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Managed Payroll for Startups: What to Know Before You Hire
Managed payroll for a startup starts before the first pay run: an EIN, state withholding and unemployment accounts, the new-employer monthly deposit schedule, and two SECURE 2.0 breaks that only new businesses get. BEG runs it for $45 per employee per month, all-inclusive, inside the payroll software you already use, live in 3 to 5 business days.
The first payroll has prerequisites that take longer than the payroll itself. An EIN from the IRS, a withholding account and an unemployment account in every state where someone works, a new-hire reporting registration, and a decision on pay frequency that fits each state's law. New employers deposit federal employment taxes monthly during the first calendar year because there is no lookback period yet; the semiweekly schedule arrives later if liability grows.
Two SECURE 2.0 provisions are written for this stage. A business less than three years old is exempt from the automatic enrollment mandate on a new 401(k), and the startup cost credit covers 100 percent of eligible plan costs up to $5,000 a year for three years at 50 or fewer employees, plus a separate credit for employer contributions. A startup with qualified research expenses can also elect to apply up to $500,000 of the research credit against its payroll taxes rather than income tax it does not yet owe.
The founder-payroll question is a classification question. An S corporation owner who works in the business is an employee and takes a reasonable salary through payroll; contractors paid $2,000 or more in 2026 get a 1099-NEC; equity compensation has withholding events of its own. At this size BEG costs $45 per employee per month with no minimum, so a 5-person startup pays $225 a month.
The line most recently crossed at a startup
| Any size | FLSA minimum wage and overtime. Applies to any enterprise with $500,000 or more in annual sales, or any employee engaged in interstate commerce, which in practice is nearly every employer. Exempt salaried staff must earn at least $684 a week; the 2024 increase was vacated and the 2019 level restored by a May 2026 technical amendment. Regular-rate overtime on every non-exempt employee; a salary test on every exempt one. [DOL, FLSA salary levels] |
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| Any size | Federal employment taxes. Withholding, Social Security and Medicare, FUTA, quarterly Form 941 (or annual Form 944 when annual liability is $1,000 or less), and W-2s. New employers deposit monthly for the first year; the lookback period sets the schedule after that. A deposit calendar that changes as liability grows, and a next-day deposit whenever $100,000 accumulates. [IRS Publication 15] |
Next lines ahead of a startup
| 10+ | Electronic filing of information returns. Ten or more information returns of any type in a year, counted together, must be filed electronically. Ten W-2s alone trip it. Paper W-2 and 1099 filing ends at this line; the e-file setup with the SSA and IRS has to exist before January. [IRS Topic 801] |
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| 11+ | OSHA injury and illness recordkeeping. Employers with 10 or fewer employees at all times during the prior year are exempt from routine OSHA 300 logs. At 11 the exemption ends unless the industry is on the low-hazard list. Headcount is measured across the whole company, so a second location can end the exemption without any one site reaching 11. [OSHA recordkeeping, 29 CFR 1904.1] |
| 15+ | Title VII, ADA, GINA and the Pregnant Workers Fairness Act. Federal discrimination law reaches private employers with 15 or more employees for 20 or more calendar weeks in the current or preceding year. Accommodation and leave decisions start needing documentation; pay data by protected class becomes discoverable. [EEOC, coverage of federal EEO laws] |
| 20+ | ADEA (age discrimination). Applies to private employers with 20 or more employees. Severance and early-retirement paperwork needs ADEA-compliant releases, with the 21-day and 7-day windows. [EEOC, coverage of federal EEO laws] |
| 20+ | COBRA continuation coverage. Group health plans of employers with 20 or more employees on more than 50 percent of typical business days in the prior year must offer continuation coverage. Termination triggers an election notice; below 20 the state mini-COBRA law, if any, governs instead. [DOL, COBRA] |
| 50+ | FMLA. Employers with 50 or more employees in 20 or more workweeks are covered; an employee is eligible after 12 months and 1,250 hours if 50 employees work within 75 miles of their site. Up to 12 weeks of unpaid, job-protected leave with benefits maintained, which means leave tracking and benefit deductions continue while pay stops. [DOL, FMLA] |
| 50+ | ACA employer shared responsibility. An employer with 50 or more full-time plus full-time-equivalent employees on average in the prior year is an applicable large employer. Part-time hours are aggregated at 120 hours a month per FTE. Offer affordable coverage to 95 percent of full-time staff or face a 4980H assessment, and file Forms 1094-C and 1095-C every year from payroll hours data. [IRS, applicable large employer] |
| 100+ | WARN Act. Employers with 100 or more full-time employees must give 60 days written notice of a plant closing or mass layoff. Pay in lieu of notice and final-pay timing on a layoff of 50 or more at one site get planned with counsel, not run as an ordinary termination batch. [DOL, WARN] |
| 100+ | EEO-1 report. Private employers with 100 or more employees, and federal contractors with 50 or more, file the EEO-1 workforce demographic report each year. Job category, sex and race or ethnicity have to sit in the HR record for every employee before the filing window opens. [EEOC, EEO-1 data collection] |
What managed payroll costs at a startup
5 employees at $45 per employee per month comes to $225 a month, $2,700 a year, with no monthly minimum and no setup fee. BEG works inside the payroll software you already use, and the price is all-inclusive: processing, federal and state deposits and filings, new hire reporting, direct deposit, W-2s and 1099s, garnishments, and the threshold-driven filings above. Live in 3 to 5 business days from signing.
Managed Payroll, Handled.
BEG manages payroll at $45 per employee per month, all-inclusive. Get an instant cost comparison for your business.
Frequently Asked Questions
What has to exist before a startup runs its first payroll?
An EIN, a state withholding account and a state unemployment insurance account in each state with an employee, new hire reporting access, a pay schedule that meets state frequency law, and a completed W-4 and I-9 for each employee. The state registrations are the slow step and can take weeks.
How often does a new employer deposit federal payroll taxes?
Monthly during the first calendar year, by the 15th of the following month, because a new employer has no lookback period. If accumulated liability reaches $100,000 on any day the deposit is due the next business day and the schedule becomes semiweekly.
Does a startup have to auto-enroll employees in its new 401(k)?
Not for its first three years. SECURE 2.0 exempts a business that has been in existence less than three years, and separately an employer that normally employs 10 or fewer, from the automatic enrollment mandate on plans established after December 29, 2022.
Can a startup use the research credit against payroll taxes?
A qualified small business, under $5 million in gross receipts and within five years of first receipts, can elect to apply up to $500,000 of its research credit per year against the employer share of payroll taxes, claimed on Form 8974 with the 941.
How is the BEG price calculated at a startup?
5 employees at $45 per employee per month is $225 a month, $2,700 a year, all-inclusive. There is no monthly minimum and no setup fee.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
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