Payroll
Payday should not live in your head
You hired someone, or you're about to. The work is easy to picture. Payday is the part that moves into your head and starts paying rent there: which day, how much, whether you already sent it, and what else comes with paying a person.
This is about paying someone in the U.S. It is not legal or tax advice.
The week it stops being a favor
Paying a friend once for a Saturday can be a transfer and a thank-you. Paying someone who works for you, on a schedule, is a different job. You owe them the money on time, and you need a record of what you paid.
The first month is easy to carry in your head. Friday is payday because you said so. The amount is whatever you agreed, plus whatever you remember about the hours. That works until the week you're on a job and the person waiting on rent texts you because nothing showed up. Your memory is a decent system right up until it isn't, and it picks a bad Friday to fail.
Write the deal down before you need it. Rate or salary, pay day, and how the money gets there. A note in your phone is enough. The point is that payday stops being something you have to remember.
Employee or contractor is the first decision
Those are not two words for the same arrangement, and they are not two stickers you swap because one looks like less paperwork. A contractor sends you an invoice. An employee is on your payroll. That usually means taxes come out of the check, you owe taxes on top of that, and filings happen on a calendar whether or not you feel like it.
Which one you actually hired is not a label you pick to make the paperwork smaller. If you aren't sure, don't decide from a blog post, including this one. Ask an accountant, or read the rules for your state, before you set up either path.
If they're a contractor, a payroll service is probably the wrong tool. You need a way to pay an invoice and keep the record. If they're an employee, the rest of this page is the decision.
What "I'll just do it myself" actually includes
A spreadsheet can hold hours, a rate, and a total. For one person, that can be the whole pay record, and it's a fine place to start. Think of it as a very good notebook. It is not a calendar with consequences.
The spreadsheet will not do the tax side. When someone is an employee, paying them usually means:
- Taking the right amount out of their check
- Sending those amounts, plus what you owe as the employer, to the right agencies
- Filing on their schedule, not yours
- Giving them a record of what they earned
Rates, form names, and due dates change. Get the current ones from the agency or from whoever does your books, not from a blog post.
Doing it yourself is a reasonable choice when there's one employee, the pay is simple, and you're willing to own that calendar. It's a bad choice when the system is "I'll remember."
When a payroll service starts to make sense
A payroll service calculates the check, keeps the record, and handles the tax filings that come with employees. You still decide what the person earns and whether the hours are right. You stop being the person who has to remember the due dates.
It starts to earn its keep in a few ordinary situations:
- You have an employee, not a contractor, and you don't want the tax calendar in your head
- Pay is about to get less simple: overtime, a second person, or work in another state
- You already missed something, or you can see that you will
It does not earn its keep as a way to avoid deciding what to pay someone, or as a way to call a contractor an employee on paper. The service runs the process you describe. It doesn't decide the relationship for you. Hand it a fuzzy story and you get a neatly filed fuzzy story.
Ways to get the calendar off your plate
A payroll service is one path. So is handing payday to an accountant or bookkeeper who already runs it, or using payroll inside the bookkeeping tool you already pay for. What it costs depends on how many people you pay and which pieces you hand over. Same test either way. Does it take the calendar off your plate, and can you see the price before you commit?
What still sits with you
Whoever runs payday, a few things stay yours.
- You still confirm hours and pay
- You still have to classify the person correctly
- You still want a person you can reach when a check looks wrong
A service that files on time matters more than a pretty app, if the thing you were afraid of was missing a filing. A service you don't understand is just a new closet for payday to hide in. Same worry, nicer login screen.
The short version
If you're paying a contractor, skip payroll software and pay the invoice.
If you're paying an employee and the plan is "I'll remember Friday," write the pay rules down this week. If the tax calendar is the part you don't want to own, a payroll service is a reasonable next step. Look at more than one way to do it, and see the price before you commit.