Operational Gaze:
How to Run Payroll in Mississippi?

April 5th 2024

As an employer in Mississippi, paying your employees involves several legal steps. This includes calculating their earnings, deductions, and adhering to payroll tax rules. To manage payroll effectively, it’s important for employers to grasp these regulations and stay updated on Mississippi’s labor and tax laws.

This article offers a step-by-step guide designed to meet Mississippi’s payroll needs. Its goal is to help businesses handle each pay period smoothly and in compliance with the law.

This Article Covers

Laws That Affect Payroll Procedures in Mississippi
Worker Classifications in Mississippi
Payroll Forms and Relevant Bodies in Mississippi
Applicable Taxes in Mississippi
Key Pay Elements That Impact Payroll in Mississippi
Step-by-Step Guide to Payroll in Mississippi

Laws That Affect Payroll Procedures in Mississippi

Mississippi Laws

  • Mississippi Labor Code: The laws governing employment matters in Mississippi fall under the Mississippi Code. The Mississippi labor laws cover various aspects of employment, including how employees are paid, rules about taking time off, workers’ compensation, and more.
  • Overtime Pay: Mississippi overtime laws have provisions for certain employees who work overtime. When employees work more than 40 hours in a week, they usually receive extra pay, known as overtime. This extra pay is typically one and a half times their regular hourly wage.
  • Paid Breaks and Meal Times: Employers in Mississippi are not required by law to provide paid breaks or meal times. However, many employers do give short breaks, usually lasting around 20 minutes, and these breaks are usually paid. Young workers aged 14 or 15, on the other hand, are entitled to a 30-minute break if they work for more than five hours in a day.
  • Unemployment, Disability, and Workers’ Compensation: Employers in Mississippi must take part in the state’s unemployment insurance program. While disability insurance is not mandatory in the state, some employers may offer it voluntarily. Workers’ compensation, on the other hand, is a required program that ensures employees are covered if they get hurt or sick because of their job.
  • Minimum Wage: The lowest wage employees can be paid in Mississippi is currently $7.25 per hour. It’s important to stay informed about any changes in the state’s minimum wage as it might change over time.
  • Paid Time Off and Leaves: Generally, Mississippi’s employment laws do not force employers to give paid time off, including sick leave, holiday leave, time off for jury duty, voting leave, or bereavement leave. However, certain federal laws, like the Family and Medical Leave Act (FMLA), may allow eligible employees to take unpaid leave for specific reasons.
  • Payment Records: Employers in Mississippi must give employees pay stubs or wage statements that show how much they’ve earned, what deductions were made, and other important information. The frequency of providing these pay stubs can vary but is usually given with each paycheck or at least twice a month.
  • Final Paycheck: When an employee’s job ends in Mississippi, they have the right to get their final paycheck, which includes any unpaid wages. 

Federal Laws

  • The Fair Labor Standards Act (FLSA): FLSA plays a fundamental role in establishing essential guidelines encompassing minimum wage, overtime pay, recordkeeping, exemption classification, and regulations pertaining to child labor across diverse industries. These directives are not limited to private businesses but also extend their reach to include federal, state, and local government entities.
  • The Federal Insurance Contributions Act (FICA): FICA necessitates both employers and employees to contribute to Social Security and Medicare. Employers are required to withhold 6.2% for Social Security tax and 1.45% for Medicare tax from the earnings of each employee. Additionally, employers bear the responsibility of matching these deductions, resulting in a comprehensive FICA payroll tax rate of 15.3% for every employee.
  • The Federal Unemployment Tax Act (FUTA): FUTA stipulates that employers must contribute to unemployment taxes, which serve to furnish benefits to eligible employees facing job loss. Although it doesn’t directly impact employees’ paychecks, as it is an obligation for employers, FUTA contributions must be duly recorded in each payroll cycle. Typically, a 6% tax on the initial $7,000 paid to an employee annually is anticipated, with potential exceptions based on the industry.

HR Laws

  • New Hire Reporting in Mississippi: Mississippi imposes specific regulations on employers when onboarding new personnel. Within a timeframe of 15 days following the hiring, recalling, or rehiring of an employee, employers are required to promptly inform the Mississippi New Hire Directory. This notification should encompass vital information such as the full name, residential address, social security number of the employee, the employer’s name, and the Federal Tax ID number. 
  • Posting Requirements in Mississippi: The Mississippi Department Of Employment Security mandates that all businesses employing individuals within the state comply with specific directives regarding labor law posters. These directives necessitate employers to conspicuously display designated labor law posters within their workplace. These informative posters convey essential information pertaining to employee rights and corresponding employer responsibilities in alignment with various labor laws. These materials cover an array of topics, including, but not limited to, regulations on minimum wage, guidelines on workplace safety, and various other laws applicable to businesses operating in Mississippi.

Worker Classifications in Mississippi

Employees and Independent Contractors

In Mississippi, it’s crucial to distinguish between employees and independent contractors due to the significant impact on their rights, responsibilities, and taxes. Workers who are classified as employees typically work under their employer’s instructions, receive benefits, and have taxes deducted from their pay. Independent contractors, however, enjoy more freedom, handle their own taxes, and don’t receive the same benefits.

Accurate classification is vital to comply with Mississippi’s labor and tax laws, as misclassification can lead to legal and financial issues for employers. Following guidelines from relevant authorities and seeking professional advice in complex cases can help navigate the state’s regulations and avoid legal problems.

To learn more about the rights of salaried and hourly employees, you can read our guides on the rights of salaried employees in Mississippi, and the rights of hourly employees in Mississippi.

The 6-Factor Test

The 6-factor classification test in Mississippi involves a comprehensive evaluation of various aspects to determine the employment status of a worker.

  • Extent of Control: In assessing control, considerations include whether the worker must adhere to regular working hours, the level of supervision or instructions provided, the ability to engage helpers, and the determination of the price of goods sold.
  • Nature of Business: This factor examines the business context, such as the name under which the worker operates, self-promotion to the public for similar services, and any advertising activities conducted by the worker.
  • Furnishing Tools, Materials, and Place of Work: Questions revolve around the provision of tools or materials by the employer, whether the worker wears a uniform, and if the pace of work is set by the employer.
  • Period of Employment: Assessing the duration of employment involves considerations such as the worker’s ability to terminate services without liability and whether the firm can terminate the worker’s services at any time without incurring liability.
  • Method of Payment: This aspect delves into how the worker is compensated, whether through an hourly rate, commission, salary, and if the worker is required to submit bids for jobs.
  • Relationship of Worker to the Firm: This factor explores the financial and insurance  aspects, including the withholding of federal and state taxes, the employer’s provision of Worker’s Compensation, and any insurance requirements imposed on the worker.

Payroll Forms and Relevant Bodies in Mississippi

Mississippi Payroll Forms

  • 89-350 Form (Employer’s Quarterly Wage Report): Employers submit this quarterly report to provide information on wages and taxes withheld from employees.
  • 89-140 Form (Employer’s Annual Federal Unemployment (FUTA) Tax Return): Employers file this form annually to report and pay federal unemployment taxes.
  • 89-142 Form (Employer’s Annual Contribution and Wage Report): This annual report provides a summary of wages and contributions for unemployment tax filing.
  • 89-350B Form (Employer’s Quarterly Wage Report – Corrections Only): Used to correct errors on previously filed quarterly wage reports.

Federal Payroll Forms

  • W-4 Form: This official document empowers employers with the authority to precisely determine the amount of tax that needs to be withheld for their employees.
  • W-2 Form: Offers a comprehensive overview of the total annual income for each individual employee.
  • W-3 Form: Summarizes the overall compensation and tax information for all employees in a succinct and consolidated format.
  • Form 940: Submits a detailed report to the IRS outlining the unemployment taxes that are owed.
  • Form 941: Employed on a quarterly basis, this form serves the purpose of reporting earnings and FICA tax deductions from employees’ paychecks.
  • Form 944: Submits an annual report providing detailed information on earnings and FICA tax withholdings from employees’ paychecks.
  • 1099 Forms: These official documents are employed to formally report annual earnings and FICA tax withholdings from employees’ paychecks.

Federal and Mississippi Payroll/ Tax Bodies

  • Internal Revenue Service (IRS): Administers federal tax laws and regulations, encompassing income tax and Social Security contributions.
  • Social Security Administration (SSA): Manages Social Security programs, including the collection of Social Security taxes.
  • Department of Labor (DOL): Oversees labor-related issues, such as minimum wage and overtime regulations.
  • Mississippi Department of Revenue: The Mississippi Department of Revenue manages state-level taxation, including income taxes.
  • Mississippi Department of Employment Security: The Mississippi Department of Employment Security deals with unemployment benefits and related taxes.
  • Mississippi Department of Employment Security: Focuses on labor-related matters, including wage and hour regulations.

Applicable Taxes in Mississippi

Employer Contributions

Unemployment Taxes in Mississippi: Mississippi adheres to the guidelines outlined in the Federal Unemployment Tax Act (FUTA). This federal regulation establishes a standard rate of 6.0% on the initial $7,000 of earnings for each employee. Employers in Mississippi are obligated to gather and remit FUTA taxes to the federal government, contributing to the funding of unemployment benefits.

Withheld from Employee’s Wages

  • Mississippi State Income Taxes: Mississippi has state income taxes that apply to both individuals and businesses. The state has a flat income tax rate of 5%. All money earned by individuals and businesses is subject to Mississippi’s state income tax. It’s important to know that Mississippi doesn’t have a state-level sales tax. However, local areas can have their own sales taxes, but it can’t go over 2%.
  • Workers’ Compensation in Mississippi: In Mississippi, employers are required by law to provide workers’ compensation coverage for their employees. This is to make sure that employees who get hurt or sick because of work get compensation for medical bills and disability benefits. If there’s a tragic work-related death, the benefits from workers’ compensation extend to the family members who depended on the person who passed away.
  • Social Security (FICA) Withholding: Employers in Mississippi have to follow the Federal Insurance Contributions Act (FICA). This means taking out money for Social Security and Medicare from employees’ paychecks. Employers also need to put in the same amount for Social Security and Medicare. It’s good to know that for the extra Medicare tax, employers only take out the employee’s part and don’t have to match it themselves.

Additional Relevant Subtractions to Withhold on Behalf of Employees

Mississippi’s employment rules lay out the allowed deductions employers can make from their workers’ pay. According to Mississippi labor laws, here are examples of deductions that are considered acceptable:

  • Personal Absence: Employers can deduct pay when employees are absent for personal reasons for a full day or more, excluding sickness or disability, following Mississippi’s employment regulations.
  • Sickness or Disability: Deductions are allowed when employees are absent due to sickness or disability for a full day or more, given there is a legitimate plan or policy compensating for the loss of pay due to illness, as outlined in Mississippi labor laws.
  • Jury and Witness Fees: Employers can deduct money to cover jury fees, witness fees, or temporary military duty pay received by employees, following Mississippi’s laws and regulations.
  • Safety Violations: Employers can impose penalties in good faith for significant safety rule violations, and these penalties may be deducted from employees’ pay, following Mississippi employment regulations.
  • Disciplinary Suspensions: Deductions are permitted for unpaid suspensions lasting a full day or more, serving as a disciplinary measure for workplace rule violations, provided they are imposed in good faith under Mississippi law.
  • Family and Medical Leave: Employers in Mississippi can deduct wages for unpaid leave taken under the Mississippi Family and Medical Leave Act, offering job-protected leave for specific family and medical reasons.

It’s important to note that employment laws and tax regulations can change, so both employers and employees should stay informed about the latest requirements and rates by consulting relevant state agencies and tax authorities in Mississippi.

Key Pay Elements That Impact Payroll in Mississippi

Minimum Wage

Mississippi’s minimum wage is currently set at $7.25 per hour for employees, and employers in the state are not permitted to rely on tips to meet the minimum hourly wage requirement. It’s important to keep in mind that minimum wage laws may change over time, so employers should stay informed about any alterations to wage regulations.

Overtime

Mississippi follows the federal Fair Labor Standards Act (FLSA) when it comes to overtime rules. If an employee works more than 40 hours in a workweek, they must receive compensation at a rate of 1.5 times their regular hourly wage. With Mississippi’s minimum wage at $7.25, this results in an overtime rate of $10.88 per hour. Employers need to be aware of these regulations to ensure compliance and fair compensation for their employees.

Workers’ Compensation Insurance

Mississippi enforces a legal requirement that obliges employers to provide workers’ compensation coverage to their employees when they employ two or more individuals. Some specialized job roles may be exempt from this rule. Additionally, employers have the option to seek permission to become self-insured through the Mississippi Workers’ Compensation Commission, which allows them to directly manage workers’ compensation claims.

Pay Stub Laws

Mississippi’s laws require employers to provide employees with a detailed pay statement during each pay period. This statement should include information about the duration of the employee’s work, their earnings, and any payments received. It should also specify regular and overtime hours worked, the hourly wage, total earnings, tax deductions, and authorized deductions. Additionally, the pay stub should clearly indicate the start and end dates of the pay period, ensuring transparency in compensation.

Wage Garnishment

Wage garnishment laws in Mississippi align with federal guidelines and offer protections for employees. It is against the law to terminate an employee solely due to wage garnishment, except in cases involving multiple garnishments. Creditors are required to provide notice to the debtor before initiating wage garnishment, and debtors have the right to dispute the debt or request a hearing. Mississippi’s state laws specify the order in which different types of debts are handled and detail the process for wage garnishment, ensuring due process and fairness for all parties involved.

Final Paycheck

When an employee’s employment is terminated, they must receive full payment for the wages or salaries they have earned through their work before the termination. This payment should be made no later than the date on which they would have normally received their compensation if their employment had not been terminated.

Step-by-Step Guide to Payroll in Mississippi

  • Understanding Payroll Regulations: Before you start handling payroll in Mississippi, it’s important to understand the specific rules that apply to your business. These rules can vary based on factors like your industry, the size of your workforce, and how your employees are classified. Get familiar with Mississippi labor laws and the federal payroll rules that affect your business.
  • Register Your Business as an Employer with the IRS: This involves getting an Employer Identification Number (EIN) and setting up an account in the Electronic Federal Tax Payment System (EFTPS). If you’re starting a new business, it’s essential to get an EIN before you create a payroll process. The EIN is a unique nine-digit number used by the IRS to track a company’s tax-related activities. You can easily apply for an EIN online using Form SS-4.
  • Registering with the State of Mississippi: If your business operates in Mississippi, you must register it with the state. New businesses can complete this registration process on the Mississippi Secretary of State’s official website. Also, any business paying employees in Mississippi must register with the Mississippi Department of Revenue.
  • Determining Employee Classification: Accurately classify your workers as employees or independent contractors. This is crucial because it affects how you report taxes and wages. Misclassifying employees can lead to legal issues and fines. You can use the Common Law Test as a guideline.
  • Collecting Employee Payroll Forms: When you hire employees in Mississippi, make sure to collect specific forms during their onboarding. Employees should complete the I-9 verification and the state’s version of the W-4, known as the Employee’s Withholding Tax Exemption Certificate.
  • Tracking Time and Attendance: Implement a reliable system for keeping track of employee work hours and attendance. This system should cover workweeks, overtime calculations, break times, and time off. You can use digital tools like time and attendance software to make this more accurate.
  • Establishing a Payroll Cycle: Set up consistent pay periods and ensure that employee paychecks are provided within these periods in line with state regulations.
  • Filing Federal Payroll Taxes: Follow the IRS guidelines for federal taxes, including unemployment tax. Deposit employment taxes according to your assigned schedule, either monthly or semiweekly, as determined by the IRS.
  • Maintaining and Archiving Payroll Records: Keep records for all employees, even former ones, for an extended period, following federal regulations.
  • Processing Annual Payroll Reports: Every year, complete payroll reports, including W-2 Forms and 1099 Forms. Provide these forms to employees no later than January 31 of the following year.

Final Thoughts

In Mississippi, it’s essential to understand and comply with the specific regulations for minimum wage, tax, and labor laws in the state to effectively manage payroll. The good news is that there are tools available to make this process easier. We have compiled a list of the top 6 apps designed to streamline your payroll operations in the US. Alternatively, if you already have a system in operation, we offer 10 tips to enhance the efficiency of your US payroll processes.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.

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