Author: janareserva

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What to Look for in Payroll Software (Especially for Hourly Teams)

  • Payroll is a process involved in calculating wages, applying deductions, and distributing pay to employees. Payroll for hourly teams can be more complex because of variable schedules and multiple pay rates.  
  • Payroll can be simplified with payroll software. But it can be tricky to find the best one. 
  • Payroll software can streamline the process, provided it has the functionality to ensure the accuracy of wage information and calculations. 

Payroll is one of the most critical and complex parts of running a business. At its core, it’s all about calculating employee wages, applying deductions, and issuing payments. But behind every paycheck is a complex system of moving parts, from tracking hours to ensuring compliance with tax and labor laws. 

For many business owners, especially those with hourly staff, payroll can become a significant pain point. Chasing down timesheets, calculating overtime, applying the correct pay rates, and reconciling records is very time-consuming and can result in significant amount of hours spent on administrative tasks. 

So, what exactly is payroll? And what should organizations look for in software to help them run payroll smoothly, especially if you’re managing hourly teams?

What is payroll?

Payroll is the process a business follows to pay its employees accurately and on time. It involves several key steps: calculating gross wages, withholding the correct amount of taxes, applying deductions such as garnishments or benefits, and issuing the final pay. 

But payroll doesn’t start and end with just cutting checks. Before payday, it requires pulling data from onboarding, time and attendance systems, and any applicable leave balances. After wages are finalized, employers must remit payroll taxes and file the necessary reports.

 In short, payroll is where everything comes together. More than a back-office task, it’s a core business function that directly impacts employee satisfaction and trust.

What does payroll mean for hourly teams?

Payroll is already a complex process, but it’s even more challenging for hourly teams. 

Unlike salaried payroll, which tends to stay consistent from cycle to cycle, hourly payroll is filled with moving parts. Pay can vary based on scheduled hours, roles worked, locations assigned, and local labor laws. These variables can drastically affect how gross pay, taxes, and deductions are calculated.

Take Dave, for example. He works at a restaurant where he’s qualified for multiple roles. Some days, he’s a server; other days, he’s a bartender—each with a different pay rate. Additionally, he may be assigned to various locations, each with its own wage rules and tax rates. These variations make processing payroll more complex. Now multiply that across 100 employees, and it’s easy to see why hourly payroll needs more than just a basic system.

It’s not just calculations, either. Employers must also stay up-to-date with state-specific pay frequency requirements. For instance, in Virginia, salaried employees must be paid at least monthly, while hourly workers must be paid at least twice a month or every other week. These rules vary across jurisdictions and can’t be ignored. 

For teams with shift-based staff, payroll isn’t a “set it and forget it” task. Automation helps, but only if the software is built to handle the unique needs of frontline and hourly operations from end to end. 

TL;DR: Payroll for hourly teams is more complex due to variable hours, multiple pay rates, shifting locations, and evolving labor laws. Getting it right takes the right tools. 

What is payroll software?

Payroll software is a tool that automates the calculation and processing of employee wages and salaries. It utilizes employee data, including hours worked, pay rates, and leave balances, to calculate pay, apply deductions, and issue payments in accordance with company policies and labor laws. It also generates pay stubs that provide employees with a clear breakdown of their earnings, taxes, and other adjustments. 

Payroll software’s primary purpose is to calculate and process employee wages using employee information and in accordance with labor laws and company policies. It also takes into account any adjustments based on leaves, holidays, and bonuses. After calculations, payroll is distributed to employees. Payroll systems often support direct deposits, sending wages straight to an employee’s bank account. Self-service access also lets employees update bank account details securely.

Payroll systems also help genrate pay stubs or payslips, which are documents that provide a breakdown of how pay was calculated.  

Payroll software can be standalone, which means that it’s solely designed to calculate pay. If it’s a standalone product, you must provide the information and data it needs to calculate employee pay.

There are different types of payroll software:

  • Standalone payroll software focuses solely on calculating and distributing pay. Necessary data, such as hours worked and overtime, must be manually input for each pay run. 
  • On-premise payroll software is installed on a company’s local servers. While this offers control over data, it typically requires a significant amount of IT infrastructure and ongoing maintenance. 
  • Cloud-based payroll software is hosted online and accessible from anywhere. It usually offers automatic updates, easier scalability, and less overhead for IT teams. In addition, it is often referred to as online payroll solutions because it allows you to process pay from anywhere with internet access.

Some payroll software is part of a larger human resources platform that includes tools for time and attendance, scheduling, and workforce management. In this setup, payroll pulls real-time data from these modules, which reduces manual entry, improves accuracy, and saves time.

What to look for in payroll software especially for hourly teams

With so many payroll providers on the market, it can be overwhelming to choose the right one. 

While most software promises to simplify payroll, not all of them are built to handle the business needs of hourly or shift-based teams. 

Here are the most essential features to look for in payroll software and questions to ask as you evaluate your options.

Ease of use

Adopting any new software has a learning curve, but it should be user-friendly enough to allow users to get up and running faster. So, what makes payroll software user-friendly? 

A good payroll system should be easy to navigate, even for non-technical users. While some learning curve is expected, it should help your team get up and running quickly without constant IT support. 

Key features to look for:

  • Accessible across devices: The software should function consistently on both desktop and mobile devices.
  • Intuitive design: A clean, user-friendly interface encourages adoption.
  • Minimal training required: Managers and admins should be able to handle payroll tasks without frustration or delay.

Even the most powerful system won’t be effective if your team doesn’t want to use it. 

Accurate wage and tax calculations

Hourly payroll is complex. Your payroll software should have safeguards that ensure every pay run is accurate, no matter how many variables are in play. 

Ask these questions: 

  • Does it support multiple pay rates and roles? 
  • Can it handle overtime, bonuses, and tips accurately? 
  • How are time and attendance data synced, automatically or manually? 
  • Does it manage federal, state, and local tax withholdings? 
  • How does the platform help minimize payroll errors? 

Accuracy is more than automation. It’s about controls and checks that fit your business.

Time tracking integration

Payroll accuracy starts with accurate time tracking. Choose a solution that integrates directly with your time and attendance tools or, even better, one where these tools are built into the same platform. 

Benefits: 

  • No double entry or data transfer errors
  • Real-time syncing of hours worked
  • Easier management of breaks, PTO, and shift differentials

Reporting and audit support

Good payroll software doesn’t stop at just wage calculations. it also helps centralize and organize your payroll data to make reporting, audits, and decision-making much easier.

Look for:

  • Built-in reports for federal and state requirements
  • Custom report builders for internal insights
  • Central access to payroll history and data

Whether you’re preparing internal summaries or government forms, payroll reporting tools should let you filter and export the data you need easily.

Customization and Flexibility

Most payroll systems typically come with default settings, but a good one also adapts to your specific requirements. This is especially important for those with more dynamic needs, such as frontline teams and hourly workers. 

Here are some questions to ask:

  • Can you set rules for multiple roles, rates, and locations? 
  • Can you configure custom pay periods or alerts for overtime and missed breaks?
  • Can the system handle tipped wages and industry-specific rules?
  • Can you automate break compliance and ensure that required penalty pay is issued if rest or meal breaks are missed?

Employee self-service

Empower your staff with access to their payroll information. A self-service portal reduces admin workload and builds transparency. 

Employees should be able to: 

  • View pay stubs, W-4s, and timesheets
  • Update personal and banking information
  • Track PTO balances and request time off
  • View schedules and shift history

Built-in compliance tools

Payroll software should support federal, state, and local tax compliance, while also helping you meet wage laws, recordkeeping requirements, and audit readiness.

The system should: 

  • Alert you to rule violations
  • Maintain digital records for audits
  • Help you stay up to date with changing labor laws

Reliable customer support

Payroll issues can’t wait. Select a provider with a knowledgeable and accessible support team, particularly during implementation and your initial pay runs.

Why Workforce.com’s payroll software is the best choice for hourly and shift-based teams

Workforce.com is a full-service payroll platform built for hourly, shift-based, and frontline workforces. It’s more than just a payroll calculator. It’s a complete workforce management suite designed to automate, simplify, and safeguard every step of the employee lifecycle, from onboarding new hires to payday.

Here’s why it stands out: 

  • Accurate pay for complex teams: Handles multiple rates, roles, and locations with ease
  • Real-time time tracking integration: Built-in time and attendance means no data re-entry
  • Flexible compliance tools: Designed to help you follow federal and state wage laws with configurable pay rules and alerts for your locations
  • Employee self-service: Mobile-friendly tools for staff to manage pay, schedules, and more
  • End-to-end visibility: See everything from scheduling to pay in one system

Workforce.com serves industries such as hospitality, healthcare, and more, helping to reduce payroll errors, save time, and ensure compliance. Book a call today to see how Workforce.com can simplify your payroll process.

FAQs about Payroll and Payroll Software

What is payroll in simpler terms? 

Payroll is the process of paying employees their wages and salaries on a regular basis. It involves calculating wages, withholding taxes, and ensuring compliance with legal requirements. 

How does payroll software work? 

Payroll software automates tasks such as wage calculations, tax withholdings, direct deposits, and reporting. It reduces manual work and helps prevent errors. 

Why is payroll more complicated for hourly workers? 

Hourly payroll often involves variable shifts, multiple pay rates, overtime, and tip reporting. These moving parts can make payroll more complex and more challenging to manage manually.

What’s the best payroll solution for hourly teams? 

The best payroll solution for hourly teams or shift-based workers is one that’s in the same ecosystem as time tracking, scheduling, and onboarding. It should support multiple pay rates, variable schedules, overtime, tip management, and compliance. An employee self-service functionality is also a must for hourly workforces. 

Can payroll software help with taxes? 

Yes. Most payroll software automatically calculates and applies federal and state tax rates, helping ensure tax compliance. Many also generate tax forms and reports to support timely and accurate filing.

What are other ways to process payroll aside from payroll software? 

Some companies opt for in-house payroll, where they use manual processes like spreadsheets or accounting tools. Others outsource payroll entirely to accountants or payroll service providers who manage the process and handle tax filings on their behalf.

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7 Practical Tips for Paying Payroll Taxes

Summary

  • Payroll taxes are just one part of running payroll, but it’s a significant part. It’s a year-round responsibility that involves calculating withholdings, filing forms, and meeting deposit deadlines.
  • Even small mistakes can lead to penalties, such as missing a deadline or misclassifying wages.
  • A few smart practices and the right payroll software can go a long way.

Payroll taxes are just one part of running payroll, but they’re a significant part. While payroll processing covers everything from tracking hours to issuing paychecks, the tax side alone spans multiple steps before, during, and after payday. You need to set up the correct withholdings, calculate deductions correctly for each run, file required forms, and meet deposit deadlines. 

Paying payroll taxes is more than just sending contributions to the IRS every now and then. Payroll tax obligations can be extremely complex, but a few practical tips can help business owners stay compliant and avoid any surprises.

Here are some best practices for paying payroll taxes: 

1. Know what taxes you’re actually responsible for

There are different types of payroll taxes that employers must withhold and process from employee paychecks, including: 

  • Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA)
  • Federal Unemployment Tax Act (FUTA) contributions – fund unemployment benefits for eligible workers
  • State and local taxes
  • Employer-side contributions – many of these taxes have an employer’s share, meaning you need to match what the employee pays (as with Social Security and Medicare).

Some of these taxes are withheld as tax deductions from employee wages, while others are paid directly by the employer.

Most of these are based on employee wages, so it’s important to understand which taxes apply, how they’re calculated, and what portion your business is responsible for. Before anything else, you need to know what taxes you need to collect and remit, both on behalf of your employees and from your business directly.

For federal income tax withholding, that process starts with Form W-4, which each employee fills out when they’re hired. It tells you how much tax to withhold based on filing status, dependents, and any additional withholding requests. Keeping this information up to date is key to avoiding under- or over-withholding. 

Also read: What are different payroll deductions? Taxes, benefits, and more

2. Track hours and wages accurately

Accurate time tracking is the foundation of tax compliance, especially when you’re dealing with hourly employees. Every hour worked directly affects how much you withhold for taxes and how much you need to report. These hours contribute to each employee’s taxable wages or the portion of their earnings that payroll taxes are calculated on.

Small errors throw off tax calculations and lead to issues. Ensure you have a system that accurately captures: 

  • Clock-ins and clock-outs
  • Breaks and unpaid meal periods
  • Overtime
  • Shift differentials or special rates

3. Register with federal, state, and local tax agencies

You need to be registered with the right government agencies before you can pay or file for anything. You can start with:

  • Employee Identification Number (EIN) – through the IRS
  • State employer registration: Usually done through the state’s Department of Revenue or Labor
  • Local registration: Required in some cities for payroll taxes or occupational licenses

If you employ workers in multiple states or eventually open up new locations, you would most likely need to register for each one separately. You need to do this first and foremost, as registration can take time to process. 

4. Know your deposit schedule 

Payroll taxes are deposited regularly throughout the year. The scheduled deadline depends on how much payroll tax you reported in the past. 

Under IRS rules, your deposit schedule is based on a lookback period, which is a 12-month window that determines your tax liability. 

For most employers who file Form 941, the lookback period covers the 12 months from July 1 two years ago through June 30 of last year.

Here’s an example: 

For 2025 deposit schedules, the lookback period is July 1, 2023 to June 30, 2024. The deposit will be:

  • Monthly: If you reported $50,000 or less in taxes, you must deposit by the 15th of the following month
  • Semiweekly: If you reported more than $50,000, you must deposit depending on what day you pay your employees. So if your payday falls on:
    • Wednesday, Thursday, or Friday, the deposit is due by the following Wednesday.
    • Saturday, Sunday, Monday, or Tuesday, the deposit is due by the following Friday. 

If you filed Form 944 in either of the previous two years or you’re filing it in the current year, the lookback period is different. It would be the entire calendar year two years before the deposit year. For instance, the lookback period is calendar year 2023 for 2025 deposits. 

It’s also important to take note of the following exceptions:

  • If your total quarterly tax liability is under $2500, you can pay the tax with Form 941 instead of making regular deposits. 
  • If you accumulate $100,000 or more in a single day, you must deposit the next business day and will become a semiweekly depositor moving forward.

5. Adhere to tax filing deadlines

Depositing taxes is only half of the payroll tax equation. The other equally important part is filing forms that officially report what you withheld, what you paid, and when. Filing forms on time is as crucial as paying taxes themselves. It’s important to note that you could be subject to penalties for late filings, even if you already paid what you owe. 

Here are key forms employers must know:

Form 941: Employer Quarterly Federal Tax Return

  • Reports federal income tax withheld from employees, plus Social Security and Medicare taxes
  • Filed four times a year (end of April, July, October, and January)
  • The most common form for employers with hourly teams

Form 940: Federal Unemployment Tax (FUTA) Tax Return

  • Filed annually
  • Reports how much you owe for federal unemployment taxes
  • Required even if you qualify for the 0.6% reduced FUTA rate

Form W-2: Wage and Tax Statement

  • Sent to each employee every January
  • Summarizes their total earnings and withholdings for the year
  • Must also send Form W-3  to the Social Security Administration

Form 944: Annual Federal Tax Return (for smaller employers)

  • Some small businesses file Form 944 instead of 941 if their total annual liability is under $1,000
  • Filed once a year, not quarterly
  • The IRS must notify you in writing if you’re eligible to use this form.

Form 1099-NEC: Nonemployee Compensation

  • If you paid contractors $600 or more during the year
  • Must be filed by January 31 and submitted to the IRS and contractors
  • Not a payroll tax form per se, but still part of year-end wage reporting

Meanwhile, every state with income or unemployment tax has its own set of required forms, which is usually a mix of: 

  • Quarterly state withholding returns
  • Unemployment insurance wage reports
  • Annual reconciliation forms
  • Copies of W-2s or 1099s

Deadlines and formats vary. If you operate in multiple locations, it’s crucial to track and stay on top of these tax due dates aside from federal requirements.

6. Don’t overlook state and local tax rules 

Once you’ve figured out your federal taxes, you’ll also need to calculate and pay state-level obligations, such as state unemployment tax, which varies by location and employer history. State and local rules are equally crucial as federal payroll taxes, especially for hourly or multi-state teams. 

Here are some examples:

  • In Massachusetts, new non-construction employers pay 2.13% in SUI rate, applied to the first $15,000 in wages per employee. If you’re in construction, the default rate is 5.45%, also applied to the first $15,000 in wages per employee. 
  • New York imposes the MCTMT (Metropolitan Commuter Transportation Mobility Tax). Suppose your total quarterly payroll for employees working in the MCTD (Metropolitan Commuter Transportation District,  including NYC, Long Island, and parts of the Hudson Valley) exceeds $312,500. In that case, you’re required to pay an additional payroll tax ranging from 0.11% to 0.60%, depending on your total payroll.
  • Reciprocity agreements can affect income tax withholding. If an employee lives in one state but works in another, a reciprocity agreement may let you withhold income tax only for the employee’s home state.

Employers must be proactive to stay up-to-date with these rules. It’s best practice to review SUI notices every year, monitor local tax obligations, and understand residency versus work state rules. 

7. Automate where you can

Running payroll manually is doable, but it’s very risky, especially when your team grows. You can face audits and fines due to mistakes in tax withholdings, errors in tax forms, or late payments. 

If your workforce clocks in and out, works variable shifts, earns multiple pay rates, or moves across locations, automation helps prevent errors that are otherwise easy to miss. 

Use payroll software that syncs directly with your time and attendance tracking and scheduling tools so that:

  • Worked hours, breaks, and overtime flow automatically into payroll
  • Pay rates, roles, and job codes are applied consistently
  • There’s no need for manual re-entry or patching together spreadsheets

Think of automation as both a time-saver and compliance safeguard. The more complex your operations, the more valuable automation becomes. Payroll software helps reduce the risk of costly mistakes, from inaccurate hours to missed employment tax filings.

Stay on top of payroll and tax calculations with Workforce.com

Workforce.com connects scheduling, time tracking, and payroll, so every hour worked, break taken, and pay rate used is accurately calculated. Learn more about payroll with Workforce.com. Book a demo today.

FAQ: Payroll Taxes for Employers

Do I have to pay payroll taxes if I only hire part-time employees?

Yes. Even if your employees work part-time, you’re still responsible for withholding and remitting payroll taxes. This includes Social Security tax, Medicare tax, federal and state income taxes (if applicable), and unemployment taxes.

Do I need to pay payroll taxes for independent contractors?

You don’t withhold income tax or pay Social Security, Medicare, or unemployment taxes for independent contractors or self-employed individuals. Instead, they’re responsible for handling their own taxes and typically receive a Form 1099-NEC, not a W-2.

What happens if I miss a payroll tax deposit deadline?

Missing a deposit or filing deadline can result in late fees, penalties, and interest from the IRS or your state agency. In some cases, repeat violations can trigger audits or legal action. Automating your payroll tax calculations can help avoid these risks.

What is EFTPS and do I need it for payroll taxes?

Yes, the Electronic Federal Tax Payment System (EFTPS) is the IRS’s official platform for submitting federal tax payments, including payroll taxes. Employers are required to use EFTPS to deposit withheld income tax, Social Security, and Medicare taxes.

Do payroll taxes help fund unemployment benefits?

Yes. Payroll taxes like FUTA (federal) and SUI (state) are used to fund unemployment benefits for eligible workers who lose their jobs. These are typically employer-paid and are required in almost every state.

What is the Additional Medicare Tax, and who pays it?

The Additional Medicare Tax is a 0.9% tax on wages over $200,000 per year, paid only by employees. Employers are required to begin withholding it once an individual employee’s wages exceed that threshold — no employer match is required.

Do I need to e-file payroll tax forms?

In most cases, yes. Employers are generally required or encouraged to electronically file payroll tax returns like Forms 941 and 940 directly with the IRS. Wage reporting forms, such as Form W-2, are filed electronically with the Social Security Administration (SSA). E-filing helps ensure timely processing and reduces errors.

How does payroll software help calculate payroll taxes?

Payroll software can handle the most complex parts, such as calculating withholdings and applying the correct tax rates. Workforce.com helps you stay accurate and compliant by syncing hours, pay rates, and locations directly into your payroll calculations, so taxes are easier to manage and less prone to error.

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Tax Resolution Excellence: Workforce.com vs. Industry Standard

Case Study 1: Mid-Quarter Provider Transition

Challenge: Customer switched to Workforce.com mid-quarter with incomplete returns from previous provider.

Industry Standard: Most providers would require the client to resolve issues with their previous provider or charge significant fees for manual corrections.

Workforce.com Approach: Submitted manual corrections free of charge, saving the client time, stress, and potential penalties.

Implications of Workforce.com Approach: Without Workforce.com’s intervention, the employer would face potential IRS penalties for incomplete filings, interest on unpaid taxes, and compliance violations that could trigger audits. The employer would also need to divert staff time to resolve the issue or pay their previous provider additional fees. Workforce.com eliminated these financial risks and administrative burdens completely.

Case Study 2: IRS EIN Merger Complication

Challenge: IRS automatically merged a customer’s two EINs, creating filing discrepancies.

Industry Standard: Typical providers might identify the issue but expect the client to resolve it directly with the IRS.

Workforce.com Approach: Invested hours on calls with the IRS to investigate the root cause, then manually reconciled transcripts with submissions to ensure compliance.

Implications of Workforce.com Approach: The standard approach would leave the employer facing potential IRS notices, penalties for apparent underpayment of taxes, and the need to hire specialized tax consultants to resolve the issue. These discrepancies could lead to incorrect tax assessments costing thousands of dollars and jeopardizing the company’s tax compliance record. By taking ownership of this complex problem, Workforce.com saved the client approximately 15-20 hours of specialized accounting work (valued at $3,000-5,000) and prevented potential penalties that could have exceeded $10,000.

Case Study 3: Late Discovery of Missing Payroll Data

Challenge: Client forgot to share January payruns during February implementation, only revealing this two weeks before federal filing deadlines the following January.

Industry Standard: Most providers would either charge rush fees, delay corrections until after deadlines, or require the client to file amendments themselves.

Workforce.com Approach: Rapidly produced corrected W-2s and completed all federal and state filings within just three business days.

Implications of Workforce.com Approach: The standard industry response would likely result in missed filing deadlines, triggering automatic IRS penalties (starting at $50 per W-2 and increasing to $260 for extended delays), plus separate state penalties. Employees would receive incorrect W-2s, potentially delaying their personal tax filings or requiring them to file amendments. The employer would face not only financial penalties but also diminished employee trust. Workforce.com’s rapid response prevented additional penalties and preserved the employer’s reputation with employees. Additionally, this quick resolution allowed employees to file their personal taxes on time without complications.

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Biweekly vs. Semi-monthly Pay: What’s the best fit for hourly teams?

Summary

  • Biweekly and semi-monthly pay may sound similar, but they differ in structure, timing, and how they impact payroll processing.
  • Several states have pay frequency laws that specify how often employers must pay their employees.
  • Payroll software makes it easy to manage multiple pay frequencies, assign them by employee type, and automate overtime and pay period calculations.

Biweekly and semi-monthly are standard popular pay frequency options. While they sound similar, they work very differently. Both involve employees receiving payment twice a month, most of the time, but the structure behind them can significantly impact payroll processing. 

So, which one is right for your team? Let’s break it down.

What is semi-monthly payroll?

Semi-monthly payroll means employees are paid twice a month on specific dates, typically the 15th and last day of the month or the 1st and 15th of each month. This results in 24 pay periods in a year. 

Unlike weekly or biweekly pay schedules, semi-monthly pay dates stay fixed by the date, not the day of the week. That means paydays fall on different weekdays each month and, in some cases, on weekends or holidays, potentially delaying direct deposits if not managed carefully. In many states, employers are still required to issue pay on or before the scheduled payday, even if banks are closed, to stay compliant with payday laws. 

What is biweekly payroll? 

Biweekly payroll means employees are paid every other week on the same specific day, such as the second Friday of each month. This leads to 26 pay periods per year, with two months each year containing three paychecks instead of two. 

Unlike semi-monthly payroll, biweekly follows the same weekday, not the same date, which provides more consistency for employees and simplifies time tracking. 

Biweekly pay is paying employees every other week on the same day (e.g., every other Friday), resulting in a total of 26 paychecks per year. Unlike semi-monthly pay, biweekly payroll means employees are paid on the same day every other week, not on a set date. 

Semi-monthly vs biweekly pay: Key differences

Biweekly PaySemi-monthly Pay
Pay periods/year2624
Pay schedule Fixed day, every two weeks (e.g., every Friday)Fixed dates (e.g., every 15th and 30th)
Payroll taxes and withholdingsMore frequent withholdingSlightly higher withholding amounts per paycheck
Direct deposits and bank timingAlways the same weekdayMay fall on weekends/holidays
Payroll and HR Admin workloadMore runs (26/year)Fewer runs (24/year), but may need adjustments
Overtime trackingEvery 2 weeks, aligns with 40-hour weeksMay split workweeks

Which payroll schedule is better for hourly employees?

To know which is the better payroll schedule, you need to understand how each of them affects your payroll management, particularly overtime pay and shift differentials. You need to figure out which pay schedule makes it easy for you to manage. 

If you manage hourly workers, your choice of payroll frequency directly impacts how you track hours, calculate overtime, or account for shift differentials.

How pay frequency schedules affect payroll workflows for hourly teams

A bi-weekly payroll schedule aligns with a standard 40-hour workweek, which makes it easier to calculate overtime. Since each pay period covers exactly 14 days, it’s predictable and easier to reconcile against time and attendance records. 

Meanwhile, a semi-monthly pay schedule may cut across weeks. For example, a pay period might start on a Wednesday and end two Thursdays later, which can result in a single workweek being split between two pay periods. This can result in challenges with overtime calculations and increases the risks of errors, especially when you don’t have an airtight payroll system.

Other pay inputs: Tips, shift differentials, and bonuses

Consider other sources of compensation, too. Businesses relying on hourly teams, such as restaurants, hotels, retail, and healthcare, may have complex pay inputs such as:

  • Shift differentials 
  • Tip pooling 
  • Bonuses and commissions

So, which should you choose?

Suppose you run a shift-based operation or manage hourly employees. In that case, bi-weekly payroll is usually the better choice because it’s easier to calculate overtime under FLSA rules and align with weekly timesheets. That said, syncing hours with pay has fewer risks of errors. 

Meanwhile, semi-monthly payments typically work better for salaried employees or companies with more fixed or consistent payroll patterns than for hourly staff. While it’s still possible to apply a semi-monthly arrangement to hourly teams, it can introduce difficulties with payroll calculations unless you really have a strong payroll system in place.

Do payroll laws affect pay schedules?

Yes. In many states, pay frequency is regulated by law, which means business owners can’t always choose freely between biweekly, semi-monthly, or monthly pay. 

Some states let employers decide how often to pay their staff, while others set a minimum required frequency (like once or twice a month). In some cases, rules vary by industry, employee type, or business size. 

Here are a few examples:

  • Connecticut: Employers must pay employees no later than eight days after the pay period ends. Employers can apply for permission to use a less frequent schedule but must still pay at least monthly. 
  • Hawaii: Employers must pay employees at least semi-monthly, with paydays no more than 15 days apart. Employees can opt for monthly pay via a formal election process. 
  • Louisiana: In industries such as manufacturing, oil drilling, mining, and public service that employ 10 or more staff, employers must pay wages at least twice a month, ideally spaced about two weeks apart. 

Pay frequency rules vary, so it’s best to check with your state or local government to see if any prevailing pay frequency rules apply to you. This is especially crucial if you operate in different states and localities. 

How payroll software makes pay frequencies easier to manage

The right payroll system can make even the most complex pay schedules feel simple, whether you choose biweekly, semi-monthly, or a mix of both. For teams with hourly staff, multi-location operations, or varying employment types, automation is key. 

Here’s how Workforce.com’s payroll software helps:

Assign multiple pay frequencies to different employees 

There are cases when not all employees in a company are on the same pay schedule. With Workforce.com, you can assign different pay frequencies per worker or department, which helps streamline and automate the process when you have a team with various classifications and certain types of employee roles.

Automate overtime, pay rates, and shift differentials

Workforce.com automatically calculates overtime based on actual workweeks, no matter what pay frequency you use. It also accounts for multiple pay rates, shift differentials, premiums, and other forms of variable compensation. That way, you avoid manual edits or reworks, and it makes payroll easier to process, especially for hourly employees.  

Integrate time tracking and scheduling directly into payroll

With Workforce.com, you no longer have to worry about manually matching hours to pay periods. Time tracking, scheduling, and payroll all function in a single system, which means that employee work hours are easily calculated into wages and that you can see labor costs while creating shifts.

Give employees visibility and control

Employees must have visibility into how much pay they will receive on payday, as well as what factors contribute to their payroll calculations. With a built-in employee self-service portal and mobile app, your staff can: 

  • See upcoming shifts and schedules
  • View upcoming pay dates
  • Update their bank account details
  • See deductions
  • Access pay stubs

Whether you decide to pay biweekly, semi-monthly, or go for another pay schedule, Workforce.com equips you to run payroll without a hitch with built-in time tracking, overtime automation, and the flexibility to manage multiple pay schedules.

Want to see how Workforce.com works for your business? Book a demo.

Additional FAQs about pay frequencies

Are there other pay frequencies besides biweekly and semi-monthly?

Yes. Other pay frequencies include:

  • Weekly: Employees are paid once a week (typically 52 paychecks/year)
  • Monthly: Employees are paid once a month (12 paychecks/year)

Some states restrict or discourage monthly pay for hourly workers due to long gaps between paydays. 

Can employers change pay frequencies?

Yes, but you must provide notice to employees (often in writing) and ensure the change complies with state labor laws.

What happens in a month with three biweekly paydays?

Because a biweekly pay frequency runs every 14 days, two months each year will include one additional paycheck. These extra paychecks don’t increase annual earnings, but they can affect things like benefits deductions, which are often only taken from the first two paychecks. Employers should plan for the added payroll run when budgeting.

Can hourly employees be paid semi-monthly?

Hourly workers can be on a paid semi-monthly pay period, but it can be more complex. This pay schedule often splits workweeks across pay periods, which makes overtime tracking and hourly calculations more challenging. If you pay hourly employees on a semi-monthly basis, you’ll need to ensure your payroll system properly handles overtime based on weekly thresholds, as required by the Fair Labor Standards Act (FLSA).

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A Guide to State and Local Pay Transparency Laws [2025]

Summary

  • Pay transparency laws help promote pay equity and transparency by requiring employers to disclose information, such as wage information and benefits, in job postings.
  • There is no federal law on pay transparency, but several states have implemented their own regulations.
  • Payroll software can help standardize pay rates and ensure compliance, especially for businesses operating across state lines.

To bridge the pay equity gap, several states and localities in the United States have enacted pay transparency laws. These laws have helped promote openness around hiring processes and compensation, but they’ve also introduced challenges for HR and payroll teams.

What does pay transparency mean?

Pay transparency refers to the practice of disclosing compensation-related information to employees, job applicants, or the public. This can include salary ranges, benefits, wage changes due to promotions, or pay by role or department. The level of disclosure depends on local or state laws. Some jurisdictions require proactive disclosures, while others only mandate sharing this information upon request. Certain regulations also specify whether disclosures must be made internally, externally, or both.

The goal of pay transparency is to ensure employees are paid fairly and to help them assess whether their compensation aligns with their role. When implemented effectively, pay transparency can support talent attraction and retention, enhance employee morale, strengthen employer branding, promote pay equity, and mitigate wage discrimination or unfair labor practices.

However, transparency also puts the responsibility on employers to manage how employees respond, especially when they discover they’re earning at the lower end of a wage range. It also adds compliance complexity, particularly for multi-location businesses navigating a patchwork of state and local laws.

Is there a federal law on pay transparency?

At the federal level, there are currently no federal laws requiring businesses to disclose pay information. In the absence of nationwide regulations, some states have introduced their own pay transparency laws, requiring organizations operating within their borders to meet specific disclosure requirements.

Which states have pay transparency laws?

Currently, 14 states, including D.C., have implemented pay transparency laws at the state level. While Ohio doesn’t have a statewide policy, some of its local jurisdictions have adopted their own rules.Here’s a running list of states and localities with pay transparency laws in place:

California

  • Employers with 15 or more employees must include the pay scale for a position in any job postings, including third-party organizations that are posting job ads on their behalf. 
  • Upon request, employers must provide the pay scale to an employee for the position that they are currently employed.
  • Employers must maintain records on the job title and wage history of each employee for the duration of their employment plus three years after they’re no longer with the company. Records should be open to inspection by the Labor Commissioner. 
  • Employers with 100 or more employees are required to submit an annual report on pay data, which is due every year in May. 

Colorado

Under Colorado’s Equal Pay for Equal Work Act, pay transparency rules require employers with at least one employee in the state to: 

  • Disclose pay and other information in job postings and notices, internally and publicly:
    • Compensation, benefits information, how and when to apply
    • The rate of pay or a range of offered rates (hourly, salary, piece rate)
    • General description of any other compensation (e.g. bonuses, commissions, or tips)
  • Disclose available job opportunities to all employees and also disclose who was selected.
  • Disclose how to advance through career progressions to eligible employees.
  • Keep records of wages and job descriptions.

Connecticut

  • Employers must include the pay range (salary or hourly rate) and a description of benefits to external job ads, internal job postings (promotions or transfers), and remote jobs if an employee would report to someone in Connecticut.
  • Disclosure should be upfront and proactive.

District of Columbia

  • Employers with one or more employees in D.C. must provide the minimum and maximum projected salary or hourly pay in all job listings.
  • Employers must disclose healthcare benefits before the first interview.
  • Employers must post a notice about employee rights under this law in a visible, shared space at work. 

Hawaii

  • Employers with 50 or more employees must include the hourly rate or salary range in job listings.
  • However, the law does not specify the location of the 50 or more employees nor the type of their employment.
  • Unlike other states, Hawaii does not require employers to disclose pay information on internal transfers and promotions. 

Illinois

  • Employers with 15 or more employees (full-time or part-time) must include a pay range and a description of benefits.
  • Employers must inform current employees of job openings.
  • If an employer posts a job posting publicly, they are also required to inform all current employees of the job opportunity within 14 days. 

Maryland

  • Internal and external job postings should include the pay range, a general description of benefits, and other compensation details offered (e.g., overtime, tips, commissions, bonuses, etc.).

Massachusetts

  • Employers with 25 or more employees must disclose the pay range in the job posting for any position.
  • Employees and job applicants have the legal right to know the pay range for a job when they apply, get promoted, transfer, or start a new position with an employer that has 25 or more employees. 
  • Current employees can also ask for the pay range for their current position. 

Minnesota

  • Employers with 30 or more employees are required to disclose the pay range for each job posting.
  • Employers must also provide a general description of benefits and other compensation (e.g. health or retirement benefits).
  • If the employer can’t provide a salary range, they must list a fixed rate.

Nevada

  • Employers must disclose the wage or salary range for a position to applicants after an interview. 
  • Employers must also disclose the wage and salary range for current employees who are seeking a promotion or transfer.

New Jersey

  • Employers with 10 or more employees over 20 calendar weeks must disclose the hourly wage, salary, or pay range in external job postings, internal promotions, or transfer opportunities. They must also provide a description of benefits an employee can expect to receive in the first 12 months.
  • Jersey City: Local rules in Jersey City require employers with five or more employees to disclose the minimum and maximum base salary or hourly wage, as well as the job benefits being offered. 

New York

New York has statewide rules and local regulations in place.

In New York state, employers with 4 or more employees are required to: 

  • Disclose pay ranges for all jobs, promotions, and transfer opportunities. 
  • Disclose compensation basis (e.g. completely commission-based work).
  • Include a job description, except when the job title itself is self-explanatory.

New York City, Ithaca, Albany, and Westchester County have their own pay transparency rules. Their regulations are similar and aligned with state requirements but may have differences in who can file a complaint to the state’s department of labor and the penalties involved. For instance, New York City allows employers a 30-day window to correct their pay information once they receive a notice of violation. The state law doesn’t have this provision.

Rhode Island

Employers are required to disclose the pay range when someone is hired, when an employee moves to a new job within the company, or when an employee requests it.

Vermont (Effective Date: July 1, 2025)

  • Businesses with 5 or more employees, with at least one working in Vermont, must include a minimum and maximum salary range in all job ads, including internal and external postings, promotion opportunities, and transfers. 
  • Employers must clearly state if jobs are commission-based. 
  • Employers must specify a base wage for tipped positions.

Washington

  • Employers with 15 or more employees must include the salary range, general description of all benefits, and other compensation offered in their job postings.
  • Employers must provide the salary range for new positions to employees who are offered a transfer or promotion. 

Ohio

Ohio does not currently have a statewide pay transparency law. However, some local rules are currently in effect. 

  • Cincinnati and Toledo: Employers with 15 or more employees must disclose the salary range upon request after the first interview.
  • Cleveland: Employers with 15 or more employees must include the salary range in job postings. (Effective date: October 27, 2025)

How can businesses adapt to pay transparency laws? 

Pay transparency is gaining momentum, and more states and localities are expected to enact rules in the near future. While these laws aim to close wage gaps, they can present challenges, especially for businesses operating across multiple jurisdictions.

Pay transparency laws often trigger company-wide policy changes. While HR usually leads these updates, payroll teams play a crucial role in ensuring that publicly disclosed pay ranges align with actual employee compensation.

Here are some practical tips to help payroll teams prepare and comply with current wage transparency rules and stay ahead of new laws:

Standardize pay rates across job sites and states

Consistent pay structures are crucial for compliance, particularly when hiring across multiple locations. Job titles and pay ranges should be clearly defined and aligned to meet local disclosure requirements. Inconsistencies can result in compliance risks and employee mistrust.

Post accurate and realistic pay ranges

Job postings must reflect actual compensation, not placeholders. Pay ranges should be based on current pay data and reflect what job candidates can realistically expect to earn. Ranges like “$50,000–$100,000” can signal noncompliance or raise red flags with regulators.

Evaluate internal pay equity across similar roles

Regular pay equity audits can help identify whether employees in similar roles are being paid fairly and equitably. If differences or disparities exist, document whether they are justified by performance, tenure, or other legitimate factors. Transparency laws make it critical to catch and address any unexplained gaps.

Keep organized payroll records

Accurate, centralized payroll records are essential. You’ll need clear documentation connecting job titles, hours worked, and pay rates, especially if employees or regulators request it.

Upgrade your systems to support compliance

Manual processes and outdated tools make compliance more difficult and prone to error. Upgrade your existing systems to centralize all your data and make it easy to track pay rates, monitor pay equity, and stay ahead of legal requirements. 

How Workforce.com helps with pay transparency compliance

Workforce.com combines payroll, time tracking, and scheduling into a single system. You can assign pay rates by role and location, ensure job postings reflect current compensation, and quickly identify any gaps and inconsistencies. With centralized records and reporting, it’s easier to comply with transparency requirements and to build a more consistent payroll process overall.

Discover how Workforce.com can help simplify payroll and compliance with pay transparency rules. Book a demo today.

This information is for general purposes only and should not be considered legal advice. While we strive to keep it updated, labor laws and regulations can change at any time. It’s always a good idea to consult with a legal professional or relevant authorities to comply with the most current standards.

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How to Do Payroll Yourself: Steps to Take and Risks to Consider

Summary

  • Small businesses often consider doing their own payroll. This option is feasible, provided you are well-versed in employee wages, tax laws, and payroll regulations.
  • DIY payroll may save you from spending on payroll services or software, but there are other factors you must consider to understand whether it’s cost-effective in the long run.
  • Much of payroll processing starts before timesheets are generated. It begins with onboarding, making sure that employee information is gathered and accurate.
  • Workforce.com’s payroll software takes the stress out of processing pay on your own, handling wage calculations, overtime, deductions, taxes, and more.

If you’re a small business owner or an entrepreneur starting out, you are probably considering doing payroll yourself. And rightfully so – doing this can save you money and give you greater control over your finances.

While this may be true, processing payroll manually presents some considerable challenges, such as keeping track of regulations, taxes, and deadlines. 

So, is doing payroll yourself the best choice for your business? In this post, we’ll explore the process of managing payroll yourself while looking into its complexities and potential pitfalls.

What are the steps for processing payroll?

Processing payroll involves several essential steps, from collecting employee data to calculating wages and managing deductions. Here’s a rundown of what these steps include: 

Apply for tax ID numbers.

You must have an Employer Identification Number (EIN) before you can pay your employees. It’s required to apply for a business bank account, file taxes, and employ people. You might also need to register for different tax IDs if you operate across multiple states. 

Consider setting up an Electronic Federal Tax Payment System (EFTPS), a free tool by the US Department of Treasury to help secure tax payments. The EFTPS allows you to make different types of payments, including estimated taxes, corporate taxes, self-employment taxes, payroll taxes, and excise taxes.  

Gather employee information.

Collect essential employee details, including their name, address, phone number, bank details, date of birth, marital status, social security number, and bank details.

You must also have their W-4 forms or tax withholding documents. W-4 documents show how much taxes you should withhold from your employees’ paychecks. Make sure that a new hire accomplishes this during onboarding. Likewise, any employee whose financial situation changes should update their W-4 as necessary. If you hire freelancers, you must let them complete W-9 forms instead. 

Financial information such as tax IDs, previous payslips, existing insurance coverage, and tax reports is also essential for processing payroll.

Onboarding can be a time-consuming process that’s heavy with paperwork, especially without an organized system in place. Workforce.com’s onboarding system lets new hires log in and input their details, submit forms, and upload necessary documents ahead of their first day. This streamlines the process, ensuring all paperwork is handled upfront and freeing your HR and payroll team from tedious manual data entry.

Set up a payroll schedule or period.

Determine when you will distribute pay to your employees. Typically, you can process payroll weekly, bi-weekly, semi-monthly, or monthly. 

To determine the most suitable pay schedule for your business, factor in the following:

  • Cash flow – The important thing here is to ensure that you have enough cash when payday comes. Determine when you’re most likely to be cash-positive and consider timing your payroll around that time. For instance, timing payroll around the same time you pay for utilities and supplies may not be the best move. 
  • Industry practices – Look at what’s common in your industry. If you employ hourly workers, opting for a biweekly or weekly payment scheme would be best, as they typically prefer more frequent payments than salaried employees. 
  • State laws or payday requirements – Check if there are prevailing state payday requirements about how frequently you need to pay your employees and when to time it.  For instance, Arizona requires that you pay employees two or more days a month as long as they are at most 16 days apart. Meanwhile, in Massachusetts, hourly employees must be paid weekly or biweekly, while salaried employees must be paid at least semi-monthly. The latter can be paid monthly, provided that they agree. These differences and nuances exist around required payday schedules, so factor those in as well.  
  • Payroll processing time – You must also be realistic about how fast you can process payroll. It may not be wise to set up a weekly payment scheme if you’re doing payroll yourself. Factor in the time you need to gather information and calculate wages. 

It’s also important to note that organizations can have multiple pay periods, especially if they employ varied workers. The key to setting the right pay period is to take a look at how your organization operates and what makes the most sense for your employees. 

Workforce.com’s payroll system supports a variety of pay schedules—weekly, fortnightly, semi-monthly, and monthly. You can set up multiple pay periods and assign them to different roles. This ensures that employees get paid on the schedule that works best for them. For you, this means one less payroll task to worry about, because it’s fully automated.

Determine payment method.

Direct deposits are usually the standard form of payment for employers to distribute salaries to their employees. However, even as the standard, some prevailing state laws prohibit employers from making this method mandatory. 

Other ways to pay employees include cash, checks, pay cards, and mobile wallets. Each method has its pros and cons. For instance, checks can be a good option for employees who don’t want to disclose their bank information, but they can be prone to getting lost and are not immediate. While direct deposits may be more commonplace and convenient, employers must factor in how long it takes for funds to reflect in an employee’s account. 

Other considerations include the possible fees that come with each payment method. For instance, pay cards can have setup costs.

As you choose the best payment method for your staff, factor in any prevailing law and what makes the most sense for your employees. Consider providing two options as well. For instance, if an employee can’t be paid through direct deposit because they have no bank account, consider setting up a pay card or issuing paper checks as an alternative.  

It would be best if you also issued pay stubs for your employees. There may be state and local laws that have specific requirements around this. For instance, some states require employers to issue printed pay stubs unless the employees consent to receive electronic ones instead. 

But regardless of whether it’s mandated in your state to issue pay stubs, it’s still best practice to do so. They are essential for transparency. It includes details about what makes up their pay, such as wages, deductions, and taxes. 

Track employee work hours.

Tracking time and attendance is at the core of processing payroll. Record the hours worked by employees, including regular and overtime hours. It also involves monitoring PTO, leave, and holidays.

There are different ways to track employee time, but the goal is to do so accurately. Time and attendance data is vital to calculating wages, and you must get it right from the start. Ensure you have an accurate record of this information to calculate salaries accurately. It’s best practice to have an automated system to capture and export employee time into timesheets. Doing so will help ensure accuracy and avoid time theft. 

Workforce.com’s time and attendance system captures employee clock-ins and clock-outs in real time, automatically generating timesheets. It also sends alerts to both managers and employees if a punch is missed, reducing the need for manual cross-checking during payroll and maintaining the integrity of time records. Plus, employees can clock in directly from their devices with GPS tracking, which is ideal for workers in the field or businesses with multiple locations. 

Calculate gross pay.

Determine the gross pay for each employee by multiplying their hours worked by their hourly rates or by dividing their salary by the pay periods if they’re salaried. 

In order to do any of this, you first need to gather employee timesheets to determine how many hours each employee has worked. This is especially crucial for hourly employees, but you must also look at non-exempt salaried workers’ timesheet records in case they’re entitled to overtime pay.

Aside from their base pay, you must also factor in overtime, PTO, bonuses, and other incentives. Do you offer premium pay rates or shift differentials? Make sure that those are accounted for as well.

Furthermore, if you have employees who receive a significant amount of tips, you’ll need to track that as well and account for all applicable state laws.

Also read: Your guide to tipping laws by state

Note that there are state-based rules for computing overtime. Typically, overtime rates come into play when employees work more than 40 hours a week. However, some states have unique stipulations, like California. Employees who reach the 8-hour threshold in a day are paid 1.5x more per hour of overtime. And if they work over 12 hours, they are paid 2x their regular rate. 

Yes, a lot goes into computing an employee’s gross wages, and clearly, it’s not just about adding up their work hours and corresponding base pay. Here are other relevant and useful guides to help you get started: 

Compute and apply deductions.

After calculating gross wages, you need to factor in applicable deductions. Some of these are involuntary, while others are voluntary. 

Involuntary deductions are mandatory under the law. Employers should subtract these amounts in compliance with applicable laws and remit them to tax agencies and other authorities. Common involuntary deductions include employee withholdings like FICA tax, Medicare tax, social security tax, federal income tax, state and local taxes, and wage garnishments. 

Voluntary payroll deductions are amounts subtracted from an employee’s paycheck by their explicit choice or agreement. These deductions include retirement plans, health insurance, union dues, and other job-related expenses such as parking and travel. Some of these deductions are taken before or after taxes. It pays to double-check whether they are post-tax or pre-tax deductions.

Also read: What are different payroll deductions? Taxes, benefits, and more

Also, consider the necessary paperwork for deductions. There’s the W-4 for taxes and insurance forms for benefits, to name a few. Authorization to deduct is required for voluntary payroll deductions, so ensure your employees accomplish that and update when necessary. In addition, some employees may be exempt from FICA, so you need to consider that, too. 

Free template: Payroll Deduction Authorization Form

Calculate net pay.

The net pay is the amount employees take home after all deductions. Subtract the total deductions from the gross income to find the net pay.

Pay your employees.

Pay your employees according to the set payment method and on the scheduled pay date. Make the necessary transactions and arrangements to ensure your staff receive their pay on time. 

If you’re paying employees through direct deposit, account for how long it will take for the money to reflect in their bank account. Typically, it takes 1 to 3 days, but double-checking is still best.

File and remit taxes accordingly.

After determining federal, state, and local tax withholdings, you must remit these payments to the correct agencies. Depending on the tax type, you may either need to direct the funds immediately or reserve them and make the remittance closer to the payment deadline. 

It’s also important to note that while employer contributions are not part of employee payroll, they are a core part of this process. Some contributions are paid by both employers and employees, such as Social Security and Medicare. Other obligations are solely on the side of employers, such as the Federal Unemployment Tax (FUTA).  

Check with the appropriate agency for more information on handling tax rates and payments. For a complete list of employment taxes and their due dates, visit this full list from the IRS.

Keep payroll records and generate reports.

Create and review payroll reports to ensure accuracy and prepare for external audits. This includes reports for tax filings, financial statements, and employee records.

You must also create reports required by government agencies such as the IRS. Typically, such reports inform the agencies about wages paid to employees, withheld taxes, and employer contributions. Note that these reports may have different deadlines and require specific forms. For instance, Form 941 is used to report an employer’s quarterly federal tax return, while Form 940 is in relation to FUTA.

Furthermore, the FLSA mandates employers to keep payroll-related for three years.

Also read: A guide to accurate and comprehensive payroll reports

You can easily generate payroll reports to get a better understanding of your business and payroll expenses. Workforce.com helps you stay on top of government requirements and also lets you create reports that show how your payroll connects to frontline work and employee performance.

Things to Consider Before Doing Payroll Yourself

If you’re leaning toward doing payroll manually, here are factors you need to carefully weigh before doing so: 

Cost

Doing payroll yourself can save you costs in terms of not having to pay for software or outsourcing payroll. That’s where the appeal comes from, especially if you have a small workforce of 5 to 10 employees. 

However, it’s not just about whether or not to pay for a service, which brings us to the next point. 

Time

Doing payroll yourself requires time – and a lot of it. If you have a growing business, the hours spent processing payroll yourself can sometimes end up costing you more than outsourcing the work.

Consider the opportunity cost of spending a day gathering data, making calculations, cross referencing computations with the latest federal, state, and local laws, staying on top of taxes, and submitting reports. What else could you be doing instead?

All of this work can be incredibly challenging when you have a scaling business. Processing payroll may be manageable for staff with 5 team members, but it can quickly become much more complex when you’re doing it for 50 employees. Not being able to manage your time well can also result in a delayed payroll, which is the last thing you want to happen.

Legal risks

If you or someone on your team is well-versed in tax laws and payroll regulations, doing it in-house might be feasible. However, manually processing pay is risky – errors are inevitable. If you’re doing payroll in a spreadsheet, one wrong entry or a single typo could cause a chain reaction of errors, making you legally liable for inaccurate pay. You can opt to double-check or even triple-check your calculations, but routinely doing so will make payroll take even longer, which, as discussed earlier, can also cost you.

Another risk of manually processing payroll is the potential for employee misclassification. Ensure you understand which staff to classify as independent contractors vs. full-time employees.

Support

When you do payroll yourself and encounter issues, it’s up to you to figure out answers or solutions. This situation can be daunting and complicated. Of course, resources are available, but combing through data sheets and government guidelines can be time-consuming, overwhelming, and prone to misinterpretation.

Operations

If your business is seasonal or operates temporarily, manual payroll might make the most sense since it’s not something you will be doing year-round. But then again, consider the number of employees you have. Choosing a payroll tool might be worth considering if you have a big workforce, even if you won’t be running payroll year-round.

Why Using Payroll Software Makes Sense

Quick answer: automation and accuracy. 

Payroll software helps simplify calculating wages, accounting for labor laws, withholding taxes, bookkeeping, and generating reports. It handles all the vital administrative areas of payroll faster than you would manually do. 

If you run a small business, payroll software helps you stay hands-on with your pay runs, but this time, you can make computations quickly and error-free. Furthermore, if you’re a growing business, payroll software can scale with you and handle the process even as you hire more team members.  

Also read: 14 Best Payroll Software Services in 2025

Features of payroll software to look for

If you’re planning to look at payroll solutions, go for software that has the following functionality: 

Synced with your time tracking system

Much of the payroll process happens even before the part where you calculate wages. This means that the success of your payroll depends on how accurately you record work hours.  

Ideally, your payroll should sync directly with whatever you use to track time and attendance. This way, you can easily process employee time automatically without re-entering or exporting it into payroll.

Automated calculations

Payroll software should be able to automatically compute wages, deductions, and taxes. At the same time, it should account for applicable taxes and labor rules. 

The thing with payroll processing is that every paycheck is different. Your payroll system should account for all these nuances and differences, especially if you employ hourly employees in various locations. 

Go for a payroll system that can handle computations for different employee classifications, pay rates, overtime, tips, deductions, and withholdings.  

Employee self-service

Make payroll information accessible to everyone at your business. Staff should be able to update their personal details and direct deposit information via an online portal or app. This eliminates the need for a middleman; employees handle their own profile changes instead of wasting time asking management.

User-friendliness

While any new software has a learning curve, it is important that you choose one that is intuitive and well-designed. Small businesses don’t have the large departments or specialized expertise required to handle complex legacy systems. Go for an easy-to-use payroll platform that offers quality support—from importing your current data to ensuring that your first pay runs are accurate and smooth. 

Do payroll in minutes with Workforce.com

Workforce.com helps reduce payroll processing time from hours to as little as 20 minutes. It automates adjustments, keeps staff details up to date with self-service features, and sends out incomplete timesheet reminders, taking care of the things that typically slow down and complicate payroll processing.

It can handle tax forms such as W-2s and 1099s, direct deposits, tax filing, wage garnishments, deductions, multiple pay runs, benefits, and payroll reporting. Workforce.com’s payroll software even syncs with other important functions like time tracking, scheduling, hiring, and more.

Discover how Workforce.com can simplify payroll for your small business by booking a demo today. 

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Payroll Challenges by Industry: What California Employers Need to Know

Summary

  • Different sectors in California face unique challenges, from varying pay rates to complex, location-specific labor laws.
  • Industries like hospitality, healthcare, retail, construction, entertainment, and agriculture often struggle to stay compliant while accurately paying staff.
  • A powerful payroll system can help simplify payroll no matter how complex the rules.

California isn’t just known for its beaches and movie sets; it’s also home to some of the most complex labor laws in the country. And those rules can get tricky fast when it comes to payroll. 

But here’s the catch: not every industry is dealing with the same challenges. In California, payroll compliance isn’t one-size-fits-all. Payroll challenges can look different for a restaurant in LA, a construction site in Fresno or a vineyard in Napa. 

So, let’s break it down. Here’s what California businesses in six major industries—hospitality, healthcare, retail, construction, entertainment, and agriculture—need to watch out for when it comes to paying their teams.

Hospitality: Tips, Schedules, and Challenging Payroll Scenarios

Complying with California Tip Laws

California law is clear: all gratuities belong to the employees. That sounds simple, but confusion often arises around who gets the tips, how they should be pooled, and whether tips count toward the regular rate of pay for things like overtime. 

Unlike in other states, California doesn’t allow a tip credit, meaning employers can’t count tips towards meeting the state’s minimum wage. Every nonexempt employee must earn the full minimum wage before tips are factored in.

Workforce.com Solution: Proper tip handling requires a clear, written policy. Setting expectations upfront is vital, whether you allow tip pooling among front-of-house staff or distribution to everyone working a shift. Once your policy is in place, Workforce.com can help manage the rest. The platform integrates directly with your POS system, enabling you to automate tip distribution based on hours worked, roles, or even custom percentages. Tips can be routed through a virtual “tip jar”, ensuring every employee gets their fair share alongside their regular wages.

Also read: Should you Implement Tip Pooling? Pros, Cons, and Best Practices for Restaurants

Managing Predictability Pay

In California, last-minute schedule changes can come at a cost. Cities like Los Angeles enforce Fair Workweek rules that require employers to post schedules at least 14 days in advance. If you cancel a shift, add work hours, change start and end times within that window, you may owe employees additional “predictability pay”. 

Predictability pay counts as regular wages, which means that they are taxed and must be clearly listed on employee pay stubs.

Workforce.com Solution: Demand-based employee scheduling can help you plan ahead and reduce last-minute changes that trigger predictability pay. Workforce.com analyzes key data points like bookings, events, weather, historical sales, and foot traffic to help forecast demand and optimize staffing. 

What if schedule changes happen within the 14-day window? You can set conditions in Workforce.com to automatically calculate predictability pay when certain conditions are triggered. This ensures that premiums are correctly calculated and won’t be overlooked when it’s time to process payroll. 

Healthcare: Minimum Wage Rules and Off-the-Clock Work Risks

Minimum Wage Compliance

Healthcare workers in California are entitled to higher minimum wages, ranging from $18 to $23 per hour, depending on the type of facility. These rates are set to rise in the coming years.

The first challenge with healthcare minimum wages is figuring out which rate applies. Employers need to know whether their organization falls under the covered categories. The Department of Industrial Relations provides a complete list of who qualifies and what rates apply.

However, knowing the applicable rate is just the first step. You also need a system that keeps up with rate increases and ensures that every employee gets paid correctly based on their job and worksite.

Workforce.com Solution: Workforce.com automatically applies the correct minimum wage rate based on each employee’s location and role. You know that your staff is getting paid what the law requires, whether they’re rotating across departments, facilities, or cities.

Preventing Off-the-Clock Work

It’s common in healthcare facilities for employees to start early or stay late to finish tasks. However, when those tasks happen outside of scheduled hours and without proper time logs, employees can be held liable for unpaid wages and penalties.  

What counts as off-the-clock work? Think nurses reviewing charts before clocking in, staff prepping meds after hours, or handoff meetings that happen outside scheduled shifts. These are all job-related tasks for which employees should be compensated.

Workforce.com Solution: It’s all about having an efficient time tracking system. Workforce.com helps by automating clock-ins, generating real-time timesheets, and sending alerts when employees try to clock in or out outside of their scheduled shifts. 

If an employee tries to log in before or after their shift, the system can prompt them to provide a reason, giving managers visibility into potential issues. Aside from preventing unpaid work, it also helps identify whether extra hours qualify as overtime. 

Employee time and attendance information can be turned into reports that help spot recurring patterns and address off-the-clock trends to avoid non-compliance.

Retail: Local Wage Rates, Predictive Scheduling, and Seasonal Staff Challenges

Managing Varying Minimum Wage Rates

Retail business owners in California can face challenges with varying minimum wage rates across cities and counties. If you’re operating stores in both Los Angeles and San Francisco, for example, you’re looking at two different minimum wage rates: $17.28 in LA and $18.67 in San Francisco. Keeping up with local wage ordinances and applying them correctly can make payroll complicated. 

Workforce.com Solution: Workforce.com’s payroll solution automatically calculates pay based on the location listed in each shift and clock-in record. Because payroll, scheduling, and timekeeping are all connected in one ecosystem, there’s no cross-checking required between spreadsheets or separate platforms.

Dealing with Predictive Scheduling Laws

Retailers in California may be under specific predictive scheduling laws, such as the Formula Retail Employee Rights Ordinance in San Francisco. These laws generally require you to post work schedules at least 14 days in advance, and any last-minute changes can mean extra pay for affected employees. That’s great for workers and improving retention, but tough on payroll if you’re constantly shuffling schedules to keep up with fluctuating demand. 

Workforce.com Solution: While last-minute changes are sometimes unavoidable, demand-based scheduling can help minimize them. Workforce.com uses labor forecasting to build more efficient schedules ahead of time. It factors in data like historical sales trends, local events, weather, and customer traffic patterns, helping managers align staffing with actual demand. This means fewer last-minute changes, fewer penalties, and better compliance. And honestly, even if you’re not legally required to, giving employees their schedules early is just good business practice.

Hiring and Paying Part-Time and Seasonal Staff

Retail relies heavily on seasonal and part-time employees, especially during holidays or promotional events. But quick hiring can often lead to messy paperwork, incorrect classifications, and payroll errors. In the rush to fill part-time and seasonal roles, it’s all too easy for key details to fall through the cracks when you’re onboarding at scale. 

Workforce.com Solution: Workforce.com streamlines onboarding with a paperless process that feeds directly into scheduling, time tracking, and payroll. New hires enter their information directly into the system, eliminating manual data entry errors and ensuring every employee is classified correctly from day one. It allows you to hire faster and focus more on training new hires so they can get up and running instead of being buried in onboarding paperwork.

Construction: Job Sites, Overtime Pay, and Workers’ Comp Risk

Multiple job sites

Construction projects rarely happen in just one place. Tracking hours can become complex when you have crews moving between job sites and working varying schedules. It becomes even more problematic when you rely on manual methods or outdated systems. Without accurate time data, you’re more at risk for wage disputes, payroll errors, and staffing gaps. 

Workforce.com Solution: Workforce.com’s mobile time clock uses geofencing to ensure employees clock in at their assigned job site. It’s a simple way to guarantee that time logs are accurate and tied to the right location. This also allows you to monitor which sites are properly staffed and which ones need more support. 

Workers’ Comp and Classification

In California, construction businesses are legally mandated to provide workers’ compensation insurance. While workers’ comp premiums aren’t technically a payroll deduction, complying with this legal requirement depends heavily on accurate employee classification and payroll records.

Getting the classification right is crucial because different tasks come with varying levels of risk. Premiums are calculated based on the work being done. If you misclassify a worker or fail to track task-specific job codes, you could end up paying too much or facing a compliance issue.

Workforce.com Solution: Workforce.com allows you to assign employee classifications, which can include job codes tied to specific tasks or roles. These classifications are then connected to time tracking and scheduling, so when employees clock in or are scheduled for a shift, their job code and classification are automatically reflected in your records. That way, your payroll data stays accurate, and your workers’ comp reporting aligns with the actual work being done.

Keeping Up with Overtime Rules

Overtime is a given in the construction sector. However, overtime rules in California can add another layer of complexity. Beyond the standard 40-hour workweek, employees are also eligible for overtime after 8 hours a day and double time after 12 hours. 

Workforce.com Solution: Workforce.com payroll software handles California’s overtime rules automatically. Whether it’s time-and-a-half after a full 8-hour shift or double time after working 12 hours, the system applies the correct rates once the appropriate conditions are met. 

Agriculture: Break Tracking, Worker Classification, and Piece-Rate Pay

Tracking meal and break times

California state law entitles workers to a paid 10-minute rest break for every 4 hours of work and an unpaid meal break of at least 30 minutes if they work more than 5 hours. It sounds easy on paper, but enforcing these rules on the field can be more challenging with fast-paced work spread across large areas. 

Workforce.com Solution: Workforce.com’s time tracking system helps ensure that your team doesn’t miss legally mandated breaks. It sends break reminders to employees, flags missed or late breaks, and alerts managers when someone’s about to skip one. Every break taken or missed is automatically logged in the system, so you’ve got a clear paper trail come payday or audit time.

Avoiding Employee Misclassification

Misclassifying workers as independent contractors, whether by mistake or misunderstanding, can lead to legal risks. When that happens, workers miss out on wages and protections they’re entitled to, and employers can face penalties. 

To guide employers, California has provided the ABC test to help determine whether a worker should be classified as an independent contractor or not. Unless a worker operates independently, outside the core of your business, and without your control, odds are they need to be classified as an employee.

Workforce.com Solution: Classification starts during onboarding with Workforce.com. Employers can set each new hire’s status right from the beginning, helping avoid errors and payroll discrepancies later.

Managing Piece-Rate Pay

In agriculture, paying by the piece, say, per basket of fruit picked, is common. However, California has strict rules to protect piece-rate workers. You can’t just pay per unit harvested and call it a day. Workers still need to be paid for rest breaks, and their total earnings must meet or exceed the minimum wage. They’re also entitled to overtime and detailed, itemized pay stubs.

Workforce.com Solution: Workforce.com’s time and attendance tools help track every hour worked and every break taken, even for piece-rate workers. If someone’s earnings fall below the hourly minimum wage, the system automatically flags and adjusts it. It also generates detailed pay stubs showing piece rates, break compensation, overtime, and other key wage information. 

Entertainment: High Turnover, Multiple Roles and Rates, Local Labor Laws

Quick Onboarding for Seasonal Work and Rotating Crews

The entertainment industry, whether it’s theme parks, theaters, concert venues, or live events, relies heavily on seasonal staff and rotating crews. That means onboarding needs to be fast and accurate. But rushing this process often leads to errors in tax forms, missing I-9s, or incorrect employee data, all of which can cause payroll issues later.

Workforce.com Solution: Workforce.com makes onboarding fast and paperless. New hires input their own information, upload documents, and complete required forms like the I-9 and W-4 in one secure system. Everything flows automatically into payroll and scheduling.

Managing Multiple Job Roles and Pay Rates

It’s common for entertainment workers to wear multiple hats. One can be an usher one day and a merchandising attendant the next. Often, these roles come with different pay rates. Manually tracking these role changes across shifts is prone to error and slows down payroll processing.

Workforce.com Solution: With Workforce.com, you can assign pay rates by role and location. When managers build schedules, they select the job the employee is working on. Workforce.com then carries that rate through time tracking and straight into payroll. This ensures every shift is accurately paid based on the actual job performed.

Location-specific labor laws

Location-specific labor laws affect entertainment businesses operating in particular localities in California. One such law is the San Francisco Health Care Security Ordinance (HCSO). 

This law requires certain employers to make health care expenditures for employees who:

  • Work at least 8 hours in San Francisco per week
  • Have been employed for more than 90 calendar days
  • Work for a business with 20 or more employees (50 or more for non-profits)

This can cover entertainment employees who meet the criteria, such as ballpark concession workers, ushers, security, janitors, and ticket agents at locations like Oracle Park or Chase Center.

Workforce.com Solution: Much of the eligibility for the San Francisco HCSO is based on hours worked and employment duration, which are all key information that Workforce.com stores and tracks. With everything centralized, employers know exactly who qualifies, how much to remit, and when. Plus, by tracking benefits obligations in real time, you can manage labor costs more effectively while staying compliant.

Much of payroll happens even before you export that timesheet. From onboarding and scheduling to clock-ins and break tracking, every step affects how accurate and compliant your payroll will be.

Workforce.com ties all those steps together in one system. Because time tracking, scheduling, and employee data flow seamlessly into payroll, you get built-in wage and hour automation that reduces errors and keeps you compliant, whether you’re navigating complex labor laws in California or operating in a more relaxed regulatory environment.

Discover how Workforce.com simplifies payroll. Get a demo today.

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Workforce.com Recognized with Accolades from Capterra, Software Advice and GetApp in 2025

We’re proud to share that Workforce.com has been honored with multiple recognitions from Gartner Digital Markets brands—Capterra, Software Advice, and GetApp. Our product has been featured across several flagship reports released in 2025, reaffirming our commitment to delivering exceptional value to our users.

Check Out Our Latest Achievements
Strong user reviews on Capterra, Software Advice, and GetApp reflect the real-world impact of Workforce.com throughout the entire Human Capital Management (HCM) lifecycle. 

Our strategic HR and payroll tools like Applicant Tracking, Core Human Resources, and Employee Onboarding streamline hiring and improve the employee experience from day one. Meanwhile, our Workforce Management Suite, continues to lead the way with advanced capabilities like Employee Scheduling, Time & Attendance, and Labor Forecasting.

These accolades are a testament to the platform’s ability to drive real impact for frontline teams and back-office operations alike. Whether it’s streamlining the hiring process, improving employee experience, or ensuring shift coverage with precision, Workforce.com stands out for its ease of use, customer support, and tangible ROI.

What Users Are Saying About Workforce.com

“I had a great onboarding/setup experience. The software does exactly what my business needs and makes everyone convenient for employees. Scheduling is very easy and it uploads hours easily to ADP. The vacation tracking tool is very easy to manage and have employees request time off.”

[Source: Capterra]

“Workforce.com has made scheduling easier and convenient. Very easy to customize, so that I could filter it accordingly.”

[Source: Capterra]

“Workforce.com has been a key part of my daily workload, and it helps with the management of feedback and coaching sessions, also allows me to keep track of any time off request and schedule changes with a simple process”

[Source: Capterra]

Have you experienced Workforce.com? Click here to review us on Capterra.

Looking Ahead

This achievement marks another step forward in our journey, and we’re more committed than ever to evolving Workforce.com to better meet your needs. We’re excited for the future and look forward to continuing this journey with our users.

Learn more about why businesses trust Workforce.com. Book a demo today.

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What New Jersey’s Pay Transparency Law Means for Payroll

Summary

  • New Jersey’s Pay Transparency Act will be in effect by June 1, 2025.
  • Employees will be required to disclose pay ranges and benefits new hires can expect to receive within 12 months of employment..
  • Payroll software is crucial to ensuring that publicized salary ranges match what employees are being paid.

New Jersey joins a growing list of states that have implemented pay transparency laws, including New York, California, and Colorado. Starting June 1, 2025, the Pay Transparency Act will require covered employees to include pay information and benefits data in job postings, both for new roles and internal opportunities.

The act is designed to improve pay equity by making compensation more transparent to job seekers and employees alike. 

Who’s covered?

The law applies to employers who meet the following criteria: 

  • Have 10 or more employees over 20 calendar weeks 
  • Conduct business in New Jersey
  • Employ workers in New Jersey
  • Accepts applications for employment in New Jersey

What must be disclosed? 

Employers must disclose:

  • The hourly wage, salary, or pay range
  • A description of the benefits an employee can expect to receive in the first 12 months

These conditions apply to external job postings, internal promotions, and transfer opportunities. Employers must disclose any opportunities for promotion to all current staff in the affected department. However, promotions resulting from “unforeseen events” or based on years of service or performance are exempt from the notice requirement.

What happens if you don’t comply?

Employers who fail to comply can be subject to a penalty of $300 for first-time violations and up to $600 for subsequent violations.

What the new law means for payroll teams and how New Jersey businesses can adapt

Compliance with this new regulation has a lot to do with policy changes, and it’s easy to think that this is more of HR’s domain. However, once salary bands are made public, payroll teams must ensure that those numbers align with actual compensation data. 

Here are some practical tips to help payroll teams prepare:

Standardize pay rates across locations

If you’re hiring across state lines, you must ensure that each job post meets corresponding pay disclosure requirements in every state. 

Businesses operating in multiple locations often face challenges with standardizing job titles and pay rates. With Workforce.com, you can set pay rates for different roles or locations, which helps avoid any inconsistency between what’s posted on job listings and what’s paid.

Align job postings with actual pay data

To comply with laws like this, job postings must be audited against internal pay data. But this is easier said than done when compensation information is scattered across different spreadsheets or platforms. 

With Workforce.com, all your pay and role information lives in one system, making it easy to review, audit, and generate realistic pay ranges. 

For instance, instead of posting a vague range of $15-$25/hour, Workforce.com can help you determine the median pay rate for the role across locations, which will help you set a more realistic pay band.

In states that already have pay transparency laws, some businesses have received criticism for posting an overly broad range (e.g. $40,000-$120,000), which feels less like transparency and more like an attempt to skirt the law. If you’re serious about compliance and attracting the right people, realistic ranges matter. 

Audit job titles across roles

Payroll teams should look for pay disparities between employees with similar roles. If two people are doing the same work but receiving different pay, it’s important to understand why. 

Again, addressing these gaps is a matter of having the right data. Workforce.com houses employee records and pay rate history, which enables you to quickly identify inconsistencies among job titles and their pay. Managers can filter reports by job title and location to check whether employees with similar roles are paid within the same pay range.

Maintain clean payroll records

Keeping payroll records organized is a huge part of complying with different labor laws, including pay transparency requirements. Workforce.com keeps this information organized because it unifies time tracking, scheduling, and payroll. Ultimately, it creates a clean audit trail that connects job titles, hours worked, and pay rates. Having that information organized can help with compliance, especially if state regulators and employees ask for proof.

Invest in a good payroll system

Payroll is too complex to manage manually or with outdated tools. More than processing paychecks, a good payroll system centralizes your data such as pay rates, job roles, and other relevant information that can be crucial to compliance. 

Workforce.com was built to simplify this. It brings payroll and HR together, giving you a clearer view of your team and helping you stay compliant with new regulations.

Simplify compliance with Workforce.com

Pay transparency is both an HR and payroll challenge. With New Jersey’s law taking effect, it’s high time to ensure job postings align with what employees are actually paid. Workforce.com has the tools to help audit pay data, standardize pay rates across locations, and make payroll reports—all to help you stay compliant. 

See how Workforce.com makes payroll transparency easy for hourly teams. Book a demo today.

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Paycheck Pain: What Employers Need to Know About Student Loan Garnishment

The Trump administration is resuming wage garnishment for defaulted student loans starting May 5, 2025, with employers required to withhold up to 15% of employees’ disposable income. Small and mid-market businesses face significant administrative responsibilities including calculating garnishment amounts, processing deductions, and maintaining documentation, with estimated costs of 1-2 hours of staff time for initial setup and 15-30 minutes per affected employee each pay period.

Unlike most debt collection, federal student loan garnishment requires no court order, making implementation immediate once employers receive notice. Businesses that fail to comply face substantial liability risks, potentially becoming responsible for the employee’s entire debt plus penalties.

The policy affects roughly 5.3 million defaulted borrowers now, with nearly 4 million more at risk of default in coming months.

The Policy Evolution and Current Implementation

The concept of garnishing student loan payments directly from paychecks first emerged in February 2019, when then-Senator Lamar Alexander proposed it as part of reauthorizing the Higher Education Act. That original proposal called for a universal withholding system for all federal student loan borrowers, offering two options: an income-driven plan capping payments at 10% of discretionary income or a standard 10-year repayment plan.

While that proposal never became law, the current Trump administration announced in April 2025 that collection efforts on defaulted federal student loans would resume after a five-year pause that began during the COVID-19 pandemic. This implementation differs significantly from the 2019 proposal:

  • The current policy applies only to defaulted loans (typically 270+ days delinquent)
  • It follows administrative wage garnishment procedures established in the Debt Collection Improvement Act of 1996
  • Collections through the Treasury Offset Program began May 5, 2025
  • Wage garnishment notices will be sent to employers “later this summer”

The Department of Education maintains that resuming collections is not discretionary but required by the Higher Education Act. Education Secretary Linda McMahon stated that “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”

Employer Responsibilities and Implementation Mechanics

When an employer receives a student loan wage garnishment order, they face several mandated responsibilities:

Immediate Responsibilities

  • Process garnishment orders as soon as received (no court order required)
  • Calculate the employee’s “disposable earnings” (gross pay minus legally required deductions like taxes)
  • Withhold up to 15% of disposable income
  • Notify affected employees about the garnishment
  • Begin withholding from the next available pay period
  • Send garnished funds to the agency specified in the order

Ongoing Requirements

  • Continue garnishment until receiving an official release or the debt is paid
  • Recalculate withholding if employee income changes
  • Maintain proper documentation of all garnishment activities
  • Ensure total garnishments don’t exceed legal limits (25% across all garnishments in most cases)
  • Manage priority order if multiple garnishments exist

The process differs from typical debt collection garnishments in critical ways. Most significantly, federal student loan garnishment is an administrative wage garnishment that doesn’t require judicial process. This means employers must implement these orders immediately upon receipt, with no court validation required.

Administrative Burden and Costs for Small/Mid-Market Businesses

Small and mid-market businesses bear disproportionate burdens from wage garnishment requirements due to limited administrative resources and less sophisticated payroll systems.

Time Requirements

The administrative work includes:

  • 1-2 hours of staff time for initial processing of each garnishment order
  • 15-30 minutes per affected employee each pay period for ongoing maintenance
  • Additional time for addressing employee questions and concerns

Small businesses face higher garnishment rates (13%) than large firms (8.7%), according to ADP Research Institute data, meaning they often handle more garnishments with fewer resources.

Financial Costs

While exact costs vary by business size and number of affected employees, expenses typically include:

  • Staff time costs (payroll/HR personnel diverting from core functions)
  • Potential investment in payroll system upgrades
  • Legal consultation expenses
  • Administrative fees (some states allow employers to charge employees $1-10 per payment)
  • Potential liability costs if garnishment orders aren’t processed correctly

For a small business with 25 employees and 3 garnishment orders, this could translate to approximately 6-8 hours of initial setup time plus 1-2 hours per pay period for ongoing maintenance—significant for operations with limited administrative staff.

Compliance Risks

The most severe cost comes from non-compliance. Employers who fail to properly implement garnishment orders can be held liable for the entire amount that should have been withheld, plus potential penalties and interest. For businesses processing multiple student loan garnishments, this represents substantial financial risk.

Timeline and Implementation Challenges

The current timeline creates several challenges for employers:

  • The Treasury Offset Program (seizing tax refunds, certain federal benefits) resumed May 5, 2025
  • Wage garnishment notices will be sent to employers “later this summer”
  • Approximately 5.3 million borrowers are currently in default, with nearly 4 million more at risk
  • Employers may face a sudden influx of garnishment orders with minimal preparation time

This compressed timeline coincides with other significant challenges:

  • The Department of Education is reducing staff by approximately 50%
  • Student loan management is transitioning from the Department of Education to the Small Business Administration
  • Many businesses face other economic pressures from inflation and tariffs

The administration has not announced any implementation assistance programs for affected employers despite the sudden resumption of collections.

Reasoning and Context for the Policy Shift

The Trump administration presents several justifications for resuming wage garnishment:

  • Fiscal responsibility: Officials argue taxpayers should not continue bearing costs of nonrepayment
  • Legal requirement: The administration maintains the Higher Education Act requires them to pursue collections
  • Normalizing operations: Officials frame this as returning to standard practice after an extended pandemic pause
  • Deterrent effect: Research suggests potential garnishment can motivate some borrowers to seek repayment options

Critics counter that the timing is problematic amid economic pressures, and that more effective alternatives exist, such as expanded income-driven repayment options.

Federal vs. Private Student Loan Treatment

The enforcement mechanisms differ significantly between federal and private student loans:

AspectFederal Student LoansPrivate Student Loans
Legal processAdministrative wage garnishment without court orderRequires lawsuit, judgment, and court order
Garnishment limitUp to 15% of disposable incomeUp to 25% of disposable income (varies by state)
Default timeline270 days of missed paymentsOften 90 days of missed payments
Notice requirement30-day notice before garnishmentVaries by state law
Additional collectionTax refund offsets, Social Security reductionLimited to wage garnishment and asset seizure
Protected incomeSome federal benefits partially protectedSocial Security and disability typically fully protected

For employers, the key difference is that federal loan garnishments arrive directly from the Department of Education with no court validation required, while private loan garnishments must first go through judicial process, potentially giving employers more time to prepare.

Precedents for Similar Wage Garnishment Systems

The current policy builds on established legal frameworks:

  • Higher Education Act of 1965 (Section 488A): Authorized garnishment up to 10% of disposable pay for defaulted student loans
  • Debt Collection Improvement Act of 1996: Expanded authority to 15% and standardized administrative wage garnishment procedures
  • Consumer Credit Protection Act: Provides general protections for all wage garnishment (maximum 25% total garnishment, employment protection)

The Department of Education has successfully implemented wage garnishment for student loans for over 20 years. Many of the debt collection mechanisms in current use were modeled after the Department’s existing practices.

Other similar systems include:

  • IRS wage levies for tax debts
  • Child support wage withholding
  • Bankruptcy-related wage earner plans

Expert Opinions on Feasibility and Impact

Experts offer varied perspectives on the policy’s implementation and effects:

On Feasibility

  • Mark Kantrowitz, higher education expert, questions the accelerated timeline: “It sounds like they are not pursuing the normal due diligence schedule for collecting defaulted federal student loans.” (CNBC)

On Economic Impact

  • Pew Research found 79% of borrowers who experienced wage garnishment reported it had a “major” financial impact, more severe than other consequences of default. (Pew Trust)
  • Federal Reserve projections suggest borrowers with delinquencies could see credit scores fall by up to 171 points, affecting their ability to secure housing and transportation. (CNBC)
  • Mike Pierce, executive director of the Student Borrower Protection Center, warns: “This will further fan the flames of economic chaos for working families across this country.” (Student Borrower Protection Center)

On Business Impact

  • Small business advocates note the disproportionate burden on smaller operations without dedicated compliance resources.
  • Scott Buchanan, executive director of the Student Loan Servicing Alliance, emphasizes proactive approaches: “Most borrowers…they’re not in danger of default today, but in five months, they could be. Taking action today is pretty important.” (NEPM)

Conclusion

The resumption of student loan wage garnishment represents a significant administrative challenge for employers, particularly small and mid-market businesses. While the legal framework for these garnishments is well-established, the sudden implementation after a five-year pause creates operational burdens with minimal preparation time. Small businesses face disproportionate impacts due to limited administrative resources, higher garnishment rates, and potential liability risks. For affected employers, developing clear internal processes, ensuring payroll systems can handle garnishment calculations, and documenting all actions will be crucial to navigating this policy shift without incurring significant costs or liability exposure.