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Payroll checks are one of many options that employers have when paying employees in return for their work. Unlike digital payments such as direct deposit, paper checks offer unique advantages for both employers and employees. Paying by check can be especially helpful for workers who do not have bank accounts, and it can prevent employees from having to share banking information if they are uncomfortable doing so. Checks can also encourage impromptu one-on-one interactions as employers hand out checks directly to employees.
This guide will explain the most common types of paychecks, the key calculations to get wages right, and how to stay ahead of compliance considerations.
Types of payroll checks
First things first, there are several types of payroll checks you’re likely to come across. These include:
- Standard payroll checks: These are regular paychecks that you distribute every pay period based on the employee’s base salary and wages.
- Overtime payroll checks: You distribute these to employees who have worked overtime.
- Bonus payroll checks: If you offer incentive pay for any reason, you can add bonus pay onto the employee’s standard payroll checks.
- Commission payroll checks: You’ll provide commission payroll checks to employees who earn a percentage or specific amount based on their sales performance.
- Reimbursement payroll checks: You can give these to employees who have incurred work-related expenses, such as travel, food, or gas.
Note that payroll checks may include multiple types of payments in one check, or separate checks for different types of payments (or payments made at different times).
Step-by-step guide to making payroll checks
Gathering employee time records
If you use paper timesheets, you can simply reference each one that’s been generated for your employees and verify that all hours are correct. However, if you use a more advanced system such as swipe cards, mobile punching, or time and attendance software, it’s likely even easier. While you can still take time to verify, most of the time the platform connected to these systems will calculate total hours for you.
Calculating gross wages
Gross wages are what you pay employees before any deductions, insurance payments, retirement, or investment contributions. For hourly workers, you simply multiply the number of hours the employee worked by their hourly rate. For salaried workers, you’ll divide the employee’s salary by the number of pay periods to see what their gross wage is for every check.
Deductions and tax withholdings
Taxes and deductions can get complicated. There may be multiple deductions to calculate with different tax rates depending on an employee’s withholding status. You might have to deduct federal income tax, FICA taxes, state income tax, benefit payments, or retirement contributions. which can calculate and track these taxes automatically. One of the easiest and most accurate ways to complete this step is to use payroll software like OnPay, which can calculate and track these taxes automatically.
Calculating net pay
Net pay is how much you pay an employee after taxes and other deductions are accounted for. You calculate it by simply subtracting the total deductions from the employee’s gross pay.
Check out our guide to gross pay vs. net pay to learn more.
Printing payroll checks
While payroll software can help automate this step, it’s also possible to print payroll checks yourself with a few supplies. You’ll need a standard printer that uses magnetic ink, blank check stock, or pre-printed checks with your business information listed (personal checks aren’t recommended), and magnetic ink. If you use a template, you’ll also likely need a magnetic ink character recognition font.
After you’ve gathered your materials, you’ll simply use your template to fill in the necessary information and print your payroll checks, just like how you’d print any other document.
Distributing checks to employees
Now comes the fun part (and the step you know your staffers are looking forward to). You can choose to distribute paychecks in person, through the mail, or at an employee’s designated work area. To add a personal touch to the distribution process, it can help to learn what each employee prefers. Also, consider that mail is going to require postage instead of simply handing the check to the employee, and there is a potential risk for mail theft.
Compliance and reporting obligations for employers
When doing business, you’ll likely need to keep up with local tax obligations, and of course, you’ll want to make sure Uncle Sam gets his due. Federal and state laws regulate how much businesses pay to employees, how they withhold and pay taxes, what documents they must provide to employees, and typically provide guidance on the records you’ll need to hold onto.
A few examples of compliance and reporting obligations include:
- Meeting minimum wage rates and accurately calculating wages, including overtime
- Calculating, withholding, and paying taxes accurately and on time
- Providing employees with check stubs, either physical or digital copies (required by some states), W-2s, and 1099s
- Providing independent contractors with 1099s
- Keeping detailed records of all payroll activities
Paper check or other payment method: put employee payment on your to-do list
Whether you’re providing actual paper checks to your employees or going another route, having a process in place for paying employees should be on your priority list. Whether distributing traditional payday checks or getting ready to hand out holiday bonuses, the steps to making and printing different types of payroll checks are easy to follow.
If you want to simplify how you pay employees, OnPay’s payroll software can make this process easier. With features such as guaranteed tax calculations, custom reporting, and custom pay schedules, we can help keep this task one that stays hassle-free. Best of luck as you keep growing your business and our team is ready to help!
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.