Operational Gaze:
How to Run Payroll in Wisconsin?

December 11th 2023

In Wisconsin, employers are obliged to follow specific legal protocols concerning payroll within their workplaces. This includes accurately calculating wages, considering deductions, and strictly adhering to established payroll tax regulations. Successfully managing payroll requires a thorough understanding of these laws and staying updated with Wisconsin’s labor and tax statutes.

Catering to Wisconsin’s distinct payroll requirements, this article offers a structured guide for employers. Its aim is to assist businesses in efficiently managing each pay period. The guide also aims to simplify the payroll procedure by providing useful information and directions tailored to Wisconsin’s labor laws.

This Article Covers

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

Laws That Affect Payroll Procedures in Wisconsin

Wisconsin Laws

  • Wisconsin Labor Code: The Labor and Industry Review Commission under the Wisconsin Administrative Code covers critical areas, including the manner in which wages are disbursed, provisions for sick leave, and the framework for workers’ compensation.
  • Minimum Wage Regulations: In Wisconsin, the minimum wage currently stands at $7.25 per hour, and employers are obliged to comply with this set rate.
  • Overtime Laws: Employees in Wisconsin are entitled to receive one and a half times their regular hourly wage for hours worked beyond 40 in a workweek, as stipulated by the state’s regulations on daily and weekly work hours.
  • Paid Breaks and Lunch Periods: While there isn’t a specific state requirement for breaks, Wisconsin typically allows a 30-minute unpaid meal break for shifts lasting over 6 hours.
  • Unemployment, Disability, and Workers’ Compensation: Employers in Wisconsin must participate in the state’s unemployment fund and provide workers’ compensation insurance, which is mandated by the state.
  • Payment Records: Employers in Wisconsin must furnish employees with pay stubs containing crucial details like the employer’s name, address, deductions, and other legally required information.
  • Final Paycheck Regulations: When an employee leaves their job, Wisconsin law mandates that they receive their final paycheck promptly, encompassing all earned wages, including accrued vacation pay

Federal Laws

  • The Fair Labor Standards Act (FLSA): This law establishes detailed guidelines covering minimum wage, overtime pay, recordkeeping, exemptions, and rules regarding child labor. It applies to various sectors, including private businesses and government entities at different levels. The FLSA is fundamental in regulating labor practices.
  • The Federal Insurance Contributions Act (FICA): FICA assigns both employers and employees the responsibility of contributing to Social Security and Medicare. Employers must withhold 6.2% for Social Security and 1.45% for Medicare from each employee’s earnings. At the same time, employers match these deductions, resulting in a combined FICA payroll tax rate of 15.3% for each employee.
  • The Federal Unemployment Tax Act (FUTA): FUTA requires employers to contribute to unemployment taxes, providing benefits to eligible employees who lose their jobs. While not directly deducted from employee wages, FUTA contributions need careful consideration in every payroll cycle. Generally, a 6% tax on the initial $7,000 annually disbursed to an employee is expected, with specific industry exceptions.

HR Laws

In Wisconsin, there are specific regulations regarding new hire reporting and posting requirements for employers.

  • New Hire Reporting: Wisconsin state laws necessitate that employers must notify the appropriate department within 20 days after hiring, recalling, or rehiring a new employee. This notification should include essential details like the employee’s full name, address, social security number, employer name, and Federal Tax ID number.
  • Posting Requirements: In compliance with Wisconsin labor laws, all businesses employing individuals must prominently display various labor law posters within the workplace. These posters detail essential labor laws, including but not limited to minimum wage standards, health and safety regulations, and other relevant statutes.

Worker Classifications in Wisconsin

Employees and Independent Contractors

Determining a worker’s employment status in Wisconsin is highly important. There are a number of key factors involved in this determination. This includes the level of control over the worker, the independence they have in their tasks, and the job’s inherent nature. It’s critical to classify workers correctly as misidentification can lead to legal and financial consequences. Employers in Wisconsin must follow state and federal laws, including specific reporting mandates, to correctly classify workers and meet employment regulations.

For further understanding of the entitlements of both salaried and hourly employees, individuals can refer to our articles on your rights as a salaried employee in Wisconsin, and your rights as an hourly employee in Wisconsin.

9-Part Employee Classification Test

In Wisconsin, there’s a nine-part evaluation used to decide if someone is an employee or an independent contractor. This assessment considers different aspects:

  1. Instructions: How much control does the employer have over the work?
  2. Training: Does the employer provide training?
  3. Integration: How much are the worker’s services part of the employer’s business?
  4. Services Rendered Personally: Must the worker do the work themselves?
  5. Hiring, Supervising, and Paying Assistants: Does the worker manage others?
  6. Continuing Relationship: Is there an ongoing work relationship?
  7. Set Hours of Work: Are specific hours set by the employer?
  8. Full-time Required: Must the worker work full-time?
  9. Work Done on Employer’s Premises: Is work done at the employer’s location or a designated place?

These aspects help determine how much control and freedom the worker has, guiding whether they’re seen as an employee or an independent contractor in Wisconsin.

Payroll Forms and Relevant Bodies in Wisconsin

Wisconsin Payroll Forms

  • Form WT-6: Employers use this form to report state income tax withholding for their employees in Wisconsin.
  • Form WT-7: Nonresident entertainers or athletes who perform services in Wisconsin and receive compensation need to file this form for income tax withholding.
  • Form WT-11: Employers use this form to report and pay unemployment insurance taxes in Wisconsin.
  • Form W-2: Similar to federal requirements, employers in Wisconsin need to provide this form to employees at the end of each year, detailing wages earned and taxes withheld for state purposes.
  • Form W-3: This transmittal form is used to submit all the W-2s issued to employees in Wisconsin to the state’s Department of Revenue.

Federal Payroll Forms

  • W-4 Form: This paper helps employers calculate how much tax they should take from their employees’ paychecks accurately.
  • Form 941:  Used quarterly, it tells the IRS how much employees earned and how much got taken out for FICA taxes from their pay.
  • Form 944: Once a year, it gives detailed info about employees’ pay and FICA tax deductions.
  • W-2 Form: Provides a complete summary of how much each individual employee earned in a year.
  • W-3 Form: This form helps employers summarize all employees’ pay and tax info, packed into one.
  • Form 940: This report tells the IRS about the unemployment taxes a company owes.
  • 1099 Forms: These forms allow employers to officially report what employees earned in a year and how much FICA tax was taken out.

Federal and Wisconsin Payroll/ Tax Bodies

  • Internal Revenue Service (IRS): The IRS is the federal agency responsible for collecting taxes and enforcing tax laws in the United States, including payroll taxes. Employers must comply with IRS regulations when withholding federal income tax, Social Security tax, and Medicare tax from employee wages.
  • Social Security Administration (SSA): The SSA manages the Social Security program, which includes collecting Social Security taxes from employees and employers. Employers are responsible for withholding a portion of employees’ wages for Social Security and contributing an equal amount.
  • Department of Labor (DOL): The DOL oversees federal labor laws related to wages, overtime pay, family and medical leave, workplace safety, and more. While it primarily focuses on employment standards, it can impact payroll practices indirectly through its regulations.
  • Wisconsin Department of Revenue (DOR): The DOR administers Wisconsin’s tax laws and regulations. Employers in Wisconsin must comply with state income tax withholding requirements, unemployment insurance taxes, and other state-specific tax obligations managed by the DOR.
  • Wisconsin Department of Workforce Development (DWD): The DWD oversees employment-related matters in Wisconsin, including unemployment insurance and worker’s compensation. Employers are required to report and pay unemployment insurance taxes to the DWD.
  • Wisconsin Department of Administration (DOA): The DOA manages various administrative functions within the state, including overseeing certain financial aspects that might indirectly influence payroll-related policies or regulations.

Applicable Taxes in Wisconsin

Employer Contributions

Federal Unemployment Tax Act (FUTA): Wisconsin State complies to the regulations stipulated by the Federal Unemployment Tax Act (FUTA). This act presently establishes a fixed federal rate of 6.0% applicable to the initial $7,000 of earnings for every employee.

Withheld from Employee’s Wages

  • Wisconsin Income Taxes: Wisconsin mandates a personal income tax for its residents, varying from 3.50% to 7.65%.
  • Workers’ Compensation in Wisconsin: Employers in Wisconsin are legally obligated to provide compensation for work-related injuries to their employees, covering medical expenses and disability benefits. In case of a work-related fatality, Workers’ Compensation laws in Wisconsin dictate that the dependents of the deceased employee must receive the entitled benefits.
  • Social Security (FICA) Withholding in Wisconsin: Regarding Social Security (FICA) withholding, Wisconsin employers must adhere to the Federal Insurance Contributions Act (FICA). This requires them to deduct taxes for Social Security and Medicare from their employees’ wages. Employers are also obliged to match these withholdings by contributing an equal amount toward Social Security and Medicare. However, for the additional Medicare tax, employers solely withhold the employee’s portion without matching it themselves in Wisconsin.

Additional Relevant Subtractions to Withhold on Behalf of Employees

The federal Fair Labor Standards Act (FLSA) clearly explains when employers can make deductions out of workers’ pay. It also recognizes many situations where deductions are allowed:

  • For Personal Absence: Employers have the authority to deduct wages when employees are absent for personal reasons for one or more full days, except in cases of illness or disability.
  • Regarding Sickness or Disability: If employees are absent due to sickness or disability for one or more full days, deductions are permissible, but only if there exists a valid plan or policy compensating for lost pay due to illness.
  • Jury and Witness Fees: Deductions can be made to cover jury fees, witness fees, or temporary military duty pay received by employees.
  • Safety Violations: Employers have the right to impose penalties in good faith for serious violations of safety rules, and these penalties may be deducted from employees’ pay.
  • Disciplinary Suspensions: Deductions are allowed for unpaid suspensions lasting one or more full days, acting as a disciplinary measure for workplace rule violations, provided they are imposed in good faith.
  • Family and Medical Leave: Employers can deduct money for unpaid leave taken under the Federal Family and Medical Leave Act, which offers job-protected leave for specific family and medical reasons.

Key Pay Elements That Impact Payroll in Wisconsin

Minimum Wage

Wisconsin sets its minimum wage at $7.25 per hour, applicable to most employees. This wage cannot be supplemented by tips, as tips belong exclusively to the employee and cannot be used by the employer to meet the minimum hourly rate.

Overtime

In alignment with the federal Fair Labor Standards Act (FLSA), Wisconsin mandates that employees who work beyond 40 hours in a work week receive overtime pay. This pay is calculated at 1.5 times their regular hourly wage. For instance, with the minimum wage set at $7.25, the overtime rate would be $10.88 per hour.

Workers’ Compensation Insurance

While Wisconsin necessitates employers to provide workers’ compensation coverage for most employees, there are specific exceptions to this regulation. Categories like part-time babysitters, non-commercial cleaning personnel, and certain temporary workers might not fall under this coverage.

Pay Stub Laws

Wisconsin employers are obliged to provide employees with detailed pay statements during each pay period. These statements should comprehensively outline work duration, earnings, deductions, and authorized deductions agreed upon by the employee. It’s crucial that these statements specify regular and overtime hours, hourly wages, total earnings, and the period covered.

Payday and Minimum Pay Frequency

Employers in Wisconsin have the discretion to choose payment methods, including electronic transfers, checks, or cash. However, it’s paramount that employees receive their earnings without any deductions. Employers using payment platforms imposing transaction fees on recipients are not compliant with state regulations.

Final Paycheck

When an employee decides to leave their job, Wisconsin mandates that the employer issues the final payment on the next scheduled payday, provided it’s at least three days after the employer receives notice. If the termination is initiated by the employer, payment must be made within three business days after the termination date, regardless of the reason for termination.

Step-by-Step Guide to Payroll in Wisconsin

  • Understanding Wisconsin’s Labor Laws: Before commencing payroll operations in Wisconsin, it’s essential to grasp the specific regulations governing payroll. These laws can vary based on industry, workforce size, and the method of payment, whether employees are paid hourly or receive a salary. Familiarizing yourself with both Wisconsin labor laws and federal payroll regulations is crucial for smooth payroll procedures.
  • Obtain an Employer Identification Number (EIN): An Employer Identification Number (EIN), issued by the IRS, serves as a unique identifier for tax-related purposes. Acquiring an EIN is a prerequisite for fulfilling employment tax obligations and other tax responsibilities in Wisconsin. The straightforward application process can be completed online via the IRS website.
  • Register with the Wisconsin Department of Workforce Development: Employers in Wisconsin must register with the Wisconsin Department of Workforce Development for unemployment insurance purposes. This registration is crucial for accurately reporting and remitting unemployment taxes to the state. The department’s website typically offers a user-friendly process for registration.
  • Employee Classification: Correctly categorizing your workforce in Wisconsin as employees or independent contractors holds significant importance as it directly impacts tax and wage reporting. Misclassification could lead to legal consequences under state laws.
  • Gather Employee Payroll Documentation: Ensure the collection of essential payroll documents from your Wisconsin employees, such as W-4 Forms for federal income tax withholding and I-9 Forms for employment verification.
  • Track Time and Attendance: Keeping detailed records of employee work hours, breaks, overtime, and leaves is fundamental for precise payroll management. Compliance with Wisconsin-specific regulations on overtime pay and minimum wage rates requires accurate record-keeping. Employing tools like time and attendance software can be advantageous.
  • Establish a Consistent Payroll Schedule: Wisconsin mandates a regular payroll cycle in compliance with state labor regulations. While the frequency of payroll disbursements may vary, it should be consistent and communicated transparently to employees to keep them informed about their pay schedule.
  • Compute Gross Earnings: Accurate calculation of gross earnings is vital in Wisconsin, where specific wage and overtime regulations apply. These calculations should encompass various components like commissions, bonuses, overtime pay, and expense reimbursements in adherence to state laws.
  • Federal Payroll Tax Compliance in Wisconsin: Adhere to IRS guidelines for depositing employment taxes according to the prescribed schedule, ensuring compliance not only in Wisconsin but also across other states.
  • Maintain Payroll Records: It’s imperative to maintain precise employee payroll records in Wisconsin, including work hours, pay statements, tax forms, and relevant paperwork. Both state and federal laws mandate retaining these records for a minimum of three years to comply with audit regulations and address potential inquiries from tax authorities.
  • Annual Payroll Reporting: Ensure timely completion of crucial annual government reports, such as W-2 and 1099 forms, which need to be provided to employees by the designated deadline.

Final Thoughts

Running payroll in Wisconsin might seem like a challenge. It’s crucial that individuals navigate the state’s specific minimum wage standards, tax responsibilities, and labor legislation. To simplify the process of managing payroll, you can explore our recommendations for the top 6 applications tailored to streamline payroll duties in the United States. If you’re already using a system, we’ve detailed ten tips to enhance your payroll procedures within the United States.

Important Cautionary Note

When making this guide, we have tried to make it accurate, but we do not give any guarantee that the information provided is correct or up-to-date. We therefore strongly advise you to seek advice from qualified professionals before acting on any information provided in this guide. We do not accept any liability for any damages or risks incurred for the use of this guide.

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