Payroll Startup Guide: Best Practices for Founders

Setting up payroll for startups is a complex task, but establishing a good foundation makes compliant and efficient growth much easier.

Payroll systems like Deel streamline payroll processes, ensure timely and accurate pay, and handle paperwork, regulations, and tax compliance—in one platform.

In this article, we outline the best practices for setting up payroll for startups with tips from experts at Kruze Consulting.

Disclaimer: This article is for informational purposes only and is not intended as legal or tax advice. Though this content focuses on US payroll, Deel enables companies worldwide to hire, pay, and manage their global teams.

How to set up payroll for a startup

Before we dive into best practices, let’s cover the steps you need to take to set up payroll for a startup. In the US, you are required to:

1. Get an Employer Identification Number (EIN) and business ID
2. Register for the Electronic Federal Tax Payment System (EFTPS)
3. Determine worker classifications and pay schedules
4. Account for statutory employee benefits and wage garnishments
5. Collect IRS Form W-4 and I-9s from employees, and Form W-9s from contractors
6. Deduct payroll taxes
7. Document the payroll process
8. Establish ongoing compliance checks and audits

Deel supports this process by enabling employees to complete I-9 Forms digitally on the platform and assign a representative to verify the I-9 Form physically. You can track who has completed I-9 Forms and who has not, approve or reject I-9 submissions, and send automated email reminders and general notifications to keep employees informed.

Set founder salary expectations early

How you hire and pay yourself as a founder will depend on your business’ entity type and legal structure. It’s best to talk with a tax and accounting expert to determine the correct course of action.

Generally, there are three main ways to get paid as a founder:

• You receive a salary like any employee
• You draw money from the company when the company has the funds
• You get paid through bonuses, dividend payments, or selling equity

Sometimes, it’s a combination of the first and third options.

How much should a startup founder get paid?

According to the Kruze team, the average CEO salary at startups in 2025 is $161,000, which is a 14% increase from the average in 2024.

To determine your salary as a founder, use this Startup CEO Salary Calculator and communicate salary expectations to investors as part of your budget and financial plan. Ensure you and your co-founders have discussed how and what you will be compensated after the company raises funding and starts payroll and document the agreement.

Use a centralized global payroll system

Doing payroll manually, issuing paper checks, or managing relationships with multiple payroll vendors takes time you don’t have. Plus, navigating employee pay compliance adds complexity through ever-changing federal, state, and local regulations.

A centralized global payroll system enables you to manage all payroll processes from a unified platform. Instead of managing multiple vendors across different countries with varying processes, centralized payroll involves consistent processes between all payroll managers, no matter the country or region. As a result, you benefit from operational efficiency, data accuracy, and scalability.

Create a seamless onboarding experience

Onboarding a new employee requires a lot of work, but first impressions are important. According to Gallup research, 1 in 2 US employees are open to leaving their company, making it imperative that employers remain intentional about retaining top talent. The HR and payroll systems for your startup should support your employees by making it easy for them to onboard and access important documents like payslips and tax forms.

Hiring employees or contractors in other countries adds additional layers of complexity to the onboarding process, so if you plan to hire overseas, ensure your payroll and accounting software can handle multiple jurisdictions.

Classify workers correctly

It sounds simple, but new employers often misclassify workers, which can have significant tax implications. Employees are either exempt or non-exempt under federal and state laws and are either an employee or independent contractor.

International employees and contractors must comply with local laws and regulations regarding paid time off (PTO), minimum wage, social security, health insurance, workers’ compensation, pay periods, and more. If you plan to employ people in other countries, seek out a global payroll provider to simplify that process.

Deel’s employment software allows Deel to function as the employer of record through local legal entities to streamline international employment. The employee works for your startup like other team members, but Deel handles compliance, payroll, and human resources support.

Don’t forget payroll taxes

“One of the biggest mistakes we see at Kruze is a startup just writing employees a check and not taking out withholding taxes,” says the Kruze team.

If the IRS hasn’t gotten your payroll taxes at quarter-end, you’ll have a significant problem with penalty notices, back taxes, paperwork, and more. To stay compliant, it’s important to register early with tax agencies, automate payroll calculations, and take note of key filing deadlines. This overview of tax filing deadlines for startup C-corporations can help keep you on track with federal and state taxes.

Choose a pay schedule carefully

Startups with fewer workers may be able to pay employees weekly, but as your business grows, it’s best to choose a pay schedule that is easier for you to scale. You may choose weekly, bi-weekly, semi-monthly, or monthly depending on your needs.

• Weekly: Employees are paid on a specific day of the week, every week, throughout the year
• Bi-weekly: Employees are paid on the same day of the week every two weeks
• Semi-monthly: Employees are paid twice a month, totaling 24 paychecks a year
• Monthly: Employees are paid once a month, usually on the last day of the month

Some states have specific payday schedule requirements and regulations on how workers can be paid (such as direct deposits to bank accounts, checks, or crypto payroll). When setting a pay schedule, consider applicable laws, your bandwidth, and employees’ needs.

How to run payroll on time

Late payroll can violate federal and state laws, but it also affects employee morale and productivity. Not only will your startup lose experienced employees, but turnover will cost money. We’ve outlined three key tips for ensuring timely payroll with expert input from the Kruze team.

Don’t backdate payroll

“Sometimes we see startup founders who don’t take paychecks until they obtain funding and then want to pay themselves for the three or six months they’ve spent raising money,” says the Kruze team.

Retroactive paychecks create tax penalties and paperwork to re-file payroll taxes. If you expect this situation to arise, you should negotiate a bonus payment in your contract that you can collect when you raise capital. And of course, run that bonus payment through payroll to account for taxes correctly.

Make sure you can handle research and development (R&D) tax credits

According to Kruze, their clients save millions each year by taking advantage of the R&D tax credit.

Those clients need to be able to handle the process of studying tax forms, properly documenting the research claim, sending the payroll information to the IRS, and ideally stopping withholding immediately to get the benefits of the credit. That’s extremely difficult if you’re using a manual system.

Improper claims for the R&D tax credit regularly appear on the IRS’s “Dirty Dozen” tax scam list that triggers IRS audits. You should work with a qualified CPA firm for this task and use a trusted vendor to adjust payroll based on the credits you’ve earned.

Regularly review employee information for accuracy

Entering correct employee information will save time on the backend when running payroll. In today’s world of remote workers and global mobility, employees can often move and don’t always mention it.

If an employee changes states or even local tax jurisdictions, that can create a tax nexus, and you’ll need to comply with those tax requirements, including possible sales taxes. Investing in a payroll platform with employee self-service allows employees to easily keep their information up to date, which results in reduced administrative workload and better accuracy for HR teams.

Plan for payroll disruptions

You never know what could happen, so it’s always best to plan for worst-case scenarios. We’ve outlined some actions you can take if you are affected by a payroll disruption.

Transfer remaining funds once available

Contact your bank to find out what options are available to you. You may be able to access funds through another branch or online banking. If not, ask about wire transfer options or check-writing services.

Find alternative funding sources

You can consider multiple strategies to raise cash quickly for basic payroll operations, including bridge loans, inside rounds, equity loans, and emergency credit.

Prioritize employee payments

Ensure your team is taken care of and can continue to work to keep the business running. Failing to pay wages on time is illegal in most states and can result in penalties, fines, lawsuits, audits, liens, and garnishments. Failing to pay wages can also damage your reputation as an employer and affect your ability to attract and retain talent.

Communicate with employees

Keep employees informed of the situation and provide updates on when they can expect their paychecks. Be transparent about the steps you’re taking to resolve the issue and assure them that you’re doing everything possible to make payroll.

Use Deel to power your payroll startup stack

Payroll software keeps information organized, simplifies domestic and international tax compliance, helps eliminate errors and delays, and saves founders time and money.

An all-in-one payroll software like Deel positions your startup for growth and success through:

• Global coverage with entities in 150+ countries
• 2,000+ in-house experts in payroll, HR, and legal
• Full-service payroll: onboarding, time off, local benefits, tax filing, offboarding, and additional HR support
• Intuitive, cloud-based platform with self-service for a user-friendly employee experience
• 24/7 customer support from our expert team

Deel has earned a 4.7/5 rating on Trustpilot with over 7,900 reviews. Clients cite our team’s excellent customer support, lightning-fast fund delivery, and easy-to-use platform as some of the many reasons they continue to trust Deel with their payroll, HR, and compliance needs.

Request a 30-minute demo today to learn more about how Deel can ensure payroll compliance and scalability for your startup.