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The forms, the schedule, and the cycle you'll repeat.
You just hired your first employee, or you're formalizing payroll for yourself and one assistant. Paying one person consistently every pay period means getting the setup right and establishing a rhythm you can sustain.
You'll collect the right forms from your employee, choose a pay schedule that fits your business, calculate payroll consistently, and meet your tax obligations on time. Before you start, you'll need your employer identification number (EIN) and your state tax registration complete.
Here's what setting up payroll for one employee looks like: from the forms you collect at onboarding to the rhythm you execute every pay period.
SurePayroll By Paychex automates this rhythm, from tax calculations to quarterly filings, so you can focus on the business you’re building.
What It Means to Set Up Payroll for One Employee
Setting up payroll for one employee means two things. You complete the initial setup (employee onboarding forms, pay schedule, first payroll run), and then you execute the ongoing rhythm (calculating gross pay, withholding taxes, paying your employee, depositing taxes, filing returns) every pay period.
At one-employee scale, the operational simplicity is real: one W-4 form, one pay calculation, one direct deposit.
The compliance obligations, however, are the same as for larger small businesses. You withhold federal income tax, Social Security, Medicare taxes, and applicable state and local taxes. You file Form 941 every quarter, then generate a W-2 at year end.
The IRS doesn’t scale tax requirements down because your team is small.
If you’re an S-corp owner paying yourself a reasonable salary on payroll, this process replaces what you’d otherwise pay as self-employment tax.
Setting up payroll for one employee means building a system you can run whether your team stays at one or grows to four. Understanding the setup and the rhythm before your first payroll keeps the deposits, filings, and paystubs on schedule. That groundwork is important. The cost of a missed deposit or a misclassified worker can surface months later as IRS penalties.
Step 1: Collect Employee Information and Onboarding Forms
When you onboard your new employee, you collect specific tax forms and documentation. Each one has a purpose, a deadline, and a place in your records. Get them right at onboarding to minimize compliance gaps.
W-4 Form (Federal Tax Withholding)
Your new hire fills out a W-4 form to tell you how much federal income tax to withhold from each paycheck. You use the filing status, dependents, and any additional withholding requests from their W-4 to calculate tax withholding every pay period. Keep the completed form on file.
You don’t submit it to the IRS, but you produce it if audited.
If your new employee doesn’t return a completed W-4, the IRS requires you to withhold federal income tax as if they’re single with no adjustments, which is the highest withholding rate.
Form I-9 (Work Authorization)
Federal law requires you to verify your employee’s identity and right to work in the United States. Both you and your new employee complete sections of Form I-9 within three business days of their start date. You keep the form on file. You don’t submit it unless an auditor requests it.
State Tax Withholding Forms
Most states require their own state tax withholding form beyond the federal W-4, but a few states have no state income tax at all. Check your state’s tax withholding requirements to confirm what your new hire needs to complete and what state tax you’ll withhold from each paycheck.
Payment Method and Bank Account Information
Confirm whether your new employee wants direct deposit or a paper check. For direct deposit, collect their bank account routing and account numbers and store this information securely, separate from other employee files. Direct deposit gives your employee predictable access to their wages on payday.
New Hire Reporting
Most states require you to submit new hire reporting to a designated state agency within 20 days of your employee’s start date.
Many online payroll services file this report on your behalf.
If you’re running payroll yourself, use your state’s reporting portal directly.
“This is the first time I have needed a payroll service and it was quite intimidating to think about all the tax implications for the myriad of mistakes that can be made. [Our SurePayroll rep] was very helpful and walked me through the process of creating my account and populating it with everything I needed. He then walked me through processing my first payroll and it was surprisingly quite simple. This is the best service out there.”
— Joseph, Google review
Step 2: Choose Your Pay Schedule
You decide how often to pay your employee. Weekly means 52 payroll cycles per year. Biweekly means 26. Semimonthly means 24. Monthly means 12. More frequent payrolls mean more administrative work for you and more frequent paychecks for your employee.
State wage payment laws may limit your options. Some states require minimum pay frequencies for hourly employees. Check your state's wage payment laws before you decide.
Biweekly is the most common choice. According to the U.S. Bureau of Labor Statistics, 39% of small businesses with one to nine employees paid biweekly in 2023. It balances your administrative workload with how often your employee gets paid. You pay every two weeks on a set day, and most employees budget around that rhythm.
Once you choose your schedule, document it clearly so your employee knows when to expect payment. Changing pay schedules mid-year creates tax withholding complications. Choose a cadence you can sustain.
For detailed comparisons: weekly vs. monthly payroll and biweekly vs. semimonthly payroll.
Once you set your schedule, SurePayroll® By Paychex runs payroll automatically every cycle. The service calculates withholdings, files taxes, and generates paystubs. You review and approve each cycle.
Step 3: Understand Your Payroll Tax Obligations
You’re responsible for withholding taxes from your employee’s paycheck, paying employer taxes, and filing returns with federal and state agencies. The tax requirements are the same whether you have a single employee or 50.
Federal income tax withholding. You withhold federal income tax from every employee’s paycheck based on their W-4 form. The amount varies with their filing status, dependents, and any extra withholding they requested. You hold this in trust and deposit it to the IRS on a schedule the IRS assigns based on your total tax liability.
FICA (Social Security and Medicare taxes). You withhold 6.2% for Social Security and 1.45% for Medicare from your employee’s gross pay. You match those amounts as the employer. Combined, FICA taxes total 15.3% (your half plus your employee’s half). Social Security withholding applies up to an annual wage base cap that adjusts each year. Medicare has no cap.
Federal unemployment tax (FUTA). You pay federal unemployment tax (FUTA) as the employer. Your employee doesn’t contribute. The rate is 6% on the first $7,000 of each employee’s wages per year, but you qualify for a credit that could reduce your effective rate to 0.6% if you pay state unemployment on time. Verify the current FUTA wage base on IRS.gov before your first deposit.
State unemployment insurance (SUI). You pay state unemployment insurance (SUI) as the employer. Tax rates and wage bases vary by state and industry. You start at a standard new-employer rate that adjusts over time based on your unemployment claims history. Your state assigns the rate when you register, and you receive an updated rate notice each year.
State income tax withholding. Check your state’s tax requirements for current withholding tables, deposit schedules, and forms.
Local taxes. Some cities, counties, and school districts impose local taxes on wages. If your business operates in one of those jurisdictions, you withhold and remit local taxes alongside your federal and state obligations.
Tax deposit and filing schedules. Federal tax deposits (income tax withholding plus FICA) follow either a monthly or semiweekly schedule based on your total tax liability. You start on a monthly schedule by default and may move to semiweekly later if your reported taxes cross the IRS threshold.
You file Form 941 quarterly to reconcile what you withheld and deposited. File Form 940 annually to report FUTA, due January 31 of the following year. State deposit and filing schedules vary, so confirm yours before your first pay period closes.
Miss a federal tax deposit deadline, and IRS penalties start at 2% of the unpaid tax and escalate based on how late you are. Staying ahead of deposit deadlines protects what you’ve built.
Step 4: Calculate and Run Payroll
Every pay period, you follow the same payroll process. Calculate gross pay, withhold federal income tax and FICA, apply any state and local taxes, calculate net pay, pay your employee, and deposit your tax withholdings. You completed the setup. This is the rhythm.
Calculate gross pay.
For an hourly employee, multiply their hourly rate by the hours worked in the pay period.
For a salaried employee, divide their annual salary by the number of pay periods per year. Add any additional compensation (overtime, bonuses, commissions, tips) before you move to withholdings.
If you’re tracking employee hours yourself, use a reliable time tracking method you can run every cycle.
Calculate tax withholdings. Use your employee’s W-4 and the IRS withholding tables to calculate federal income tax withholding. Calculate FICA at 7.65% of gross pay (6.2% Social Security plus 1.45% Medicare).
Add state income tax withholding if your state requires it, and local taxes if applicable. This is where manual payroll can break down. Federal withholding tables change. Social Security caps adjust annually. State tax laws vary by jurisdiction.
Tax calculations are the step where small errors can turn into corrected returns and reissued paychecks.
Calculate net pay. Gross pay minus all withholdings equals net pay. This is what your employee takes home. Subtract any voluntary deductions, like health insurance premiums or retirement contributions, from gross pay along with tax withholdings to arrive at net pay.
Pay your employee. Issue payment via direct deposit or paper check on the scheduled payday. Generate a paystub showing gross pay, every deduction, and net pay. Many states require you to provide a paystub each pay period regardless of payment method.
Deposit payroll taxes. You deposit federal taxes (withheld income tax plus FICA) by the 15th of the following month if you’re on a monthly deposit schedule, or within a few business days of payday if you’re semiweekly. State tax deposits follow your state’s schedule.
This is the rhythm you repeat every pay period. You complete the setup, then you execute the cycle: calculate gross pay, withhold taxes, pay your employee, deposit taxes. Every two weeks, or whatever frequency you chose, you run through this sequence. Knowing it upfront means you execute confidently from your first payroll.
SurePayroll automates payroll tax withholding calculations, deposits taxes on your schedule, and generates paystubs every pay period. Built for teams of 1–10, where running payroll consistently is part of how you grow.
Step 5: File Payroll Taxes and Maintain Records
Beyond the pay cycle, you file payroll taxes and keep records. You file tax returns monthly, quarterly, and annually. You maintain records continuously. Together, these obligations form the compliance side of your payroll tax management responsibilities.
Quarterly federal filing. You file Form 941 every quarter, due April 30, July 31, October 31, and January 31. Form 941 reports the federal income tax and FICA you withheld during the quarter, plus your employer share of FICA. You file even with one employee.
Annual federal unemployment filing. You file Form 940 annually by January 31 to report FUTA tax for the prior year.
State tax filings. State filing frequency varies. Some states require quarterly returns, others monthly. Some require annual reconciliations on top of your regular returns. Check your state’s requirements for current filing schedules and tax forms.
Year-end tax forms. By January 31, you generate and distribute W-2s to your employee showing total wages, taxes withheld, and pre-tax deductions for the prior year. You file copies with the Social Security Administration. If you also paid an independent contractor during the year, you file a 1099-NEC by the same deadline.
Recordkeeping requirements. The IRS requires you to keep payroll records for at least three years. Some states require longer retention. Records include W-4s, I-9s, paystubs, tax deposits, filed returns, time-tracking records, and proof of payment.
Keep them organized so you can produce them in an audit or in response to a state agency request. Pair your payroll records with your bookkeeping in accounting software so the financial trail stays consistent across systems. The same records you use to file taxes each quarter feed your year-end W-2 and your business tax return.
Learn about payroll reports.
That's the full cycle. Setup gets you ready. The rhythm is what you execute every pay period, and what you repeat for as long as you have employees.
Ready to Set Up Payroll for Your First Employee?
Setting up payroll correctly helps protect you from penalties and gives your employee confidence in how you run your business.
The steps are straightforward, but the details matter—tax rates, filing deadlines, and withholding calculations require precision.
“SurePayroll has made the hiring of my first employee very easy. There isn’t a single detail that they don’t take care of for me. The cost of this service is remarkably low, certainly when I compare it to what my CPA wanted to charge. I am very excited to recommend SurePayroll.”
— Ronald, Trustpilot review
SurePayroll is built for businesses like yours: one employee, no HR team, and payroll that needs consistent. Setup is free, onboarding support is included, and once it's running, federal, state, and local taxes are calculated and filed automatically—every pay period.
This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up to date
