If an employer has only one worker, he is still responsible for paying the employee accurately and on time. He must also withhold the appropriate income tax and pay them timely to the government. The employer can set up payroll for one employee using a number of different ways. Depending on his comfort level with payroll, he can choose the appropriate method.
Establish a manual payroll system. A manual payroll system is done completely by hand, including wage and tax computations, record keeping, and tax reporting and filing. The room for error is high with a manual system because it is being done entirely hand. However, if there is only one employee, it is possible to have an accurate payroll so long as it is thoroughly double-checked.
To set up a manual payroll system, create a yearly Excel spreadsheet to log the employee’s time worked. Separate the spreadsheet by weeks. Enter the hours worked per day and have a total for each week. During processing payroll, pay the employee for hours worked according to his payroll frequency (for example, weekly or biweekly) at his agreed pay rate. To calculate his federal taxes use his Form W-4 and the current year’s IRS withholding tax tables (Circular E).
You can print the check on a typewriter. Use one with an erase feature and include a pay stub beneath the actual check outlining the pay details. Record details of the employee’s pay for each pay period into a payroll journal. Make your tax deposits to the federal and state government as per their requirements. Issue a W-2 yearly to the employee and to the government.
Use a payroll service. If you would rather not deal with any payroll duties, you can outsource your payroll to a payroll service. Many payroll services do not limit the amount of the employees they process. For a small fee, they will handle all your payroll processing, including issuing the employee’s paycheck, W-2and filing the appropriate taxes.
Use payroll software. You can set up payroll for one employee using payroll software, such as Quickbooks or an accounting software with a payroll feature attached. Using payroll software allows you to simply enter the relevant information for the employee, such as name, Social Security number, address, pay rate, pay frequency and tax data. The system will compute the wages and taxes to be paid. It will also generate the paycheck. Further, the system stores payroll registers and all the information you need to file your taxes. This is a convenient method if you would like to set up and process payroll for the employee yourself.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.