Operational Gaze:
How to Run Payroll in Nevada?

April 8th 2024

Running payroll can be tricky business. It encompasses far more than just issuing paychecks; it’s a complex, multifaceted process that involves calculating wages, handling deductions, navigating payroll tax procedures, and maintaining meticulous records.

In the state of Nevada, this process comes with its own unique set of rules and regulations. Thanks to the huge gaming industry in the state, employers won’t face some of the extra taxes that other states impose on individuals and businesses. But this doesn’t mean that payroll in Nevada is without its challenges. To thrive in the state’s dynamic business environment, understanding the nuances of payroll is not just helpful – it’s absolutely essential.

In this article, we’ve undertaken the task of simplifying the payroll process for you. We’ve assembled a comprehensive series of step-by-step guidelines designed specifically to help you navigate each pay cycle within the Silver State. We’ll also cover everything you need to know to run payroll successfully, from essential payroll forms, labor laws affecting payroll, and applicable taxes.

This Article Covers

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

Laws That Affect Payroll Procedures in Nevada

Nevada has a distinct set of laws that businesses must navigate to ensure compliance and uphold fair compensation practices. Familiarizing yourself with these essential statutes will empower your business to maintain financial integrity and safeguard your employees’ rights.

Nevada Laws

  • Minimum Wage: Nevada labor laws maintain two primary minimum wage standards. When an employer does not provide qualifying health insurance, the minimum hourly rate is $11.25. The minimum rate is adjusted to $10.25 if the employer offers qualifying health insurance. It’s important to note thought that effective July 1, 2024, there will be a uniform minimum wage of $12.00 per hour for all employees, regardless of health insurance provisions.
  • Overtime: According to Nevada overtime laws, employees are entitled to receive overtime compensation at 1.5 times their regular pay rate for any hours worked beyond their standard workweek. The specific conditions governing this overtime rate can vary based on the employee’s wage level.
  • Rest Periods: Employees who work continuously for 8 hours are entitled to a 30-minute meal break as per Nevada Revised Statutes (NRS) section 608.019. Additionally, for every 4 hours of work (or a significant part of it), workers are entitled to a 10-minute rest break. These rest breaks are considered part of working hours, so they won’t reduce employee wages.
  • Pay Frequency: NRS 608 mandates that employers must pay their employees at least twice a month. Any wages earned before the first of the month and still unpaid should be paid by 8 a.m. on the 15th day of the following month.
  • Paid Time Off and Leaves: Nevada is the second state, next to Maine, to officially make paid leave available to employees for any reason, even personal ones, through Senate Bill (S.B.) No. 312, which took effect on January 1, 2020. Nevada leave laws mandate employers with 50 or more employees in Nevada to offer paid leave, adjusted based on hours worked.
  • Payroll Recordkeeping: Employers must keep employee wage records for at least two years. These records should include gross wages (excluding non-cash compensation like services, food, housing, or clothing), deductions, net cash wages, total hours worked per pay period, and the payment date. This information helps ensure transparency and compliance with Nevada Statute 608.215.
  • Payroll Taxes: State unemployment insurance taxes (SUTA) and workers’ compensation insurance must be covered by employers, but they are not obligated to pay state income taxes or disability insurance. These regulations align with federal laws, and employers typically file these payments quarterly.
  • Final Pay: When an employee quits their job, they should get their final wages within 7 days or by the next regular payday, whichever comes first. If the employer discharges the employee, the final wages must be given within 3 days, as per NRS 680.020–608.040.

Federal Laws

  • Family and Medical Leave Act (FMLA): The FMLA allows eligible employees at covered employers to take unpaid, job-protected leave for specific family and medical reasons while maintaining their group health insurance coverage under regular terms. Eligible employees can take up to twelve workweeks of leave in a 12-month period for various reasons, including the birth or adoption of a child, caring for a family member with a severe health condition, dealing with their own serious health condition, or addressing specific military-related exigencies involving their spouse, child, or parent who is on covered active duty.
  • Fair Labor Standards Act (FLSA): The FLSA establishes crucial federal standards for minimum wages, overtime pay, child labor, and employee classifications. It applies across various sectors, including private businesses and government entities at federal, state, and local levels. In Nevada, the state wage law aligns with the FLSA in areas like overtime and child labor protections, with some variations. If Nevada law offers more extensive safeguards, it should take precedence, as the FLSA sets a baseline rather than an upper limit.
  • The Federal Unemployment Tax Act (FUTA): Most employers are required to pay a payroll tax under FUTA. This money goes to state unemployment insurance agencies, which benefit unemployed individuals. Only employers are responsible for paying FUTA taxes, so individual taxpayers are unaffected.

HR Laws

  • New Hire Reporting: All employers are required to report specific details about newly hired employees to a designated state agency. A “newly hired employee” refers to someone who hasn’t worked for the employer before or is being rehired after a separation of at least 60 consecutive days. This information must be reported to the Employment Security Division of the Department of Employment, Training, and Rehabilitation. Reporting can be done through Nevada’s Unemployment Insurance self-service website or by mailing the W-4 form to the Employment Security Division.
  • Reporting Out-of-State Employees: In certain situations, out-of-state employees may still need to be considered for Nevada tax filing, similar to other states’ regulations. If an employee primarily works in Nevada, all their wages should be reported to Nevada. If they work partially in Nevada but primarily elsewhere, their wages should be reported in the state where they have their main work location, known as their “base of operations,” whether it’s an office or a home. However, if the employee doesn’t have a clear “base of operations” or a specific work location, their wages should be reported to Nevada if that’s where they reside.
  • Child Labor: Federal and Nevada laws are in place to protect minors, individuals under 18, from workplace exploitation. They set restrictions on work hours and specific job types. According to federal law, all minors, regardless of age, are prohibited from working in hazardous positions. Nevada adds extra regulations specifying the types of work and hours allowed for minors.

Worker Classifications in Nevada

How workers are classified can significantly impact payroll procedures, tax liabilities, and legal obligations. To determine whether someone is considered an employee or an independent contractor, Nevada follows what’s called an “ABC” test. Let’s explore the “ABC” test further and understand the main distinctions between employees and independent contractors.

Employees and Independent Contractors

When a worker is considered an employee, their employer is typically responsible for providing them with an IRS Form W-2. Employees are individuals who have a formal employment agreement with their employer and receive regular compensation, which could be in the form of a fixed salary, hourly wage, or commissions.

On the other hand, independent contractors usually receive an IRS Form 1099-MISC from the businesses they work with. Independent contractors are workers who take on freelance or contract-based assignments, getting paid by their clients through Form 1099. This is why many people often refer to independent contractors as “1099 workers.” They have more independence in how they perform their work.

Apart from differences in paperwork, how a worker is classified can also affect important legal rights and benefits such as:

  • Overtime pay
  • Minimum wage
  • Workers’ compensation benefits

“ABC” test

The “ABC” test is a crucial assessment for employers to determine if a worker is an independent contractor, as mandated by many states and the U.S. Department of Labor. It comprises three essential criteria employers must meet to classify workers as independent contractors. Simply having a written contract isn’t sufficient; employers must prove the following:

  • The person has independence and control over how they perform the services, both in their contract and in practice.
  • The service is unrelated to the usual business operations or locations of the enterprises for which it is performed.
  • The service is part of an independently established trade, occupation, profession, or business similar in nature to the contract of service.

The use of these criteria is also supported under the Nevada Revised Statutes. § 612.085 to determine eligibility for unemployment insurance. To learn more about the entitlements of both salaried and hourly employees, you can refer to our guides on the rights of salaried employees in Nevada, and the rights of hourly employees in Nevada.

Payroll Forms and Relevant Bodies in Nevada

Great news for employers in Nevada – the state doesn’t impose an individual income tax or corporate income tax, which means you’re spared from the hassle of submitting state W-2 and 1120 Forms.

However, it’s important to note that while you may not have to deal with state W-2s, there are still other essential state withholding and federal payroll forms that you must stay on top of. 

Nevada Withholding Payroll Forms

  • Form NUCS 4072: This form is for filing unemployment insurance taxes on paper. You should receive a pre-filled copy from the state each quarter, but their website might sometimes have issues. Keep checking if you need to download it.
  • Automated Clearing House (ACH) Debit Authorization: Use this for paying unemployment insurance taxes through ACH debit.
  • Nevada Commerce Tax Return Form: Reports your business’s earnings and deductions from conducting business in Nevada. If you make $4,000,000 or less in gross revenue during the year, you don’t have to file a Commerce Tax Return anymore.

Federal Payroll Forms

  • W-4 Form: Helps calculate taxes to withhold from employee paychecks.
  • W-2 Form: Reports total annual wages earned (one per employee).
  • W-3 Form: Reports total wages and taxes for all employees.
  • Form 940: Reports and calculates unemployment taxes due to the IRS.
  • Form 941: Filed quarterly to report income and FICA taxes withheld from paychecks.
  • Form 944: Reports annual income and FICA taxes withheld from paychecks.
  • 1099 Forms: Provide non-employee pay info to help the IRS collect taxes on contract work.

Federal and Nevada Payroll/ Tax Bodies

  • Nevada Department of Taxation: The Nevada Department of Taxation handles the collection of taxes for the state and local governments, covering over 21 different types of taxes. This includes excise tax and commerce tax. They aim to fairly, efficiently, and effectively manage these tax programs, following the rules and policies. They serve both taxpayers and government bodies while supporting their employees.
  • Nevada Department of Business & Industry Industrial Relations: Nevada’s Department of Business & Industry Industrial Relations is essential for supervising workers’ compensation rules and offering vital support to Nevada’s businesses. Its mission involves ensuring fair and safe workplaces for employees and helping businesses understand and comply with labor laws and regulations in the state, simplifying the complex landscape of labor compliance.
  • Internal Revenue Service: The Internal Revenue Service (IRS) is the government department that deals with taxes. It makes sure people and businesses follow tax laws, collects taxes, helps with tax-related questions, and does tax audits.
  • Wage and Hour Division: The Wage and Hour Division (WHD) makes sure workers are treated fairly at their jobs. It enforces rules like minimum wage, overtime, and child labor laws. It also looks after worker rights in different laws, including those for agricultural workers, family leave, and protection against wage garnishment. Additionally, it manages wage rules for certain federal contracts, like construction and service jobs.
  • Social Security Administration: The Social Security Administration (SSA) looks after the financial well-being of U.S. citizens throughout their lives. It manages programs for retirement, disability, survivor benefits, and family help. It also helps people sign up for Medicare. The SSA provides Social Security Numbers, which are essential for jobs, money matters, and government services.

Applicable Taxes in Nevada

Nevada is considered to be a low-tax state. This is mainly because it doesn’t impose any state income tax. It also doesn’t tax Social Security benefits or retirement distributions like 401(k) or pensions. While you can tick these taxes off your list, there are still a couple of other state and federal taxes that you need to be aware of.

State Taxes

  • Workers’ Compensation Insurance: Nevada mandates workers’ compensation insurance for all employees, including noncitizens and minors, except for casual or theater performers, domestic workers in private homes, volunteers, clergy, real estate brokers, phone-based direct sales workers, and commission-based salespeople. To comply, your policy must cover essential aspects like medical treatment, lost time compensation (temporary total or partial disability), permanent partial or total disability, vocational rehabilitation, dependent benefits in case of death, and other related expenses such as mileage.
  • Nevada State Unemployment Insurance Tax (SUTA): In Nevada, if you pay more than $225 in wages in a calendar quarter, you’re responsible for State Unemployment Insurance (U.I.) tax withholdings, except for some specific cases. Tax rates for experienced employers in Nevada vary from 0.25% to 3.55% for those with positive ratings, and from 3.55% to 5.4% for those with negative ratings. New employers have a tax rate of 2.95% of taxable wages. Afterward, the state calculates a specific rate for you and provides it on your preprinted Form NUCS 4072.

Federal Taxes

  • Federal Income Tax: While Nevada doesn’t impose state income taxes, residents are still required to pay federal income taxes. Nevada employers deduct federal income taxes from each paycheck and forward it to the IRS, which contributes to an employee’s yearly income tax. The amount paid in federal income taxes depends on factors like the worker’s marital status, annual salary, and whether you opt for extra tax withholding. An employer will determine these deductions based on the details an employee provides on their Form W-4.
  • Federal Unemployment Tax Act: Employers are required to set aside 6% of the first $7,000 of their employees’ yearly earnings for the federal unemployment tax (FUTA). However, many businesses can claim a federal tax credit of 5.4%, which significantly reduces their FUTA rate. This often means that most employers end up paying only 0.6% of the first $7,000 of an employee’s annual wages for FUTA.
  • Federal Insurance Contributions Act: The Federal Insurance Contributions Act (FICA) tax is a required deduction from an employee’s paycheck. Employers must take a portion of their employees’ earnings and send it to the government as payroll taxes. FICA has two parts: one for Social Security (OASDI program) and another for Medicare. Both employees and employers contribute to this tax, and the amount paid over a person’s working years affects their future Social Security benefits and potential survivor benefits. The FICA tax is based on the employee’s total income, separate from federal income tax, and it’s not optional; everyone must pay it.

Other Payroll Deductions

Employees in Nevada can have various deductions from their paychecks, like taxes and healthcare costs. But it’s important to note that employers can only deduct wages if it’s allowed by state law or if the employee agrees in writing. These deductions can include things like:

  • Court-ordered payments (like unpaid taxes or child support)
  • The employee’s share of health insurance and other benefits
  • Repayment for damages caused by the employee at work

There are limits to how much can be taken. For example, if the employee’s weekly pay is low, a certain percentage can be taken. Additionally, employers can’t charge employees for special uniforms or accessories.

Without the employee’s permission, employers can only deduct for things required by law (like taxes or child support) and contributions to benefit programs (like health insurance or a pension plan).

Routine deductions like these are usually fine, but if an employer wants to deduct for other reasons (like damage to company property or unpaid debts), they will need to meet three conditions:

  • They must have a good reason to think the employee owes the money.
  • The deduction has to be for a specific purpose, date, and amount.
  • The employee has to agree in writing to the deduction.

Key Pay Elements That Impact Payroll in Nevada

Minimum Wage

In Nevada, the minimum wage you pay your employees depends on whether you offer health insurance or not. If you provide health insurance, the minimum hourly rate is $10.25. If you don’t offer health insurance, the minimum hourly wage is $11.25.

This two-tier minimum wage is set to be removed in July 2024 with a standardized $12 hourly rate for all employees in Nevada.

Overtime

In Nevada, overtime pay is governed by the FLSA overtime regulations, which require employees to receive 1.5 times their regular pay rate for hours worked beyond 40 in a week. For employees who are provided with health insurance, the hourly overtime rate would end up at $15.38.

The overtime rate applies to most employees, except for those who fall under specific exemptions such as:

  • Outside buyers
  • Independent contractors
  • Taxicab and limousine drivers
  • Agricultural employees, and so on

Learn more in detail about Nevada Overtime Laws.

Tip Pooling

According to both federal and Nevada laws, tips are the property of the employee, and employers can’t take them for themselves. In some states, employers can use a “tip credit,” meaning they can count some of the tips their employees earn to meet the minimum wage requirement. But in Nevada, this practice is not allowed.

While Nevada doesn’t permit tip crediting, it does allow a practice known as “tip pooling” or “tipping out.” This means that a portion of everyone’s tips goes into a pool and is then divided among a group of employees. However, the employee must still receive at least the full minimum wage.

Pay Stub Laws

In Nevada, employers are required to give employees a detailed list of deductions on each paycheck. Employees can also ask for their “wage record,” which includes:

  • Deductions
  • Total earnings
  • Take-home pay
  • Payment date
  • Total hours worked (unless an exemption applies)

If employers don’t provide these documents, employees can complain to the Nevada Labor Commissioner or take legal action. Employers who don’t comply may face a $5,000 fine and criminal charges.

Workers’ Compensation Insurance

Workers’ compensation in Nevada is a no-fault insurance program designed to provide benefits to employees injured on the job while offering protection to employers who have provided coverage when the injury occurs. This system ensures a safety net for both workers and employers.

According to the Nevada Department of Business and Industry, nearly all employers in Nevada, with a few exceptions, are required to carry workers’ compensation insurance if they have one or more employees. Failure to comply with this mandate can lead to fines of up to $15,000, and in serious cases, a business might be ordered to cease operations until proper insurance is obtained.

Nevada Pay Frequency Laws

As per Nevada Revised Statutes (NRS) 608.060, employers are required to pay their employees at least twice a month, aside from exceptions. Employers should also post a notice to inform employees about the payday schedule in at least 2 conspicuous places.

Should an employer need to alter the payday schedule or payment location, they are required to give their employees written notice at least one week in advance. This practice is crucial in upholding fairness and transparency within the payment process.

Garnishments and Deductions

Wage garnishment is a legal process where someone’s employer is required by court order to withhold part of their earnings to pay off financial obligations, like child support, student loans, tax levies, and more.

Nevada law provides guidelines for wage garnishment exemptions. It depends on the judgment debtor’s gross weekly salary when the garnishment order was issued. If it’s $770 or less, 82% of disposable earnings are exempt for that workweek. If it exceeds $770, 75% is exempt. There’s also an exemption of 50 times the federal minimum hourly wage. “Disposable earnings” refers to what’s left after legal deductions from earnings.

Final Paycheck

When an employee leaves their job, whether by quitting or being discharged, there are specific rules regarding when they should receive their final wages. According to NRS 680.030, if an employee resigns, they must be paid their final wages within 7 days or by the next regular payday, whichever comes first. In the case of a discharge, the employee should receive their final wages within 3 days.

If an employer fails to meet these deadlines, they are required to compensate their former employee for each day that passes without receiving their final paycheck for a maximum of 30 days. Additionally, employers will be subject to a $5,000 administrative fine imposed by the state of Nevada for failing to pay their former employees on time.

Step-by-Step Guide to Payroll in Nevada

Managing payroll in Nevada involves several key steps. Follow this simplified breakdown to get started:

  1. Identify Payroll Rules Applicable to Your Company: Take a moment to get to know the payroll rules that pertain to your business in Nevada. These rules can change based on things like your industry, how many employees you have, and whether they’re paid by the hour or on a salary. Make sure to be well-acquainted with Nevada labor laws, federal payroll guidelines, and the key pay elements that impact payroll in Nevada. This will help you ensure that you’re paying your employees correctly and within legal bounds.
  2. Apply for an Employer Identification Number (EIN): An Employer Identification Number (EIN) is a nine-digit unique identifier given to businesses. Think of the EIN as your business’s I.D. number for tax purposes. The IRS uses a business’ EIN to keep track of them for tax reporting. Every qualifying business needs an EIN before starting operations, and obtaining one is cost-free through the IRS website. You can also apply for it by mail using a Form SS-4.
  3. Register with the Nevada Department of Taxation: Before you can run payroll in Nevada, you need to make sure your business is registered with the state, too. Thankfully, Nevada has a user-friendly registration guide that new businesses can use. You’ll have to use your federal EIN to sign up for a Nevada Unemployment Insurance tax account. Visit the Employer Self-Service page of the state’s U.I. website and select “Create a new online user account.” Fill up all the required forms, and you’ll be good to go.
  4. Determine Employee Classification: It’s important to figure out if your workers should be classified as employees or independent contractors. This decision is vital because it can directly impact how you handle taxes and report wages. You can use a tool called the “ABC” Test to help you with this classification. This test considers factors like control over work and how integrated the worker is into your business.
  5. Collect Employee Payroll Forms: When onboarding employees, it’s crucial to collect their personal details, Social Security numbers, and tax filing statuses, along with the necessary payroll forms specific to Nevada. This step streamlines your payroll management system. The essential forms include the W-4, I-9, and direct deposit information. The W-4 helps calculate federal income tax withholdings, while the I-9 verifies an employee’s eligibility to work in the U.S. Remember, employees should update their W-4 for any tax-related life changes. It’s also important to report all new hires to the Nevada Employment Security Division of the Department of Employment.
  6. Establish Your Payroll Process: If your business is new, you’ll need to create a payroll system from scratch. This means determining the frequency of employee pay, which, for Nevada employers, typically follows a standard bi-monthly schedule. You can manage payroll on your own (though it’s not recommended), use an Excel template, or use a payroll service to handle payroll more accurately and efficiently. 
  7. Get Employee Timesheets In Order: Accurate payroll relies heavily on precise timekeeping. To achieve this, it’s essential to implement a well-defined time and attendance system that covers various aspects such as workweeks, overtime, breaks, paid time off, and sick leave entitlements. Make sure to review and approve several days before your payroll is due. This allows ample time to go over the documented work hours of both hourly and nonexempt employees, ensuring accuracy. If discrepancies or mistakes are found, you’ll have the opportunity to address them before processing payroll.
  8. Calculate Employee Gross Pay: When calculating gross pay, it’s essential to account for various factors, such as hourly wages or salaries, overtime hours, and any special payments like bonuses or commissions. To streamline this process, consider utilizing reliable payroll software or automated timesheet apps. These tools are designed to minimize errors, making it easier to calculate paychecks with precision.
  9. Process Necessary Payroll Deductions: Start with pre-tax deductions like health benefits or life insurance contributions. Then, handle mandatory deductions like federal and state income taxes and Social Security and Medicare taxes. Remember, you’ll need to match your employees’ contributions to Social Security until a certain income limit is reached. Don’t forget about the federal unemployment tax (FUTA), which you, as the employer, cover entirely. Finally, factor in post-tax deductions for things like wage garnishments or union dues. Getting these deductions right ensures your employees receive their paychecks correctly and in line with legal requirements.
  10. File Tax Reports: Once you’ve deducted taxes from your employees’ paychecks, it’s time to file them with the right agencies. For federal taxes, use Form 941. This form covers your share of FICA taxes, as well as the income tax, Social Security tax, and Medicare tax you withheld from your employee’s wages. For the Annual Federal Unemployment (FUTA) Tax Return, you will need to file Form 940.
  11. Distribute Payroll: After figuring out taxes and net pay, you can start to distribute wages based on the payment method you’ve chosen. In Nevada, you can pay wages in cash, by check, or with employee consent through direct deposit or electronic paycards. Nowadays, many employers are switching from paper checks to save money and offer convenience. Options like direct deposit or pay cards are cost-effective and attractive to potential employees.
  12. Maintain and Store Payroll Records: Your records should include important details like employee names, addresses, Social Security numbers, hours worked, wages, deductions, and more. Some records need to be kept for up to four years for tax purposes, while others should comply with federal or state requirements, whichever is longer.

Final Thoughts

Running payroll in Nevada comes with its own unique set of rules and regulations. From navigating the complexities of minimum wage laws to understanding payroll tax procedures specific to the state, it’s crucial to approach this process with diligence and precision.

Don’t feel like you have to go through the process alone, though. There are various tools and resources at your disposal to streamline the payroll process and optimize your operations. If you’re interested in enhancing payroll efficiency, you may want to examine our compilation of the top 6 applications designed to simplify payroll tasks in the United States. On the other hand, if you already have an established system, we’ve outlined ten valuable tips to enhance your payroll processes within the United States.

By adhering to best practices and making use of the tools at your disposal, you can confidently handle the realm of payroll management in Nevada.

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.