How to Do Payroll in Tennessee: What Every Employer Needs to Know

Table of Contents

Tennessee employers can be found in many industries, from healthcare to hospitality. The state’s tax system is also unusual, with no income taxes on individuals and the highest sales tax rate of 9%. If you’re thinking about opening or expanding a business in Tennessee, you’ll have plenty to learn before doing so.

The “tennessee payroll tax calculator” is a tool that allows employers to calculate their payroll taxes in Tennessee. The tool also includes information about the state’s income tax and unemployment insurance laws.

Because there are no state-specific rules, learning how to conduct payroll in Tennessee is rather straightforward. Tennessee also has no Taxes on income or municipal taxes, so you won’t have to fill out a state W-4 tax withholding form.

Using an all-in-one payroll provider like Gusto may make handling your Tennessee payroll even simpler. It helps you make sure your payroll is precise every time, so you don’t have to incur late fines or penalties, from electronically onboarding new workers to calculating and reporting Tennessee payroll taxes. For a 30-day free trial, sign up now.

Gusto is a great place to visit.

How to Run Payroll in Tennessee: A Step-by-Step Guide

Tennessee follows federal payroll criteria, making the procedure simple—you won’t have to juggle between federal and state regulations to stay in compliance. Calculating payroll taxes is the most difficult task for most small company owners, particularly when done by hand.

Here’s a quick rundown of how to conduct payroll in Tennessee.

Step 1: Register your company as an employer. To get a new Federal Employer Identification Number (FEIN), new businesses may need to use the federal Electronic Federal Tax Payment System (EFTPS) (FEIN). To pay federal taxes, you’ll need your FEIN.

Step 2: Register your company with the Tennessee Department of Commerce. If your company is brand new, you must create an account on the Tennessee Secretary of State’s website. The Tennessee Department of Revenue requires every firm that pays workers in Tennessee to register.

Step 3: Set up your payroll system. Determining how and when workers are paid is the first step in establishing a regular payroll procedure. A well-established firm will almost certainly have a process that you can inherit, but it may need to be tweaked to better suit your requirements. You have the option of processing payroll by hand (you’ll need to understand all of the stages and regulations), using an Excel payroll template, or using a payroll service to assist you with your Tennessee payroll.

Step 4: Have staff complete the necessary paperwork. During the onboarding process, every firm that recruits workers in Tennessee is required to gather specific paperwork. Each employee must complete an I-9 form. A completed W-4 must also be on file for new workers.

Step 5: Go through the time sheets and approve them. You’ll need a mechanism to monitor employee time to enable fast payroll processing—many small company owners make their own time sheets or start with time and attendance software. If you have hourly or nonexempt workers, you must gather time records at least a few days before payment is due. Examining the time sheets allows you to talk with anybody who may have committed an error.

Step 6: Work out the gross compensation and taxes for each employee. To conduct payroll in Tennessee, you’ll need to total hours worked (you may use our free timecard calculator to achieve this), gross pay, payroll deductions and tax withholdings, benefit premiums, and so on.

Step 7: Reimburse employees for their salary, benefits, and taxes. The majority of businesses now pay all workers through direct deposit. However, cash (in a legal manner) and paper checks are also viable solutions. Because there is no state minimum wage in Tennessee, the federal minimum wage of $7.25 per hour is used. You may pay your federal and state taxes online in Tennessee. If you utilize a benefits provider, they should collaborate with you to make deductions as straightforward, automated, and electronic as possible.

Step 8: Make a backup of your payroll data. It’s a good idea to keep track of your company’s finances. Your company is not required to preserve any employment papers in Tennessee. However, the Fair Labor Standards Act (FLSA) mandates that some documents be kept for at least three years.

Step 9: Register with the federal and state governments to file payroll taxes.

All Tennessee state taxes must be paid on time, generally quarterly, to the appropriate state agency, which you may do online at the Tennessee Department of Revenue website. You may pay your federal taxes online using the EFTPS on one of the two schedules shown below:

When the IRS sets you a monthly schedule, you must deposit employment taxes on payments received during that calendar month by the 15th of the next month.
When the IRS gives you a semiweekly schedule, you must deposit employment taxes by the following Wednesday for payments made Wednesday, Thursday, and Friday, and by the following Friday for payments made Saturday, Sunday, Monday, and Tuesday.

Please keep in mind that the reporting and depositing of employment taxes are two separate things. You must submit taxes quarterly on Form 941 or yearly on Form 944, regardless of your payment schedule.

Step 10: Finish your payroll reports for the year.

You’ll need to file payroll reports every year, including all W-2 and 1099 forms. These forms must be sent to workers by January 31 of the following year.

In this tutorial on how to conduct payroll, you may learn more about how to do payroll yourself. You may obtain a free checklist to ensure you don’t miss any tasks.

Payroll Laws, Taxes, and Regulations in Tennessee

Calculating Tennessee payroll taxes and ensuring compliance with all federal and state employment laws are crucial to ensure a correct payroll on every occasion. To help you maintain compliance with payroll regulations, review information on Payroll Laws, Taxes, and Regulations in Tennessee below.

Most employers in the United States are required to pay Federal Insurance Contributions Act (FICA) taxes, with a few exceptions. FICA tax rates for Social Security and Medicare are now 6.2 percent and 1.45 percent, respectively. These taxes will be paid by both the employer and the employee, with each contributing 7.65% of the total Social Security and Medicare taxes.

Taxes in Tennessee

Tennessee, like other states, has specific taxes that businesses must pay. Employees in Tennessee, on the other hand, are not subject to municipal taxes or a state income tax.

Unemployment Taxes for Employers

In Tennessee, all companies are required to pay State Unemployment Tax Act (SUTA) taxes. The current pay base is $7,000, with interest rates ranging from 0.1% to 10%. A SUTA rate of 2.7 percent will be paid by all new employers in Tennessee. Businesses may receive a tax credit of up to 5.4 percent on their Federal Unemployment Tax Act (FUTA) payments if they pay SUTA in full and on schedule.

Compensation for Employees

Tennessee requires every employer with five or more employees to carry Compensation for Employees insurance. Compensation for Employees insurance provides benefits to employees who suffer on-the-job injuries and covers the cost of medical treatment and lost wages. Payments start on the fourth day of disability.

Taxes on income

There is no state income tax in Tennessee.

Minimum Wage in Tennessee

Because Tennessee has no state minimum wage, the federal minimum wage of $7.25 is used instead. Tipped workers must be paid at least $2.13 per hour if their gratuities bring them up to the hourly minimum wage. If this is not the case, the corporation will be required to make up the shortfall.

Overtime Calculation

The overtime restrictions in Tennessee are based on the standards of the Fair Labor Standards Act. For hours worked beyond 40 in a workweek, all businesses are required under the FLSA to pay workers 1.5 times their usual hourly rate.

Employee Remuneration

Businesses with five or more employees are required by Tennessee law to pay their employees at least once a month. Employers must also set and adhere to a consistent compensation schedule. If a corporation only pays employees once a month, it must do so by the fifth day of the following month. When a corporation pays workers twice a month, Tennessee requires that it do it in the following manner:

All salaries received prior to the beginning of the month must be paid to workers by the 20th of the following month.
Wages earned prior to the 16th day of any month must be paid to workers by the 5th day of the following month.

Employees may be paid more than twice a month by their employers. If they do, companies must set up regular pay days and notify employees of any changes.

Employers in Tennessee may also pay employees using one of the following methods:

Pay Stub Regulations

There is no legislation in Tennessee that requires employers to furnish pay stubs to their workers. It is, nonetheless, a sound business practice to do so. Include information such as your employee’s name, pay rate, pay period covered, pay date, and so on.

Paycheck Deductions in Tennessee

According to the Tennessee Department of Labor & Workforce Development, businesses can only deduct wages from an employee’s paycheck if the employee has provided written consent. So, if you need to deduct any of the following from an employee’s pay, you must first get written consent from that employee:

Money shortages
Company property that has been broken, destroyed, or stolen
Checks that have been returned
Uniforms or tools that are required

Please keep in mind that, according to the Department of Labor, a corporation cannot deduct from an employee’s salary if doing so would result in the person earning less than the federal minimum wage ($7.25 per hour) for the pay period.

Final Paychecks for Terminated Employees

When an employee quits, resigns, is fired, or is dismissed, Tennessee law requires that their last paycheck be paid no later than the following normal payday or 21 days after their last workday, whichever comes first.

Use one of our suggested methods to generate a free payroll check if you need to pay an employee right away and aren’t presently utilizing a service.

Human Resources Laws in Tennessee That Affect Payroll

There aren’t many state-specific HR legislation in Tennessee. You must guarantee that you are following federal requirements, which are largely followed by Tennessee law.

New Hire Reporting in Tennessee

Every employer in Tennessee must report new hires and any rehired employees to the Tennessee Department of Labor & Workforce Development within 20 days of their hire date. This report is used to enforce child support orders and must include the employee’s name, address, and Social Security number.

Breaks and Meals

Employees who are scheduled to work six or more hours in a row must be given a 30-minute break. This regulation does not apply to workplaces when the nature of the firm allows employees to relax often. Meal breaks are not required by Tennessee law, but if an employee does offer one, it must be longer than 20 minutes and is not needed to be compensated. Paid breaks of fewer than 20 minutes are usually required.

Child Labor Laws in Tennessee

Children as young as 14 may start working. Working hours for 14- and 15-year-olds are limited to three hours per school day and 18 hours per week. 14- and 15-year-olds may work up to eight hours per day and 40 hours per week while school is not in session. Children aged 16 and above are not subject to any restrictions.

Requirements for time off and leave

Tennessee does not have many state-specific Requirements for time off and leave. Employers must accommodate voting and jury duty and those of a certain size must provide maternity leave.

Tennessee adheres to the Family and Medical Leave Act (FMLA), which mandates that all qualified companies give up to 12 weeks of unpaid leave to workers with a qualifying disability. Pregnancy and caring for a sick relative are two examples. Employers are not required to pay workers during this time off, but they must offer the employee with the same or a comparable position when they return to work, according to the FMLA. State law in Tennessee does not allow for any extra family leave.

Employers with at least 100 workers in Tennessee, on the other hand, are required to give maternity leave. Employees who are unable to work due to pregnancy, delivery, or a related ailment may take unpaid leave for up to four months if they have worked full time for the firm for at least 12 months. Upon their return, the company must retain the employee’s job or a comparable role open for them.

There are no regulations in Tennessee that require companies to give paid time off to their workers (PTO). In Tennessee, employers are able to set their own PTO rules, including whether or not to pay out accumulated and unused PTO when workers depart. Because organizations in Tennessee are not required to do so, it’s a good idea to have this clearly outlined in your company policy. The most crucial thing is to follow your policy’s restrictions, otherwise you might be held accountable.

Use our free PTO calculator if you provide paid time off and need assistance calculating your workers’ PTO accumulation.

Private businesses in Tennessee are not compelled to compensate workers for holidays or to pay them a higher rate if they work on a holiday. Companies may opt to pay higher rates or force holiday employees to work, as long as they comply with the FLSA.

Employers in Tennessee are not required to provide paid or unpaid sick leave to their workers. Employers are able to develop their own sick leave policies as long as they follow the FMLA criteria.

All companies in Tennessee are required to provide employees with a fair amount of paid time off to vote. The amount of PTO granted must not exceed three hours, and an employee must fulfill the following criteria to be eligible:

When the polls are open, the employee seeking leave to vote must not have more than three hours before or after their work starts or finishes to vote.
Employees must seek paid voting leave by noon on the day before to their scheduled leave.

Workers who are called for jury duty must be paid by a company with five or more employees. The only exception is if an employee has worked for a company on a temporary basis for less than six months. Any employee called for jury service cannot be fired or treated unfairly.

Businesses in Tennessee are not required to give bereavement leave to their workers. Employers have the option of creating policies if they so want.

Forms for Payroll

Tennessee does not have state Forms for Payroll since the state does not levy Taxes on income. You should familiarize yourself with federal forms though.

Federal Forms for Payroll

Here is a complete list and location of all the federal Forms for Payroll you should need.

W-4 Form: Provides information on employee withholdings so you can properly calculate and withhold federal and state Taxes on income
W-2 Form: This form is used to record each employee’s total yearly pay.
W-3 Version: A summary form of the W2 that is used to report total yearly salaries for all workers.
Form 940 is used to compute and submit unpaid unemployment taxes to the Internal Revenue Service (IRS).
Form 941 is used to submit quarterly income tax returns.
Form 944 is used to submit yearly income tax returns.
1099 Forms: Provides details for contract work performed by non-employees.

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

Payroll Tax Resources in Tennessee

Conclusion

Tennessee has no state income tax and no state Forms for Payroll, making it one of the easiest states to pay employees. It is relatively painless to navigate Tennessee’s HR laws as they follow federal regulations.

Despite the fact that it is one of the easiest states in which to conduct payroll, errors can happen. Payroll software like Gusto, which calculates and files your taxes, handles employee paychecks, and provides direct deposit, may help you avoid these blunders. Sign up for a free 30-day trial.