minimum wage laid out in the Fair Labor Standards Act.However, in some jurisdictions the minimum wage is set higher. If you’ve got Washington in your address, look out. Washington has the highest state minimum wage at $15.74, and the jurisdiction with the highest minimum wage in the country is the District of Columbia, at $17 per hour.

Overtime pay is the extra amount per hour employers must pay nonexempt employees who work more than 40 hours in a workweek. The overtime rate must be at least 1.5 times the standard pay rate.Exempt employees (those who don’t make overtime) must be paid a salary above a certain level, and work in an administrative, professional, managerial, sales, or other non-hourly role. The Department of Labor website has plenty of info to help make that distinction.

The federal government has several overlapping requirements for payroll recordkeeping. Employers must keep all personnel or employment records for a year. All payroll records must be kept for three years. Any benefit plan and seniority/merit system must be kept while in effect, and for a year after it is ended. Finally, any records that explain the basis for paying different wages to employees of opposite sexes need to be kept for at least two years.Doing all of this recordkeeping with paper and pen or spreadsheets and Word documents is time-consuming and risky. You should use an HR system (like HR for Health!) that handles documentation, organization, and storage for you and flags any risks before a lawsuit comes up.

Setting up payroll is one of the first steps in starting a new practice. Here are the seven key steps to get going: Apply for a federal employer identification number (EIN) Get a local or state business ID (this will vary by jurisdiction) Collect employee documents — you’ll usually need an I-9, W-4, and state withholding allowance certificate from each employee. Most of these should be filled out on the employee’s first day on the job. Choose your pay periods Buy workers’ comp insurance. Even if you only have one employee who works at a desk, you probably still need it Offer optional benefits like health insurance, dental insurance, retirement plans, and PTO Open a payroll bank account separate from your business accountIt’s a lot of paperwork. You can ease most of the administrative load down the road by getting an HR platform that handles payroll and is built for your business.