Running payroll for the first time feels intimidating, but it breaks down into a repeatable process. Here’s exactly what to do.
1. Get your EIN and state tax IDs. Before you pay anyone, you need an Employer Identification Number from the IRS and any state-specific tax accounts your business requires.
2. Collect employee paperwork. Every employee needs to complete a W-4 (federal tax withholding) and I-9 (employment eligibility). Independent contractors fill out a W-9 instead.
3. Choose a pay schedule. Weekly, biweekly, semi-monthly, or monthly — your schedule affects cash flow and compliance with state law, since many states mandate minimum pay frequencies.
4. Calculate gross pay. For hourly employees, multiply hours worked by their rate, including overtime. For salaried employees, divide their annual salary by the number of pay periods.
5. Withhold taxes and deductions. This includes federal income tax, Social Security, Medicare, state income tax, and any benefits deductions like health insurance or retirement contributions.
6. Pay employees and file taxes. Deposit net pay via direct deposit or check, then remit withheld taxes to the IRS and state agencies on schedule.
7. Keep records. The IRS requires you to retain payroll records for at least four years.
Where most small businesses get stuck: manually tracking tax rates that change every year, calculating overtime correctly, and remembering filing deadlines. This is exactly why most growing businesses move off spreadsheets within their first year.
How Onyx helps: Onyx automates steps 4 through 7 — calculating pay, withholding the right taxes, filing on your behalf, and keeping compliant records automatically. Most users run their first payroll in under 10 minutes.
