How to Do Payroll in North Carolina

A recent study found that 70% of US workers are paid less than $35,000 a year. These low-income jobs leave employees underpaid and overworked – something an employer has no legal obligation to provide relief for. How can the pay gap be fixed? The answer lies in North Carolina’s progressive payroll laws, which require employers to give their workers three months’ notice before any change is made or wages decrease by more than 20%.

North Carolina is one of the states that have a unique payroll tax system. This includes a state income tax and an employer contribution to the state’s unemployment fund.

North Carolina payroll is simple and follows federal requirements, requiring you to get a Federal Employee Identification Number, a North Carolina Withholding Identification Number, and register for unemployment tax. To assure state payroll compliance, however, there are still a few labor law standards to consider. Using the steps in our instructions below, you’ll be guaranteed to process payroll properly in North Carolina.

Consider utilizing payroll software such as Gusto to prevent making errors and incurring fees. It calculates, files, and pays your payroll taxes, and it will reimburse your expenses if you make an error owing to a mistake made by Gusto. You may also utilize the program to pay and benefit your staff through Make a direct deposit. Today is your chance to try it for free.

Gusto is a great place to visit.

Payroll Processing in North Carolina: A Step-by-Step Guide

Step 1: Register your company with the federal government. You’ll need a Federal Employee Identification Number (FEIN) to register your firm for withholding and unemployment taxes in North Carolina (EIN). We also recommend that you sign up for the Electronic Federal Tax Payment System (EFTPS), which makes it simple to pay your federal taxes online or over the phone.

Step 2: Contact the North Carolina Department of Revenue to get a Withholding Identification Number. Each new company paying wages in North Carolina must complete out a Form NC-BR and submit it to the North Carolina Department of Revenue to get a Withholding Identification Number.

Step 3: Register with the North Carolina Division of Employment Security for Unemployment Tax (DES). The NC DES requires that your small company be registered. You’ll be instantly assigned a North Carolina unemployment insurance number (Employer Tax Account Number) after you’ve enrolled.

Step 4: Gather papers from employees. You’ll need the following information from each employee to perform payroll:

Collect, evaluate, and approve employee time sheets in step five. Your personnel will be classified as W-2 employees or 1099 independent contractors, depending on their position. Before filing payroll for each, you must collect and approve time sheets. We propose time tracking software to save you time and verify that the hours you report are accurate.

Step 6: Complete your payroll and pay your workers. This stage needs you to either create your own payroll procedure or utilize an excel spreadsheet. You may also compute payroll on your own or utilize a payroll software system, but you must pay your workers on a regular basis (daily, weekly, biweekly, Semimonthly, or monthly). Make sure you meet the minimum pay criteria as well.

Step 7: File payroll taxes with the federal and state agencies in North Carolina. You must submit Form NC-5 (monthly and quarterly withholding filers) or Form NC-5Q (quarterly withholding filers) depending on your withholding frequency (semiweekly withholding filers). The North Carolina Department of Revenue allows you to submit your taxes online. If your company is a sole proprietorship, LLC (Schedule C), or corporation, the form you’ll need for federal tax filing will differ (Form 1120 or 1120-S).

Step 8: File yearly payroll reports: Regardless of whatever state your firm is located in, every employer must complete W-2s for all workers and 1099s for independent contractors. By law, you must deliver yearly tax forms to all workers and contractors by January 31 of the following year.

Check out our article on how to make payroll for broad guidance on the fundamentals.

Payroll Laws, Taxes, and Regulations in North Carolina

North Carolina follows the current federal payroll legislation, making it a straightforward state in terms of payroll taxes and regulations.

However, there are a few rules to keep in mind:

• Employers are expected to inform new recruits about their salary and regular pay schedule, either verbally or in writing.
• Employers are obliged by law to give written notice of any salary cut at least 24 hours in advance.
• Employers must follow the minimum wage legislation and pay nonexempt workers time and a half if they work more than 40 hours in a week.

Payroll Taxes in North Carolina

Every employer in North Carolina is responsible for paying payroll taxes, as well as Social Security, Medicare, and unemployment taxes. The Federal Insurance Contributions Act mandates the payment of Social Security and Medicare levies (FICA). FICA is paid in half by the employer and half by the employee from their salary, resulting in each side paying 6.2 percent for Social Security and 1.45 percent for Medicare.

Employers must additionally pay a portion of each employee’s wage in State Unemployment Taxes (SUTA) and Federal Unemployment Taxes (FUTA). The SUTA rate for new employers in North Carolina is 1%. Each year, after paying into the system for 12 months, you will be given a new SUTA rate. On the first $7,000 earned, FUTA is taxed at 6%.

Remember that the following services are not subject to withholding laws:

Income Taxes in Different States

North Carolina has a 5.25 percent flat income tax rate. This implies that the rate is the same for all employees, regardless of their taxable income or filing status. Employers must withhold state income tax from workers’ paychecks and return the amounts withheld to the Department of Revenue in North Carolina. Any employer having a company or an employee in North Carolina, whether or not the employer is a resident of the state, is required to remit state tax.

Taxes on the local level

North Carolina has no local or municipal taxes, making it one of the easiest states in which to submit payroll taxes.

Taxes on Unemployment Insurance

You’ll have to pay North Carolina unemployment insurance (UI) tax if your small company has workers who work in the state. Unemployment compensation schemes for qualifying workers are funded by the UI tax.

Employers must submit a Quarterly Tax and Wage Report every three months (Form NCUI 101). Each quarter’s tax and reported wages are due on the last day of the month after the quarter’s conclusion.

DES is the source of this information.

Insurance for Workers’ Compensation

All businesses with three or more employees in North Carolina are required to carry Insurance for Workers’ Compensation coverage to assist with medical costs in case employees are injured on the job. Insurance for Workers’ Compensation is administered through the North Carolina Industrial Commission.

The three-employee rule has certain exceptions:

• Workers’ compensation insurance is required for businesses that utilize or are exposed to radiation, even if only one person is employed.
• Agricultural employers are exempt from carrying workers’ compensation unless they employ 10 or more full-time, nonseasonal employees.
• The United States Department of Labor is responsible for federal workers’ compensation.

Be sure to follow all guidelines for Insurance for Workers’ Compensation. Failure to provide Insurance for Workers’ Compensation could result in penalties, a misdemeanor or felony charge, and even imprisonment.

North Carolina’s Minimum Wage Laws

Employers must pay a minimum wage of $7.25 to all nonexempt hourly workers (the current rate under both state and federal labor laws). Employers must give a fixed wage of $684 every workweek ($35,568 per year) to salaried exempt workers.

The minimum wage is set at $2.13 for firms that have tipped hourly workers, such as restaurants, as long as the gratuities the employee earns bring their hourly income up to the minimum of $7.25. A “tip credit” is what this is called. If the employee’s tips do not bring their hourly rate up to minimum wage, the company must make up the difference so that the person is paid at least $7.25 per hour.

Tipping pooling is also permitted under North Carolina law, which entails aggregating all tips received and then distributing the gathered funds evenly among workers.

Overtime Regulations in North Carolina

In North Carolina, there are no labor regulations that restrict the amount of hours an employee over the age of 18 may work. Nonexempt workers, on the other hand, are entitled to time and a half overtime compensation if their workweek exceeds 40 hours. Overtime compensation is not paid to exempt workers.

Private businesses are not allowed to pay nonexempt salaried workers comp time instead of time and a half. Employees who are paid a salary are not excluded from obtaining overtime compensation.

In North Carolina, there are a variety of ways to pay employees.

In North Carolina, there are presently no regulations that identify a certain kind of payroll payment. As a result, companies are free to pay their workers in whatever lawful way they see fit, as long as the payment is provided in full on the scheduled payday.

The following are examples of acceptable payment methods:

• Cash
• Check
• Order via Money Order
• Make a direct deposit
• Payroll Debit Card

If an employer chooses to pay with a Payroll Debit Card, to be compliant, the employee must be able to withdraw all funds on payday; also, there should be no cost to the employee for use of the card.

Pay Stub Laws in North Carolina

Employers in North Carolina are required to furnish written or printed pay stubs. This also offers electronic pay stubs that the employee may print out.

If you need help making pay stubs, use our free pay stub template as a starting point.

Minimum Pay Period

Because there is no mandated pay frequency statute in North Carolina, companies have a few alternatives when it comes to how frequently they must pay their employees:

• Monthly
• Semimonthly
• Biweekly
• Weekly
• Daily

Payroll Deduction Regulations

State and federal income taxes, as well as FICA, are required by law to be deducted from paychecks. Garnishments imposed by the court, such as child support or debt, may be removed from an employee’s salary automatically depending on the amounts and frequency authorized.

Additionally, with prior written approval, North Carolina companies may take the following from employee paychecks:

• Premiums for health insurance (medical, dental, vision, FSA, HSA)
• 401(k) retirement plans (k)
• Premiums for life and disability insurance
• uniforms and other work-related costs
• The price of tuition
• Charitable contributions
• Purchases for which the employee is responsible for reimbursement

North Carolina’s Final Paycheck Laws

Regardless of whether an employee left or was fired by the employer, North Carolina law requires that they get their last salary on or before the next available payday after their termination. Payment for all hours worked, commissions owed, and any accumulated but unused paid time off must all be included in the final paycheck. Furthermore, final paychecks cannot be kept until the company’s equipment is returned.

Severance Pay Laws in North Carolina

Employers in North Carolina are not required to give severance compensation when an employee is fired. If an employer chooses to pay severance benefits, they must adhere to any severance policy or employment contract terms and conditions.

Paid Time Off (PTO) has been accrued.

If there are no company policies in place, the employer is required to pay employees for accrued time off upon termination of employment (voluntary or involuntary). Earned time off cannot be forfeited unless the employer has a written forfeiture clause in its company policies (under N.C.G.S. 95-25.13(2)). This means that if your company handbook or policies manual does not specifically state what happens with Paid Time Off (PTO) has been accrued., you are liable to pay it upon termination.

HR Laws in North Carolina That Affect Payroll

North Carolina’s human resources regulations are in accordance with federal norms. Although no unique restrictions exist, you should be aware of federal regulations.

Reporting on New Hires in North Carolina

Employers in North Carolina are required by federal law to report all new hires and rehired workers to the Division of Social Services (DSS) State Directory of New Hires within 20 days of hire. To report new recruits, employers must first register with the DSS and then log in.

Requirements for Lunch and Other Breaks

Rest and food breaks for adolescents under the age of 16 are exclusively regulated by state legislation, as required by the Wage and Hour Act. After five hours of employment, youths under the age of 16 must be given at least a 30-minute break.

Employees aged 17 and above are not compelled to take a lunch or break, regardless of the amount of hours they work in a row.

Laws Concerning Child Labor

Minors are protected by the Wage and Hour Act, which limits the sorts of employment they may do and the amount of hours they can work. For teenagers under the age of 18 who work in non-farm occupations, North Carolina law follows federal employment requirements. Those under the age of 18 are not permitted to work in some vocations, such as those that are dangerous or harmful. Furthermore, it is illegal to schedule adolescents to labor during school hours on school days, according to federal legislation.

Please note that during the school year, federal law prohibits 14- and 15-year-olds from working more than 15 hours a week. Furthermore, 16-year-olds are not permitted to work after 7 p.m. on school evenings or after 9 p.m. on non-school nights. Please visit the Federal Wage and Hour Division of the United States Department of Labor for further information.

Minors’ Work Permit

Employees in North Carolina between the ages of 14 and 17 must get a Youth Employment Certificate.

After registering, the minor will be assigned a Youth Employment Identification (YEID) number. They must present their YEID number to their employer in order to acquire the certificate.

The following steps may be taken by the employer:

1. You’ll need to double-check the teen’s age, suggested employment tasks, and any limitations.
2. You next go to the North Carolina Department of Labor and fill out the necessary company and employer information. During this phase, the YEID number must be entered.
3. After submitting the form, the youngster will get an email with instructions for the next stage in the process.
4. You will get an email with the completed youth employment certificate attached when the youngster and parent/guardian sign the certificate.
5. After the kid reaches 18 or leaves work, you should keep a copy of the certificate for three years as a best practice.

Forms for Payroll

Forms for Payroll, beyond federally required forms that must be submitted in the state of North Carolina are limited to those of unemployment tax. You will be required to file a quarterly wage report to the Division of Employment Security.

W-4 Form for the State of North Carolina

To calculate the quantity of withholdings from workers’ paychecks, North Carolina requires businesses to receive a federal W-4 form from each employee. You should also acquire an NC-4 form from your staff. The NC-4 ensures that the right amount of state income tax is withheld. You must set an employee’s withholding to “single,” zero exemptions if they do not present you with an NC-4 form.

Forms for Unemployment Insurance

Employers in North Carolina must submit a quarterly Unemployment Insurance Tax Payment as well as an Employer’s Quarterly Tax and Wage Report whether they are a sole proprietorship, partnership, or corporation (NCUI 101). On any North Carolina firm you purchase that is already subject to the tax, you may be obligated to pay unemployment insurance tax.

Taxes and reported salaries must be filed by the last day of the month following the quarter, even if the firm has no workers in that quarter.

Federal Forms for Payroll

• W-4 Form: Used by businesses to figure out how much tax to withhold from employees’ paychecks.
• W-2 Form: This form is used to report total yearly earnings (one per employee)
• W-3 Form: Reports all workers’ total pay and taxes.
• Form 940: This form is used to report and compute the amount of unemployment taxes owed to the IRS.
• Quarterly income and FICA taxes deducted from paychecks are reported on Form 941.
• Annual income and FICA taxes deducted from paychecks are reported on Form 944.
• Non-employee pay information is included on 1099 forms to assist the IRS in collecting taxes on contract labor.

For a more detailed discussion of federal forms, check out our guide on federal Forms for Payroll you may need.

Payroll Tax Resources/Sources in North Carolina

Conclusion

When it comes to setting up payroll for your employees, you’ll be responsible for more than just providing a paycheck. Every employer must withhold and remit payment for all payroll taxes to both the Department of Revenue and the state of North Carolina. Additionally, you must pay Taxes on Unemployment Insurance. While the process can be simple, specific labor laws can be tricky so be sure to follow all requirements listed in this article to properly set up and submit your payroll.

Try Gusto if you want to make payroll in North Carolina easier. You don’t have to worry about staying up to date on all state and federal payroll rules since it does it for you. It also electronically pays your payroll taxes and your workers’ paychecks. To test it out, sign up for a free trial.

Gusto is a great place to visit.

North Carolina is one of the few states that does not have a state income tax. Instead, North Carolina levies a gross receipts tax on the businesses in the state. The “north carolina department of revenue” will be able to help you with payroll and taxes.

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