Before your first employee starts, you need a federal Employer Identification Number (EIN) from the IRS. This is the tax ID your business uses to report payroll taxes, file forms like the 941 and 940, and issue W-2s. Applying takes about ten minutes online and the number is issued immediately.

You also need state tax accounts. In North Carolina, that means a withholding account with the Department of Revenue and an unemployment insurance account with the Division of Employment Security. South Carolina has its own equivalent accounts. These take a few days to a few weeks to issue depending on the state and time of year. Without active accounts, you can’t legally remit the taxes you withhold, and you’ll face penalties for late registration once payroll starts.

Decide on a pay schedule before hiring. Weekly, biweekly, semi-monthly, or monthly each have different cash flow implications and administrative burden. Biweekly is common for hourly employees because overtime calculations align with the standard workweek. Once you set a schedule, you need to stick with it because changing later requires notifying employees and possibly the state.

Set up employee onboarding records. Every new hire needs to complete a Form W-4 for federal withholding, a state withholding form (NC-4 in North Carolina), and a Form I-9 for employment eligibility verification. You also need to file a new hire report with the state within 20 days of the start date. Direct deposit authorization forms and emergency contact information round out the basic employee file.

Workers’ compensation insurance needs to be in place before anyone starts working. North Carolina requires coverage for businesses with three or more employees, but rules vary by state and industry. Buying a policy after an injury doesn’t help you.

Inside your accounting software, map payroll to the correct general ledger accounts. Wages, employer taxes, benefits, and deductions each need separate accounts so your financial statements reflect labor costs accurately. Generic mapping lumps everything into one line and makes it impossible to analyze labor as a percentage of revenue or compare departments. This is the step most business owners skip and regret later when their books don’t show useful information.

Benefits and deductions also need to be configured before the first pay run. Health insurance premiums, retirement contributions, garnishments, and any pre-tax deductions each have specific tax treatment. Setting them up wrong means incorrect withholding, which creates problems for both the employee and the business at year end.

GMJ offers payroll system setup and training starting at $300. The setup covers EIN and state account registration, pay schedule configuration, withholding rules, employee profiles, benefits and deductions, and GL mapping so your books reflect payroll correctly from day one. Training is hands-on so you can run payroll independently afterward.

Getting this right before your first hire saves significant time and avoids penalties. If you’re planning to hire in the next few months, set up payroll now rather than scrambling the week before someone starts. We provide small business accounting, bookkeeping and tax services in Jacksonville, NC and help business owners across the Carolinas set up payroll systems that work from the first pay run forward.