The Payroll Setup Checklist: Everything You Need to Know to Get Started

Between browsing different platforms, managing your employee data, and conducting the appropriate research, switching payroll systems has a lot of moving parts. Here’s our comprehensive payroll setup checklist.

payroll piggy bank

Between browsing different platforms, managing your employee data, and conducting the appropriate research, the process of switching payroll services or starting a new one has a lot of moving parts. What do I need to know to stay compliant? What information is absolutely necessary for me to provide? Is this what’s best for my employees? We’re here to offer you some resources to answer these questions and help you through the process. To get started on a new payroll system, there are a few pieces of information you’ll need to have ready– here’s our payroll setup checklist.

The Ultimate Payroll Setup Checklist:

Federal Tax Information

  • Federal filing form
    • Typically this means Federal Form 941, which is the quarterly federal tax return form.
    • Filing deadlines for these forms are: April 30, July 31, Oct. 31, and Jan. 31
  • Federal Employer Identification Number (EIN)
    • Jargon breakdown: an Employer Identification Number is a 9-digit number written in this format of 00-0000000 that is assigned to each employee by the IRS.

State Tax Information

Note: you will need to register for every state in which you have employees working and/or living. Once your modern payroll solution has all of the appropriate information, it will be able to file and remit taxes automatically for every location. To complete your payroll setup checklist, you just need to enter these pieces of key info:

  • Withholding account number
  • Unemployment Insurance Account Number (and rate)
  • Worker’s Compensation Insurance Account Number (and rate)
  • Additional requirements such as a third party administrator registration.

Payroll Documents

If you have paid any W-2 employees this calendar year

  • Year-to-date payroll history report
  • Summarized payroll report for prior quarters:
    • Every employee you paid, including those who have been terminated
    • How much was paid (gross, net, and by earning type)
    • How much was paid in employer taxes (FIT, MED, SS, FICA, etc)
    • How much was deducted in employer taxes (FIT, MED, SS, FICA, etc)
  • A detailed report for every check date of the current quarter, including:
    • Pay period & check date
    • Every employee that was paid (this includes terminated employees)
    • How much was paid in gross and net (and broken down by earning types)
    • How much was paid in employer taxes (FIT, MED, SS, FICA, etc)
    • How much was deducted for employee taxes (FIT, MED, SS, FICA, etc)
    • How much was deducted for other miscellaneous deductions (insurance, 401K, etc.)
  • A copy of prior quarter federal, state, and local (if applicable) tax filings

If you have NOT paid any W-2 employees this Calendar Year

You will need to upload these documents, usually in an “other” category:

  • Articles of incorporation
  • State and local tax confirmation documents, including the state tax account numbers
  • Principal owner’s ID (drivers license or passport acceptable)

Decide on a Payroll Schedule

There are four common pay schedules to choose from. Like most other decisions, this one should be based on the nature of your business, the types of workers your employ, and the amount of administrative burden each one requires. Here’s a more in-depth look at each payroll schedule.

Type Frequency Paychecks per year Considerations
Weekly Once a week on a specific day of the week, e.g. every Friday 52 Employees like more frequent paydays, but this necessitates the most administrative work for companies. Workers that are paid hourly tend to prefer this, especially if they work different amounts of hours each week or want to collect overtime immediately.
Bi-weekly Every two weeks on a specific day of the week, e.g. every other Friday 26 In a bi-weekly schedule, the exact date of payday can vary from month to month (sometimes it will be the 15th, sometimes the 13th, etc.) and because months differ in length, a bi-weekly schedule ends up offering more paychecks than semi-monthly.
Semi-monthly Twice a month on two specific days of the month, e.g. 15th and 30th 24 This schedule is the most common. It’s good to keep in mind that many other systems run on a monthly basis, such as benefits packages (typically). If payroll is linked directly to employees’ benefits packages, semi-monthly paychecks will make the two easy to sync.
Monthly Once a month on a specific, recurring date, e.g. the 20th of every month 12 This is the least time-intensive, but also least popular among employees. Works best in industries in which the income is irregular, making it difficult to pay employees more frequently. Note that monthly payroll is often restricted for compliance reasons on a per-state basis

Payroll Types:

You’ll need to know all of this information before pursuing your next payroll solution:

  • What earnings will/do you use?
    • Example earning codes: Bonus, Commission, Double Overtime Hours, Holiday
  • What deductions and contributions will/do you use?
    • Example deduction codes: Medical Insurance, Flex Spending Account, 401( k ) Retirement Plan

Once you’ve completed this payroll setup checklist, your payroll platform will take care of the rest for you!

Still have questions? We have answers. Download our Payroll Pocket Guide below for step-by-step instructions on how to select and implement your next payroll solution.

Or schedule a demo today to check out how we can help you with all your payroll needs and beyond.

This post was originally published June of 2018 and has since been updated.

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