What changes with employee #1
Until now, mistakes in your books mostly hurt you. Payroll changes that: someone's rent depends on you running it correctly and on time, and a government now expects you to withhold, remit and report on a fixed calendar. The good news - it's a checklist, not a talent.
The true cost of a salary
| Component | Who pays | Typical range |
|---|---|---|
| Gross salary | You → employee | The number you agreed |
| Income tax withholding | Employee (you collect) | Per tax tables |
| Social security / provident fund | Both, typically | 5–15% each side |
| Other employer levies | You | 0–10% by jurisdiction |
| Cost to company | You | Salary + 10–25% |
Illustrative: what a stated salary really costs
Withholding is trust money
Tax you withhold from a paycheck belongs to the government from the moment you withhold it. Remit on schedule - payroll withholding penalties are among the harshest in every system.
The first-hire sequence
- 1
Register as an employer
With your tax authority and any social security scheme - before the first payday.
- 2
Collect employee paperwork
Tax declarations, ID, bank details - legally required before you can pay correctly.
- 3
Set the payroll calendar
Pay date, withholding remittance dates, filing dates. Calendar all of them for 12 months.
- 4
Run payroll #1 small and early
Do a dry run days before payday. Payday is a terrible time to learn your software.
- 5
Issue the payslip
Required almost everywhere, appreciated everywhere. Automate from day one.
Can I just keep everyone as contractors?
Only if they genuinely are. Every jurisdiction tests substance over label - control, hours, exclusivity. Misclassification unwinds expensively, with back-taxes both sides.
Do I need payroll software for one employee?
You need automated calculations and payslips; whether that's software or your accountant is preference. Manual spreadsheet payroll is where withholding errors breed.