How to Do Payroll for One Employee
Reviewed for 2026 ·
Short answer
Running payroll for one employee takes the same seven steps as running it for fifty: get an EIN, register with your state, collect a W-4 and I-9, calculate gross pay and withhold federal income tax plus 6.2% Social Security and 1.45% Medicare, deposit those taxes on the schedule the IRS assigns you, give the employee an itemised pay stub, and file quarterly on Form 941. The work does not scale down with headcount — only the arithmetic does.
The part that surprises people
One employee carries almost the same compliance load as a department. There is no small-employer exemption from withholding, from deposit deadlines, or from quarterly filing — the amounts are smaller and the obligations identical.
The second surprise is cost. Beyond the wage, the employer pays a matching 6.2% for Social Security and 1.45% for Medicare, plus federal and state unemployment insurance. Budget meaningfully above the headline salary.
The third is timing. Deposit deadlines are set by the IRS according to your prior tax liability, not by your convenience, and late deposits attract penalties that scale with how late they are.
The steps, in order
Do them in this sequence. Several depend on the one before, and the registrations take days rather than minutes.
- 1. Get a federal EIN
- Free from the IRS and usually issued immediately online. Every filing references it.
- 2. Register with your state
- For state income tax withholding and unemployment insurance. Separate from the federal EIN and often the slowest step; start it early.
- 3. Collect Form W-4 and Form I-9
- The W-4 sets federal withholding. The I-9 verifies eligibility to work and must be completed within the first few days — keep it on file rather than filing it anywhere.
- 4. Calculate gross, then withhold
- Hours times rate, or salary divided by periods. Then federal income tax per the W-4, Social Security at 6.2%, Medicare at 1.45%, and state tax where it applies.
- 5. Deposit the taxes
- Through EFTPS, on the monthly or semi-weekly schedule the IRS assigns based on your prior liability. This is not the same as filing.
- 6. Give an itemised pay stub
- Most states require one each pay period showing gross, each deduction, and net. Being a single-employee business does not exempt you.
- 7. File quarterly and annually
- Form 941 each quarter, Form 940 for unemployment annually, and a W-2 to the employee plus a W-3 to the SSA by 31 January.
What one employee actually costs
Employer-side additions on top of gross pay. Unemployment rates vary by state and by your own claims history, so the total sits in a range rather than at a number.
| Item | Rate | Paid by |
|---|---|---|
| Social Security | 6.2% of wages to the annual cap | Employer matches the employee |
| Medicare | 1.45%, no cap | Employer matches the employee |
| Federal unemployment (FUTA) | 6% of first $7,000, less state credit | Employer only |
| State unemployment (SUTA) | Varies by state and experience rating | Employer only, in most states |
The FUTA credit for timely state unemployment payments reduces the effective federal rate substantially in most states. Withholding from the employee — income tax and their half of FICA — is their money, not an employer cost.
Paying a genuine employee as a 1099 contractor to skip this process is the mistake that costs most. It shifts your payroll tax onto them, and it unravels the moment they file a return, claim unemployment, or are injured at work — at which point the back tax, interest and penalties are yours.
Common questions
Do I need an EIN for one employee?
Yes. Every employer needs a federal Employer Identification Number regardless of headcount. It is free from the IRS, usually issued immediately online, and every filing references it.
Can I just pay my one employee as a contractor?
Only if they genuinely are one. The test is control: if you set the hours, direct the work and provide the tools, they are an employee. Misclassifying shifts your payroll tax onto them and unravels when they file, claim unemployment or are injured.
How often do I deposit payroll taxes?
Monthly or semi-weekly, on a schedule the IRS assigns based on your tax liability in a prior lookback period. It is assigned to you rather than chosen, and depositing is separate from filing Form 941.
Do I have to give a pay stub to one employee?
In most states, yes. The requirement for an itemised statement each pay period is per employee, not per company size, and a handful of states specify exactly what it must show.
Step six, without payroll software
Once the withholding is calculated, the employee still needs an itemised statement. Our generator produces one from the gross, deductions and net you enter — with 2026 federal and state figures built in.
Open the pay stub generator