Guide
Step-by-Step Guide to the US Payroll Process
US payroll
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Running payroll in the US involves more than just paying employees. It requires compliance with federal, state, and local tax laws, managing payroll cycles, and handling tax withholdings correctly.
Whether you're processing payroll in-house or looking to outsource payroll, understanding the US payroll process is essential to ensure accuracy and compliance.
Download our Guide to the US Payroll Process and get a clear, step-by-step breakdown of how to manage payroll effectively, including details on the Federal Unemployment Tax Act (FUTA), social security and Medicare taxes, income tax withholding, and Fair Labor Standards Act (FLSA) compliance.
In this guide
- Key steps to running payroll in the US
- How to calculate payroll taxes, deductions, and net pay
- The best payroll software options to streamline payroll processing
- Differences in federal, state, and local tax requirements
- How Deel simplifies payroll management for US employers
Who should download this guide?
This guide is designed for business owners, HR professionals, finance teams, and payroll managers who need a clear, step-by-step process for handling payroll in the US. If you:
- Are new to managing payroll and keeping up with compliance requirements in the US
- Find income tax, social security tax, and Medicare tax deductions confusing
- Need to understand how to calculate payroll taxes and net pays
- Are looking to outsource payroll or adopt payroll software to streamline processes
The US payroll process: Key steps
1. Gather information
Before running payroll, collect essential details, including:
- Taxpayer Identification Number and Certification (EIN, State, and Local Tax IDs)
- Employee’s paycheck details (hourly rate, pay period, tax withholding forms)
- Bank account information for direct deposit
2. Identify the correct payroll schedule
Employers must follow state laws when deciding on a payroll cycle. Common schedules include:
- Weekly: 52 pay periods per year
- Bi-weekly: Every two weeks (26 pay periods)
- Semi-monthly: Twice per month (24 pay periods)
- Monthly: Once per month (12 pay periods)
3. Calculate gross pay and tax withholdings
- Hourly employees: Multiply hours worked (including hours worked over 40 in a workweek) by the hourly rate
- Salaried employees: Divide annual salary by the number of pay periods
- Withhold taxes: Calculate federal income tax, social security tax, Medicare tax, and state income tax
- Deduct payroll taxes and voluntary benefits before finalizing net pay
4. Distribute payroll and maintain records
Employers can pay employees via direct deposit, paper checks, payroll cards, or payroll software. Payroll records must be retained for compliance with the FLSA and IRS requirements.
How Deel simplifies payroll management
Deel’s US Payroll service automates tax calculations, compliance, and employee payments, so you never miss a deadline. With Deel, you can:
- Automate federal, state, and local tax payments
- Instantly calculate payroll taxes
- Sync direct deposits and payslips with HR and accounting systems
- Manage benefits admin and HR from one platform
- Ensure full compliance with the FLSA and FUTA
When it comes to US payroll, the amount of money saved exceeds thousands of dollars since we didn’t have to hire consultants to set up and maintain our payroll. We can just do it ourselves through Deel’s easy-to-use all-in-one global platform.
—Amir Podensky,
CEO & Co-founder, Strada
FAQs
What is the payroll cycle in the US?
The payroll cycle determines how often employees receive their paycheck. It varies by state and company policy but typically follows a weekly, bi-weekly, semi-monthly, or monthly schedule. State laws set minimum pay period requirements.
How does a paycheck work in the USA?
A paycheck includes an employee’s gross pay, minus federal income tax, state income tax, social security and Medicare taxes, and other deductions. The remaining amount is the net pay that the employee receives.
What is US payroll compliance?
US payroll compliance requires adherence to federal, state, and local tax laws, including income tax withholding, payroll taxes, social security, Medicare, and unemployment taxes. Employers must follow the FLSA and state wage laws to ensure timely and accurate payments.
What are the 5 basic steps in processing payroll?
- Gather employee and business tax information.
- Determine the payroll cycle and pay schedule.
- Calculate gross pay and apply tax deductions.
- Distribute employee payments and pay stubs.
- Maintain accurate payroll records for tax compliance.
How are US salaries paid?
US salaries can be paid through direct deposit, paper checks, payroll cards, or payroll software. Direct deposit is the most common method, offering secure and timely payments.
Does Deel offer US payroll services?
Yes! Deel US Payroll automates payroll processing, tax filings, and compliance for US-based employees. Deel handles payroll tax calculations, social security and Medicare withholdings, and provides expert guidance on managing payroll across different states.