Payroll Services for One Employee: How to do it Right in 2024

Whether you’re a sole proprietor or a small business owner, you’ve probably considered using payroll services for one employee.

Payroll management is essential to regulating a one-person business. You are responsible for handling your finances to ensure they align with your operations and long-term goals.

In this article, our payroll experts will guide you in understanding the benefits and risks of using one employee payroll. You will also learn how to choose the most suitable payroll service for your business and implement it seamlessly.

Key Takeaways

• A single-employee payroll applies to startups and small businesses. It includes preparing and disbursing employee wages, making timely tax payments, managing work schedules, and overseeing employee benefits.
• Implementing payroll services for one employee saves time, reduces operational costs, ensures complete tax and legal compliance, reduces payroll errors, builds employer-employee trust, and helps generate insightful financial reports.
• The most common challenges of preparing payroll for one employee include maintaining consistency in payroll management, adapting to changing market demands and federal regulations, exuding professionalism, and securing long-term stability.
• To carry out an effective one employee payroll system, small business owners must apply for an employee ID number, stay informed about state tax regulations, have a background in accounting and managing finances, and choose a suitable pay schedule.

What is One Employee Payroll?

One employee or single-employee payroll is a payroll system implemented in startups, sole proprietorships, or businesses with only one employee.

Enforcing a payroll system on a single employee may seem impractical initially. Realistically speaking, it is instrumental in securing essential business records and tracking operational expenses, employee work hours, and tax liabilities.

Before you stop, ask yourself, “Do I need payroll software for one employee?” Remember that labor laws and federal and state regulations still bind startups and sole proprietors.

Sole proprietors and self-employed individuals who are new to the world of business tend to overlook important responsibilities such as:

• Staying on track with pay schedules and tax deadlines
• Preparing and organizing balance sheets and finance reports
• Budgeting the business’s income to manage essential expenses and accruals
• Comparing and evaluating their costs vs. their revenue
• Underscoring key factors that negatively affect sales trajectory and revenue
• Implementing suitable employee benefits and incentives
• Complying with federal and state labor laws and tax regulations

The obligations listed above could be even more intricate, depending on the nature of your work or the type of products you sell.

With a reliable tool to simplify and regulate the mountain of work you have to do, it is possible to stay organized and prepared to address potential challenges your business may face.

Let’s say you missed a tax deadline or failed to pay your employee the correct wages. Naturally, you would have to retrace your most recently completed payroll and compensate your staff for the discrepancies in their paycheck.

You would also face penalties or fines from the IRS for missing the tax filing deadline. The more mistakes you repeat and incur, the more time and resources you waste, and the less value you bring to your business.

7 Benefits of One Employee Payroll Services

One-employee payroll services offer the following benefits to your small business:

#1. Time-Saving

Shouldering all the tasks and responsibilities associated with managing your business is daunting and may lead to unintentionally missing some critical processes or steps.

On the other hand, taking advantage of payroll services for one employee keeps your business operations in check. You can automate bookkeeping, prepare employee work schedules, and organize your finances.

In this manner, you have extra time to focus on developing other essential aspects of growing and maintaining your business.

#2. Tax & Legal Compliance

Complying with federal and state tax and labor regulations means filing taxes promptly and withholding the correct tax amounts from your employee’s wages.

It also entails providing employee benefits such as health care and life insurance coverage, paid time-off or overtime compensation, and implementing programs to boost employee morale and motivation.

Most payroll software offers a combination of HR and tax filing tools, which is a perfect fit if you have a limited workforce to handle your payroll.

#3. Minimizes Errors

Human error is common when manually calculating your company's expenses, revenue, and employee earnings. Delays in addressing and resolving these errors often lead to disputes and significant financial losses.

There’s no harm in delegating the accounting and salary math to reliable software, especially if it means making your accounting books and employee paycheck information more accurate.

Taking advantage of one-employee payroll services also gives you a more comprehensive look into your future expenses, thereby allowing you to make the necessary modifications to your budget in advance.

#4. Cost-Effective

Smart money-making and money-saving decisions pave the way for startups to thrive and survive amid economic challenges and the growing number of more established competitors.

With in-depth research and careful comparison, you can find low-cost software that offers just the combination of payroll services for one employee your business needs.

You also get to diversify the incentives you can offer to your employees since you have a reliable tool to help you track your staff’s benefits and align them with your company structure.

#5. Improved Employee-Employer Trust

Employees appreciate their wages being paid on time, and their taxes and voluntary contributions are handled carefully and meticulously.

At the same time, allowing the staff to access their pay records and monitor their benefits with the help of an HR or payroll platform fosters transparency and trust. It is also a great way to showcase the employers' strong sense of responsibility.

#6. Insightful Data Analytics & Reports

An efficient way to take a closer look at your business’s progress is to generate financial reports using your payroll software.

You can evaluate your monthly payroll and operational expenses and then compare the data with your business’s average earnings in a given period.

Doing so gives you a more concrete grasp of where to improve your sales and entice more customers to try your services and products.

Similarly, you can focus on finding payroll services for one employee that enable you to generate employee performance reviews based on specific criteria related to your staff’s job role.

#7. Employee Retention

Happy and loyal employees are one of the most invaluable resources that a business owner can have.

As such, small businesses that prioritize implementing a smooth and error-free payroll process retain more employees than companies that don’t.

The size of your workforce does not matter when it comes to upholding your employee’s rights and providing them with benefits that would improve their working conditions and quality of life.

Potential Challenges With One Employee Payroll

If there are benefits, then there are also risks and challenges associated with integrating one employee payroll into your business.

These challenges typically have to do with the following:

• Consistent regulation and monitoring. Preparing payroll for a single employee may seem like an effortless task at first. However, this also means added pressure because you, as the employer, are responsible for continuously overseeing payroll processes while taking charge of other vital components of running your business.

• Ensuring adaptability. While having an array of payroll services for one employee at your disposal can be assuring, you need more preparation for changing market demands and industry trends. Also, the possibility of expanding your business and hiring additional staff means having the capacity to make the necessary adjustments to accommodate more staff.

• Exuding professionalism. Professionalism is often overlooked in startups or small companies with few workers. Maintaining a professional environment and implementing a systematic approach to single-employee payroll essentially generates higher security, reliability, and compliance.

• Achieving long-term stability. Sometimes, startup owners need to assess whether the cost of payroll service for one employee is worth the added responsibility and expense. After all, there is no guarantee that the employee will stay with the business for an extended period. They may find a more significant opportunity at a larger company or firm, leaving small businesses to hire a replacement and redo their payroll process from scratch.

• Balancing existing business expenses. Using payroll software or services to guarantee proper compensation and enable acceptable working conditions for one employee does not come at a low price. It also comes with added costs that need careful budgeting alongside existing operational expenses.

• Adhering to the employee’s labor rights. Automating payroll management practices should underscore the employee’s rights to fair labor practices. For instance, you must know the difference between a non-exempt vs. an exempt employee in terms of their eligibility for overtime compensation. At the same time, their employment records and pay statements should adhere to the FLSA’s regulations.

How to Choose The Best Payroll Services for One Employee

Choosing the best payroll services for one employee can be tricky, with several options available in the market.

Below are some features to consider to help you narrow down your options and find a payroll service that suits not only your business but also underscores your employee’s needs:

Full Suite of Services

Payroll software should offer services designed to augment your HR and payroll management processes, including tracking PTO, overtime, and work hours and organizing employee benefits like retirement plans and healthcare insurance.

The goal is to accomplish more tasks and maximize resources without breaking the bank.

Some top-rated payroll software for startups worth checking out include OnPay, Intuit Quickbooks, and Gusto.

OnPay’s affordable pricing, automatic tax filing and payment feature, and self-service employee portal make it a top choice. Meanwhile, Intuit Quickbooks offers a 50% discount for the first three months, resources for HR, and bookkeeping tools.

Gusto boasts seamless payroll processing for regular employees and contractors, automated tax filing, improved tax regulation compliance, and tools to review employee performance.

However, for a one-person workforce, it might be much more cost-efficient and practical to use a more specialized tool like Paystub.org for certain payroll tasks, such as generating paystubs or W-2 forms for your employees. More on this later on.

Software Integration for Accounting

Running a business comes with endless accounting and financial reporting. While there’s nothing wrong with manual data entry and bookkeeping in your accounting books, it is also prone to repetitive errors.

Find software that automates critical steps in accounting for your company’s budget, including your profitsand expenses.

Other helpful accounting tools include bill tracking, online payment integration, document management, time and attendance tracking, and detailed analytics and reporting.

Payroll Tax Management

Payroll taxes include FICA, Social Security, and Medicare taxes on employee wages. Employers share half of the FICA tax payments with their employees.

As a business owner, you know how critical it is for your venture and employees to file and pay federal taxes on time. A dependable software offering payroll services for one employee should provide the tax support you need, especially with your limited resources.

Payroll tax tools in the form of automated tax calculation and updated payroll tax guidelines ensure you don’t incur mistakes in processing your taxes.

Simple UI

Aside from an impressive array of payroll and accounting tools, a simple and easy-to-use interface effectively reduces the time and effort it takes to adapt to the software.

Imagine using payroll services for one employee, thinking it would streamline your operations, only to discover that its complicated framework only does the opposite.

Review your business’s structure and requirements, and focus on what can be improved with the help of online or automated platforms. Navigating the software should be as easy as a cakewalk for your HR or payroll staff and your employees.

Paystub.org and Payroll Services

Paystub.org streamlines your online payroll services with an easy-to-use paystub generator.

Whether your employee gets paid daily, weekly, bi-weekly, or monthly, our generator offers a straightforward solution that lets you generate as many pay stubs as you need.

All you have to do is choose a template and fill in the blank fields with your employee’s personal and wage information. Next, preview your pay stub, download a PDF copy, and print the document.

Our generator also has a built-in calculator to ensure your employee’s pay slips reflect the correct gross and net income amounts. You can easily pair our pay stub generator with your existing payroll software or services and maximize your resources.

How to Implement Payroll Services for One Employee

Knowing how to implement payroll services for one employee is the next thing you must learn once you’ve chosen a payroll service provider for your business.

Here is a short guide you can use as you get started with executing a smooth payroll process, even for a small workforce:

• Get an Employer ID Number (EIN). Applying for an Employer ID Number is necessary for businesses that employ staff to carry out their operations. The IRS uses your EIN to identify your business entity when you pay payroll taxes.

• Read up on your state’s tax regulations. Tax rates and regulations vary per state. Learning about the specific rules and restrictions imposed by your state government on payroll and business taxes keeps you from incurring penalties or owing additional taxes to the government.

• Calculate your employee’s withholding amounts. You can do this by checking their tax forms, particularly Form W-4. You must also verify whether their filing status, tax rates, and number of dependents, if any, are up-to-date.

• Choose a pay schedule. A pay schedule, or payroll cycle, determines how frequently you will pay your staff each month. At the same time, it will set the specific dates when you will disburse salaries while serving as your guide for important payroll and tax deadlines.

• Determine how to implement your payroll. Will you rely on payroll software for the most part, or will you combine online tools with manual payroll management? Assessing how to do payroll for one employee correctly also entails weighing your options and considering the nature of your business. It will also help in determining whether you need to pay for additional features or employ additional staff instead.

Final Thoughts

Payroll services for one employee underscore the need for startups and small businesses to stay professional, efficient, and structured, primarily in enforcing fair labor practices and effectively managing their finances.

Preparing salaries, deducting taxes and contributions, and monitoring paid time off for a single employee can be just as arduous as processing payroll for a larger workforce. A single mistake could lead to penalties or, worse, a loss of employee trust and a valuable asset to the company altogether.

Therefore, make sure all information is correctly calculated and filled out, which tools like Paystub.org can help you with. This tool makes the process of filling out documents like pay stubs and W-2 forms for your employee very intuitive and straightforward.

Make sure you also stay on top of changing payroll practices, tax laws, and regulations, and keep your entire business operations in check.

Payroll Services for One Employee FAQ

#1. How do I do payroll for a single employee?

You can manually implement a payroll process for a single employee or with the help of payroll software services available on the market.

Better yet, use an automated payroll management approach to minimize errors and boost the accuracy of your financial and employee records.

#2. Should I use a payroll service for one employee?

Yes, using a payroll service for one employee is worth trying because it streamlines your payroll management process, ensures you pay your staff on time and withhold the correct tax amounts, and keeps your business from incurring possible penalties and prompting legal action.

#3. Can I run my own payroll?

Yes, you can run your own payroll for as long as you consistently update and organize your payroll records. Ideally, you must also be knowledgeable in accounting and bookkeeping and stay updated with federal and state regulations on taxes and voluntary contributions.

Determining the most suitable pay schedule for your business is crucial, as is knowing your tax liabilities and gathering all critical tax information and documents for your employees.

#4. What is the cheapest payroll service for one employee?

Some of the cheapest payroll services for one employee currently available on the market include Quickbooks, OnPay, Rippling, Gusto, and Roll by ADP. You can also use our generators for invoices, W-2 forms, and 1099 forms at a very affordable price.