How to pay employees: the paycheck, then the taxes you still send

How to pay employees on payday

Start with the job, not with a login. Gross pay is the wages the person earned before taxes. Count the hours and the rate you agreed to. That total is the top of the check.

Gross pay

Wages before taxes

Withholding

Taxes you take out and send

Net pay

The amount the employee receives

The FLSA is the Fair Labor Standards Act, the federal wage-and-hour law. The DOL is the U.S. Department of Labor, the federal labor agency. The Labor Department’s guide to that law says covered nonexempt workers get overtime after 40 hours in a workweek. Overtime pay is at least one and one-half times the regular rate. Nonexempt means the overtime rule covers that worker. Some workers are exempt. Exempt means the overtime rule does not cover them. The same guide says those exemptions are narrow. Read the exact rule before you skip the extra half.

Wages that law requires are due on the regular payday for the pay period. The law does not pick how often that payday comes. The Labor Department payday chart was last revised January 1, 2023. The chart is a map. The Labor Department says to confirm it with the state labor office. Hiring your first employee walks that chart. This page does not copy it.

A faster clock for the last check, after someone quits or is let go, is a state rule. The state pages below do not print that clock. Do not copy one state’s last-check rule onto another state.

What you take out of the check

Withholding means money you take out of a paycheck and send to a tax agency. The IRS is the Internal Revenue Service, the federal tax agency. Publication 15 (Circular E) is the IRS Employer’s Tax Guide. It is the federal book for this job.

Form W-4 is the Employee’s Withholding Certificate. The employee fills it out so you can withhold federal income tax. The form is on the About Form W-4 page. The dollar amount comes from Publication 15-T, the withholding tables Publication 15 points to. If a new employee does not give you a 2026 Form W-4, Publication 15 says to treat the person as single or married filing separately, with nothing filled in on steps 2, 3, or 4.

FICA is the Federal Insurance Contributions Act. It is the law for Social Security tax and Medicare tax. For 2026, Publication 15 sets Social Security at 6.2 percent of wages for the employee and 6.2 percent for you, up to $184,500 for that employee. Medicare is 1.45 percent for the employee and 1.45 percent for you. Medicare has no wage cap. You also withhold an extra 0.9 percent Medicare tax, called Additional Medicare Tax, on wages you pay that employee above $200,000 in the year. You do not match that extra 0.9 percent.

Net pay is what is left after the taxes you withhold. That is the amount on the paycheck. Your own Social Security and Medicare stay off that check. You may also owe federal unemployment tax. Only the employer pays it. The rate and the wage base are in Publication 15. A state unemployment tax can follow a different rule about the check. The state section below is that split.

A pay stub is a note you give the employee. It shows gross pay, what you took out, and net pay. The Labor Department’s questions page says the Fair Labor Standards Act requires you to keep records of hours and wages. It does not require you to give the employee a pay stub. Whether you must hand one over is a state rule. The state pages below do not print that rule.

The Labor Department’s guide says the records you keep include total hours, deductions, total wages paid each pay period, and the date of payment. They do not have to be on a special form.

How to pay employees with direct deposit

Direct deposit means the net pay goes into the employee’s bank account. You do not hand over a paper check. The amount is still net pay.

The Labor Department’s Field Operations Handbook is the staff handbook for wage investigators. Chapter 30 covers how wages may be paid. It says direct deposit into the employee’s bank account is acceptable if the employee can still choose cash or a check from you. The same section allows another path. You arrange for the employee to cash a check drawn on your payroll account, at a place convenient to the job, with no charge to the employee.

A 1983 Labor Department opinion letter says the Fair Labor Standards Act does not require you to consult the employee about the method. It still says a bank deposit is proper if the employee can choose a check. If you do not offer that choice, the letter says to arrange free, convenient check cashing.

A signed consent form is a different question. That handbook section does not require one. A state wage-payment law can. The state pages on this site do not print a direct-deposit consent rule. Do not paste one state’s consent sentence onto another state. Confirm that rule with the state labor office before you require direct deposit. A paper check and cash can still pay the same net pay.

What the state takes off the check

These pages do not print a payday calendar, a pay-stub list, a last-check clock, or a direct-deposit consent rule. They do print what comes off the check, or what you must not take off. Those rules are not the same.

California starts a registration clock because you paid wages. If you pay more than $100 in a quarter, you have 15 days to register with the Employment Development Department, the state payroll-tax office. Workplace injury insurance is due before anyone starts work. That clock is not a payday calendar.

New York treats you as liable for unemployment when you pay $300 or more in a calendar quarter. One registration covers unemployment, withholding, and wage reporting. Employees use Form IT-2104, the Employee’s Withholding Allowance Certificate. A federal Form W-4 does not replace it.

Texas does not take state income tax from paychecks. There is no state withholding account to open. Labor Code § 204.003 says you may not deduct any part of the unemployment contribution from wages. That contribution stays off the check.

Florida does not take state income tax from paychecks. Reemployment tax is Florida’s name for the employer tax that funds unemployment benefits. Workers do not pay it. You must not take it from paychecks.

Illinois does take state income tax from paychecks. Employees use Form IL-W-4, the Employee’s Illinois Withholding Allowance Certificate. The income-tax office says to register before you hire.

Washington does not take state income tax from paychecks. The quarterly unemployment report asks for gross pay and hours. That report goes to the state. It is not a pay stub for the employee.

Massachusetts takes state income tax from paychecks. Collect Form M-4, the Massachusetts Employee’s Withholding Exemption Certificate, as well as Form W-4. Paid Family and Medical Leave is a state program. It is not unemployment tax. A larger shop may withhold part of that contribution from pay. A shop with fewer than 25 covered individuals does not owe the employer medical-leave share. The percents are on the Massachusetts page. Do not copy them onto another state.

Pennsylvania withholds state income tax at a flat 3.07 percent of compensation. Local earned income tax is a separate collector. One state account does not cover it. Do not treat the 3.07 percent line as the local tax.

Alaska does not take state income tax from paychecks. For 2026, deduct an employee unemployment share of 0.50 percent from wages. You also pay an employer share. Do not copy that 0.50 percent onto a state that does not take an employee share. The same page says limited liability company members are not unemployment employees. The shop’s employees still go on the report.

How to pay employees LLC

The question is how a limited liability company pays the people who work there, and how it pays its owners. An LLC is a limited liability company. A state lets you form one. The owners are called members.

An LLC can have employees. Publication 3402 is the IRS guide to how an LLC is taxed. Its example is a one-owner LLC that pays three employees. That LLC withholds income tax and FICA, and it owes FUTA, on those wages. FUTA is the Federal Unemployment Tax Act, the federal unemployment tax. The LLC files the employment tax returns in its own name. It gives those employees Form W-2, the wage and tax statement. The owner in that example is not an employee.

A single-member LLC is an LLC with one owner. If the IRS disregards it, the company is not separate from the owner for income tax. Publication 3402 says that owner is generally not an employee of the LLC. The owner pays self-employment tax on the LLC’s net earnings. Self-employment tax is the Social Security and Medicare tax a person in business for themselves pays on profit. It is not withholding from a paycheck. The same publication says most new single-member LLCs need an employer identification number if they have employees. An employer identification number is the nine-digit tax ID the IRS assigns to a business.

A domestic LLC with at least two members is a partnership for federal income tax unless it elects to be a corporation. The IRS LLC page states that default. A partnership is the tax label for that multi-owner default. Partners are not employees. The IRS paying-yourself page says not to issue Form W-2 for distributions or guaranteed payments. Publication 541 is the IRS partnerships guide. It says a distribution includes a partner’s withdrawal of money, including a draw against that year’s earnings. A guaranteed payment is an amount the partnership pays a partner that is set without regard to the partnership’s income. It can be for services or for the use of capital. Publication 541 says a guaranteed payment is not subject to income tax withholding.

The owner path changes if the LLC elects to be taxed as a corporation. File Form 8832, the Entity Classification Election, to be taxed as a C corporation. File Form 2553 to be taxed as an S corporation. Publication 3402 says filing Form 2553 is treated as the corporation election too. An officer of a corporation who performs services is generally an employee. An officer who does no work, or only minor work, and who neither gets nor is owed any pay, is not an employee. Wages for an officer should generally match the duties. The IRS may change the returns if the officer is underpaid for the work. The people who are not owners, and who are employees, still get a paycheck either way.

How to pay employees without payroll

Without payroll means you are not using payroll software and you are not paying a payroll company to run the check. It does not mean the wages are free of tax.

You still have the employee fill out Form W-4. You still withhold federal income tax, Social Security, and Medicare. You still add your employer share. You still deposit that money and file the return. Form 941 is the quarterly federal return for income tax withheld and for Social Security and Medicare, including your share. Publication 15 says you generally stay responsible for the returns and the deposits if a payroll company misses them. A certified professional employer organization is a special case that publication describes. A certified professional employer organization is a firm the IRS certifies to be treated as the employer for certain wages it pays. Read that case before you assume the duty moved.

Can I do my own payroll? is the deposit calendar and the filing dates. This page stops at the check.

You can also hand the arithmetic to software. On some plans it files a return the company names on its own help page. A login is not a state tax account. The methodology page explains the three grades. The directory shows those grades by state. Best payroll software for small business is a checklist for the jobs a product leaves on you. Gusto is one plain link. Patriot is the other service on this site.

Cash or a 1099 does not change an employee

Paying an employee in cash, with no Form W-4 and no tax sent in, does not make the wages disappear. The IRS paying-yourself page says you can be liable for Social Security and Medicare taxes, and for the income tax you did not withhold, if you treated an employee as a nonemployee. That includes you, if you are a corporate officer.

Form 1099-NEC is the form for pay to someone who is not your employee. Filing it does not make an employee a contractor. The IRS paying-yourself page says you cannot pick the label only by issuing Form W-2 or Form 1099-NEC. Independent contractor vs employee is the label check. Decide it before the first payment.

Related guide: Employer payroll taxes percentage is the employer share that stays off the paycheck.