Learn exactly how payroll works in the state of Florida and which payroll taxes and laws your Florida business is required to follow.
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Blessed with no state or local income taxes, Floridian businesses enjoy one of the laxest tax codes in the country. That leaves them with much less number crunching and heavy lifting to do in their payroll management. And coupled with highly intuitive payroll management software, small and medium scale business owners in Florida can process their payrolls personally with relatively greater ease.
With this guide, we aim to equip you with all the know-how you need to implement and run your payroll management system personally in Florida.
Federal & State Payroll Taxes In Florida
Not only is Florida an income tax haven, both the state and local governments can side-step other taxes charged in other jurisdictions and on the federal level. However, payroll management in Florida is still fraught with many hurdles in the form of Federal taxes. You need to properly account for FICA taxes, which cover your employees’ Social Security, Medicare, retirement benefits, and other social programs. Basically, you can’t escape some long-winded calculations in your payroll management system in Florida.
But no worries, we’ll make it easy to get your state of Florida payroll taxes right. Here are all the different types of taxes that you need to keep in mind when processing your payroll in Florida. Drill down to see each Florida payroll tax type and learn exactly what your business can expect.
Florida Income Tax
Though Florida’s state and local governments don’t take anything directly out of employee’s incomes, employees still need to pay income taxes to the Federal government. Federal income taxes can fall anywhere from 0% – 37% depending on your employees’ withholding selections.
Florida Estate Tax
Florida is an estate tax haven for retirees, veterans, investors, and everyone across the board. Neither the state nor local governments partake of the proceeds from willed or inherited properties.
People in Florida aren’t obliged to pay taxes on intangible goods from assets to investments, services, etc.
Florida Sales Taxes
Floridians are required to pay a 6% sales tax on all tangible goods that are sold or rented. However, groceries, medicines, and a number of other commodities are exempted. Also, most Florida counties charge their own sales taxes – the highest so far has been 1.5% (7.5% in total sales taxes).
Florida Use Tax
Although it applies to all taxable items bought in Florida, use tax is an extension of state sales tax mainly designed to charge people for out-of-state online purchases. You won’t need to consider this tax in your payroll management because your employees are obliged to report the purchases and pay the applicable use taxes personally.
Federal Insurance Contributions (FICA) Tax
You also need to keep FICA taxes in mind, which comprise a 6.2% social security tax on annual incomes below $147,000 per year and a 1.45% Medicare Tax on annual incomes below $200,000. Employers are mandated to match these deductions.
Federal Unemployment Tax (FUTA)
Employers are also obliged to pay 6% of the first $7,000 of an employee’s taxable income as FUTA unemployment taxes, but they can get a tax credit of up to 5.4% if they’re paying state unemployment taxes.
Garnishments & Tax Contributions
Besides federal and state taxes, you also need to factor in court-ordered wage garnishments, child support, contributions to post-tax savings accounts like Flexible Spending Account (FSA), 401(k), etc., if applicable to an employee.
It’s your obligation as an employer to make these deductions from your employee’s paychecks and turn them into the proper authorities on your employee’s behalf.
Florida’s Tax Exclusions & Exemptions
Primary residences in Florida enjoy homestead exemptions of up to $50,000, though $25,000 applies only to non-school taxes while the rest are spread across all taxes. Widow/widowers are eligible for Widow(er) Exemptions of $500 provided they were not divorced at the time of their ex-spouse’s death. You’re also totally exempted from property taxes if you have a total or permanent disability.
Certain counties and cities provide Senior Citizen Exemptions of up to $50,000 for residents aged 65 and older with gross incomes below $20,000.
Veterans in Florida enjoy some of the most comprehensive exemption provisos in the country. These include property tax exemptions ranging from $5000 to no property taxes at all depending on factors such as disabilities from service-related events, age, and recent deployment.
Florida’s Labor Laws & Other HR Requirements
Labor laws in effect in Florida cover an exhaustive range of labor-related issues from minimum wage to overtime, breaks, leaves, and severance pay. Florida state and federal laws overlap in some areas, while only one level of legislation applies to some others. Here’s exactly what you need to know about Florida’s payroll and labor laws and how they apply to your business.
Florida's Minimum Wage
Florida’s voters recently passed Amendment 2, which increased Floridas’s minimum wage to $10.00/hour and will continue to increase the minimum wage incrementally until it reaches $15.00/hour, which is almost double the federal minimum wage of $7.25/hour. The Florida state rate for tipped employees, which is $6.98/hour, is more than three times the Federal rate, which is $2.13/hour. This makes a huge difference since you’ll need to make up for a relatively big difference in the tipped employees’ weekly pay. It’s your obligation to cover whatever amount is needed to make up for the minimum wage, in addition to the tips.
You also need to keep in mind that you’re mandated by law to display a Florida minimum wage poster conspicuously within your workplace. You also need to openly display the Florida Reemployment Assistance notice with details of eligibility requirements for unemployment assistance in your workplace.
Florida Reemployment Tax
Also known as unemployment taxes, reemployment taxes are charged on employers towards the unemployment benefits of their employees. The rate for new businesses is 2.7% for the first $7,000 earned by the employee. After the first 10 quarters of existence, a new business’ reemployment rate can fall anywhere from 0.10% to 5.4% per new employee. People taking over an existing business will be subjected to the previous owner’s rate.
In addition, employers are also obliged to pay federal reemployment taxes, though they may be eligible for tax breaks of up to 5.4%.
Florida New Hire Reporting
You’re required by both federal and state laws to report new hires and rehires to the Florida New Hire Reporting Center within 20 days from their assumption date. You may be fined up to $25 per employee for neglecting to report them or up to $500 per new employee if you intentionally failed to report them. You might even be fined for not reporting yourself; you need to report yourself if you’re self-employed.
Hiring laws currently prevailing in Florida also prohibit the consideration of several factors in the hiring process. These include race, color, religion, sex, age, country of origin, and health conditions such as AIDs, sickle cell, genetic conditions, etc.
Florida's PTO Policy
Paid Time Off (PTO) tracking in payroll management is easier for business owners in Florida because it’s possible to void all outstanding PTO expenses at the turn of a new year. Florida law also allows you to forgo paying out outstanding PTO at termination or rolling them over from year to year.
However, many businesses in Florida offer their employees PTO for several reasons ranging from holiday time to jury duty, voting leave, and bereavement leave. You don’t necessarily have to offer PTO for all these reasons; you can use your discretion to determine the circumstances under which your employees will be paid for hours they haven’t worked.
Florida Meal Break Laws
The state law stipulates a mandatory meal break for minor employees younger than 18 years, while it defers to federal labor laws for the regulation of mealtime for adult employees. Employers are not required by federal law to provide meal breaks for adult employees. Those who provide meal breaks lasting less than 20 minutes are required to pay for the period, but break periods lasting 30 minutes or longer can go unpaid, provided the employees are allowed to do as they please during that period.
Florida Overtime Laws
Overtime regulations are also up to federal labor laws. But no laws across any level require employers to pay for any leave, including sick leave, holiday leave, jury duty leave, voting leave, and bereavement leave. Employers are also not obliged by any laws to provide severance pay at termination, though they will be held liable for the severance terms stipulated in their employment contracts and policies.
Florida Child Labor Laws
Federal law permits minors to work for any number of hours provided they’re 16 years and older. However, Florida’s state laws are a lot more intricate. Minors under the age of 14 are not eligible to work except under rare circumstances; minors aged 16 and older aren’t allowed to work for more than 30 hours a week and their working hours must not fall within school hours (except when engaged in career education programs) or at times earlier than 6.30 a.m. or later than 11.30 p.m. Minors under 16 cannot work for more than eight hours during a school day or for more than six consecutive days in a week. State laws also prohibit minors from working in hazardous occupations.
Florida Payment Obligations
Although employers are not required by any law in Florida to pay their employees within a certain period, they’re still mandated to schedule regular paydays. In other words, they need to pay their employees consistently. Once you choose a payroll schedule, you must stick to the frequency of the payment at all times.
Another payment obligation employers in Florida need to be aware of is the final check issued to terminated employees. Although employers are not subjected to severance pay laws, it’s always advisable to pay off any outstanding monies owed to terminated employees promptly to avoid legal disputes that might take up time and money.
Employers are also liable to pay reemployment fees to both the state and federal government if they hire at least one employee for a day, have a quarterly payroll of at least $1,500, or pay no local taxes.
You’re also responsible for paying garnishments to the proper authorities on behalf of your employees as an employer in Florida. A garnishment is a court order or an IRS levy directing an employer to withhold a certain amount of an employee’s wages for debt repayment. But it doesn’t apply to an employee with a weekly income of $500 who is supporting a household.
Florida Disability Insurance
No laws in Florida impose disability taxes on employers. But you can still opt to provide disability insurance for your employees who may be out of work due to non-work-related accidents or illnesses or who may not be qualified for worker’s compensation.
Note, however, that group disability insurance policies with specific provisions sold by insurers are subject to certain state laws.
Florida Worker's Compensation Insurance
Employees working in various occupations in Florida also enjoy institutional access to insurance coverage for work-related accidents and illnesses. Employers in certain fields must run worker’s compensation insurance for all their employees in Florida, with the cost of each policy determined by factors like the nature of the occupation and the claim history of the business. Minimum level plans are required for construction companies with at least one employee, non-construction companies with a minimum of four employers (including part-time, full-time, corporate and LLC staff), and agricultural businesses with at least six part-time and/or at least 12 part-time employees.
Subcontractors are also required to provide coverage if they’ve hired at least one employee for at least 30 days. Businesses issuing the contracts are also obliged to check for the subcontractor’s compliance with this coverage.
Nonetheless, certain categories of business owners are exempted from workers’ compensation requirements. You have the liberty to decline to offer workers’ compensation if you’re a corporate officer, sole proprietor, or a partner working with non-construction companies.
How Calculate Payroll Taxes In Florida
Now that you have a firm grasp of the legalities and numbers you need to pay attention to when processing payroll, you’re half-equipped with what you need to know to set up and run your payroll system on your own.
Several factors determine the effectiveness and efficiency of certain tools and functionalities for running a payroll system. However, in the following sections, we’ll show you how to combine the necessary factors to implement and manage your payroll management system in just six easy-to-follow steps. Read on to find out how to take advantage of various payroll tools and resources to implement your payroll on your own seamlessly.
Step 1: Make Sure You’re Following All Florida Payroll & Labor Laws
You can always refer to the first section of this guide to refresh your memory about the existing payroll laws in Florida. Given their relatively lax requirements, it’s easier to comply with Florida’s payroll laws, but you’ll still want to do your due diligence. You can end up paying heavy payroll penalties for failure to comply with any payroll law in the state.
Step 2: Have the Proper Employee Documentation
Once you’ve thoroughly researched payroll laws in Florida, the next step to take towards implementing your payroll system is to collect proper documentation for your employees. These documents will help you determine what to enter in various columns of an employee’s slot in your payroll system. Your employee’s W-4 form will provide you with details that can help you determine the exact amount you need to withhold from their paychecks for state and federal taxes. Your employees are free to change the details in their W-4 forms at any time of the year to reflect recent changes in their lives that are relevant to taxation.
You also need to get an I-9 form for your employees to verify their identity and eligibility to work in the U.S. Your employees need to fill out this form on their first day at work, and you need to fill out the employer’s section within three business days afterward.
If you want to offer direct deposits as an option for distributing paychecks, your employees need to fill out a form to that effect.
Step 3: Calculate Your Employee’s Pay
This is usually the most complex step of the process, but you can simplify things using one of these top payroll software options. You can use a timesheet, attendance systems, or digital time to keep track of your employee’s working hours. When calculating earnings from working hours, you can only apply the regular hourly rate to 40 hours in a week – any extra hours must be counted as overtime, which is 50% more of the normal hourly rate. But besides their working hours, you also need to factor in overtime, tips, commissions, PTO, etc. when calculating your employee’s earnings.
The calculation of a salaried employee’s pay is much more straightforward than that of employees paid hourly. You only need to divide their annual pay by the number of paydays in a calendar year.
Check out our complete guide on how to calculate payroll if you need more help.
Step 4: Deduct Federal & Florida State Payroll Taxes
Next, calculate and deduct any applicable taxes from each employee’s earnings. Here’s a rundown of the most important taxes you need to deduct on behalf of your employees:
- Federal Income Tax: You can calculate what each employee owes in federal income taxes based on the tax withholding tables published in the most recent edition of IRS Publication 15-A.
- FICA: These include Social Security and Medicare. You need to take note of the year-to-date income and the income limits for the deductions.
- Contributions To Savings Accounts: You’re also responsible for sending contributions to various social welfare programs on behalf of your employees, from health insurance to life insurance, 401(k), etc.
- Garnishments: If you receive a notice to garnish your employee’s paycheck, attend to it promptly to avoid legal issues.
- Miscellaneous Deductions: Finally, you need to check properly to ensure that you’ve factored in all the deductions you’re mandated to keep from your employee’s paychecks, including loan repayments for loans from banks and other lending institutions.
Learn more about small business payroll deductions in our complete guide.
Step 5: Process Payroll
After determining all the tax withholdings and net pay, the next thing you need to turn your attention to is the methods for distributing the paychecks. You can choose to process the paycheck manually, tearing out check leaves from a dedicated checkbook and writing out the checks. A faster method is direct deposits, but that requires a one-time setup fee for each employee and a small transaction fee for each deposit.
You can also outsource the paycheck distribution to a professional employment organization (PEO), or use payroll software to completely automate the process.
Step 6: Don’t Forget To Keep Records
Lastly, you need to document and store all your payroll records and make them easy to retrieve when you need to report them to the proper federal and state authorities. Your payroll records should include details like:
- Employee’s full name and Social Security number
- Address, including ZIP code
- Employee’s schedule
- Total hours worked each day
- Type of pay (hourly or salaried)
- Regular pay rate
- Overtime and other earning
- All deductions from their paycheck
- Total monies paid each payday
- Payment dates and the period covered
Learn exactly which payroll records you need to keep and for how long.
State Of Florida Payroll Resources
That’s just about everything you need to know to implement and manage a highly simplified payroll system. It might take you some time and several rounds of processing to gain a full grasp of the entire process and work more quickly.
For more Florida business resources, learn about Florida small business insurance.
For more payroll tips and tricks, check out our best payroll practices for small businesses and best of luck with your payroll processing!
Florida Payroll Tax FAQs
How do I calculate employee payroll taxes?
To calculate employee payroll taxes, you’ll need your employee’s W-4 to know exactly how much to withhold from their paycheck. You’ll also need to take into consideration FICA, FUTA, any contributions to a 401(k) or FSA, any garnishment pay, and any state payroll taxes.
How much are payroll taxes in Florida?
Florida-based businesses have to pay federal payroll taxes like FICA and FUTA, as well as Florida sales and property taxes.
Does Florida have state income tax?
Florida does not have a personal income tax. Income tax in Florida follows the federal income tax regulations.
What is Florida's minimum wage?
Florida has a minimum wage of $10/hour or $6.98/hour for tipped employees. However, the minimum wage will be increasing incrementally to $15.00/hour as voted on in the 2020 election.
Can I pay the federal minimum wage in Florida?
Because Florida’s minimum wage is higher than the federal minimum wage for both hourly employees and tipped employees, business will need to pay the Florida minimum wage requirements.