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Gemini To pay employees, you set up as an employer, calculate each person’s pay and tax withholding every pay period, pay their net wages by direct deposit, payroll check, pay card or cash, and then deposit and report the payroll taxes. Most small businesses pay by direct deposit and keep payroll checks for the cases that need them.
This guide covers what to do before your first payroll, the ways to pay employees and how they compare, the steps for each pay period, and the rules that apply.
Before Your First Payroll
Get these in place before you pay anyone:
- An Employer Identification Number (EIN) from the IRS.
- Form I-9 for each new hire, to verify identity and work authorization.
- Form W-4 from each employee, so you know how much federal income tax to withhold. Your state may have its own withholding form.
- State registration for state payroll taxes and unemployment insurance, where required.
- A pay schedule that meets your state’s payday rules. Federal law doesn’t set one; the U.S. Department of Labor lists each state’s payday requirements.
- A way to calculate payroll: payroll software, an accountant, or doing it yourself with IRS Publication 15.
Ways to Pay Employees
Federal wage law requires wages to be paid in cash or a “negotiable instrument payable at par” (29 CFR 531.27), which in practice covers cash, checks and direct deposit. Here’s how the common methods compare:
| Method | How it works | Employee needs a bank account? | Watch out for |
|---|---|---|---|
| Direct deposit (ACH) | Net pay is sent electronically to the employee’s bank account on payday | Yes | Employees must be able to choose their own bank (Regulation E); collect account details securely |
| Payroll check | A printed (or emailed, printable) check with a pay stub | No, they can cash it | Printing, signing and delivery; uncashed checks still count as wages owed |
| Pay card | Wages loaded onto a prepaid card the employee uses like a debit card | No | You can’t make a card at a provider you choose the only option; fees and state rules apply |
| Cash | Net pay handed over in cash, with a pay stub | No | You still have to withhold and report taxes and keep records; handling cash adds risk |
Many employers combine methods: direct deposit for most of the team, and checks for anyone who needs one.
How to Pay Employees Each Pay Period
- Collect hours. Gather timesheets for hourly employees and note any overtime, bonuses or commissions.
- Calculate gross pay from hours and rates or salary.
- Withhold taxes and deductions: federal income tax based on the W-4, Social Security and Medicare, state and local taxes, and any benefit deductions.
- Pay net wages by direct deposit, check, pay card or cash, with a pay stub if your state requires one.
- Deposit payroll taxes on your IRS deposit schedule, and pay your share of Social Security, Medicare and unemployment taxes.
- File and keep records: quarterly Form 941, annual W-2s, and the payroll records federal and state law require.
Paying Employees in Cash vs “Under the Table”
Paying employees in cash is legal. Paying them “under the table” is not. The difference is whether you run payroll properly:
- Legal cash pay: you withhold income and payroll taxes, deposit them, give a pay statement where required, and report the wages on Form 941 and the employee’s W-2.
- Under the table: wages aren’t reported and taxes aren’t withheld. This can lead to back taxes, penalties and interest for the employer, and it leaves the employee without a record of income.
If you pay in cash, keep the same records you would for any other payment method.
Can You Pay Employees Without a Payroll Service?
Yes. Small employers can do payroll themselves: calculate pay and withholding with IRS Publication 15, pay employees by direct deposit or check, and handle tax deposits and filings on schedule. The trade-off is time and the risk of errors, which is why many businesses use payroll software or an accountant for the calculations and a payments platform to send the money.
How Zil Money Helps You Pay Employees
Zil Money handles the payment side of payroll. Your payroll provider, software or accountant still calculates wages and taxes; Zil Money doesn’t calculate payroll, file taxes or make W-2s. With Zil Money you can:
- Send direct deposit (ACH) payments to employees’ bank accounts.
- Issue payroll checks: design them with a drag-and-drop tool, print them with stubs on blank check stock using a standard printer, email a one-time printable PDF, or have Zil Money print and mail them.
- Fund payroll with a business credit card when cash is tight: confirm a prepared payroll run and pay it by card. A 2.9% credit card fee applies, funds are transferred within 1 to 3 business days, and you should pay at least three days before the payroll date.
New to paying by check? Read What Is a Payroll Check?
Frequently Asked Questions
What is the best way to pay employees?
For most small businesses, direct deposit is the simplest regular option: it’s set up once and runs with every payroll. Payroll checks work well for new hires, final paychecks and employees without a bank account. Many employers offer both.
Can I require employees to use direct deposit?
Under federal rules (Regulation E), you can require direct deposit only if employees choose the bank or credit union that receives their pay. If you want pay to go to a bank you pick, you have to offer another option, such as a check. Some states add their own limits, so check your state’s rules.
Is it legal to pay employees in cash?
Yes, as long as you run payroll properly: withhold and deposit payroll taxes, give the pay details your state requires, and keep records. Paying “under the table,” without withholding or reporting, is illegal and can lead to back taxes and penalties.
How often do I have to pay employees?
Federal law doesn’t set a pay frequency. Each state sets its own payday rules (for example weekly, every two weeks or twice a month), so check your state labor department.
Can I pay employees without a payroll service?
Yes. You can calculate pay and withholding yourself using IRS Publication 15, then pay employees by direct deposit or check. You’re still responsible for depositing payroll taxes and filing the required forms on time, so many small businesses use payroll software or an accountant for the calculations.
Can I pay payroll with a credit card?
You can’t pay wages onto an employee’s card, but you can fund a prepared payroll run with a business credit card through Zil Money. A 2.9% credit card fee applies, and employees are paid the usual way.
This article is general information about paying employees and does not constitute legal, tax or compliance advice. Payroll, wage payment and tax rules vary by state and can change; consult your state labor department, the IRS or a qualified professional for requirements that apply to your business. Processing and delivery times are estimates and may vary based on financial institution processing schedules, payment method, and recipient bank participation. Timeframes are not guaranteed.