Small Business Payroll & Employee Compensation

Managing payroll involves more than writing checks. You must navigate federal and state employer payroll tax responsibilities, calculate employee overtime earnings accurately, and track accrued employee paid time off (PTO) to remain compliant with labor laws.

W2 Employees vs. 1099 Contractors

Correct worker classification determines your tax withholding obligations:

• W-2 Employees: Work under your direct control. You must withhold FICA, federal income tax, and pay unemployment insurance (FUTA/SUTA).
• 1099 Contractors: Self-employed entities providing services. You do not withhold taxes, but you must file Form 1099-NEC if annual payments exceed $600.

Calculating Overtime & Vacation Accruals

Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive overtime pay of 1.5 times their regular hourly rate for hours worked over 40 in a workweek. Accruing vacation rates correctly on paystubs ensures liability transparency on your balance sheets.