Simple Payroll Spreadsheet for 1-5 Employees

If you have 1-5 employees and a relatively straightforward payroll, you may not need payroll software yet. A well-built spreadsheet handles the calculation, keeps your records organized, and makes tax time less painful. Here’s exactly how to build one.

Important caveat: Payroll tax rules change. Verify current rates with IRS.gov before using any spreadsheet for actual payroll. This guide gives you the framework; you’re responsible for using current numbers.

What the Spreadsheet Needs to Calculate

Every payroll period, you need to figure out:

1. Gross Pay — what the employee earned before any deductions
2. Federal Income Tax Withholding — based on their W-4 and IRS withholding tables
3. Social Security Withholding — 6.2% of gross (up to annual wage base)
4. Medicare Withholding — 1.45% of gross (no wage base cap)
5. State Income Tax Withholding — varies by state
6. Other Deductions — health insurance premiums, retirement contributions, garnishments
7. Net Pay — the check amount
8. Employer Taxes — your additional costs beyond gross pay

The Spreadsheet Structure

Set up one sheet per pay period, or use a running log with one row per employee per period.

Employee Setup Tab (fill once, reference from payroll):

Column	Data
Employee Name
Pay Type	Hourly / Salary
Hourly Rate or Salary
Filing Status (W-4)	Single / MFW (Married Filing Jointly)
Federal Withholding Allowances	From their W-4
State	For state tax lookup
Health Insurance Premium (pre-tax)	Employee’s portion per pay period
401k Contribution %	If applicable

Payroll Register Tab (fill each pay period):

Column	Formula / Input
Employee Name	Reference to Setup tab
Pay Period	Date range
Regular Hours	Manual input for hourly
OT Hours (>40/week)	Manual input
Regular Pay	=Hours * Rate or salary ÷ pay periods
OT Pay	=OT_Hours * Rate * 1.5
Gross Pay	=Regular Pay + OT Pay
Pre-tax Deductions	Health, 401k, FSA
Federal Taxable Wages	=Gross Pay - Pre-tax Deductions
Federal Income Tax	Lookup or formula (see below)
Social Security	=Gross Pay * 0.062
Medicare	=Gross Pay * 0.0145
State Tax	Per your state’s formula
Other Deductions	Post-tax items
Net Pay	=Gross - All Deductions

Federal Income Tax Withholding

This is the complicated part. The IRS publishes withholding tables in Publication 15-T annually. The simplest approach for a small number of employees is the Percentage Method Tables.

The basic structure for 2025 (verify current brackets at IRS.gov):

1. Calculate adjusted wage: Gross Pay - Standard withholding allowance based on their W-4
2. Find the withholding bracket for their adjusted wage and filing status
3. Apply the marginal rate formula: Fixed amount + (Adjusted wage - lower bracket threshold) × rate

Rather than hard-coding specific brackets (which change annually), build a Tax Table tab in your spreadsheet:

Filing Status	Lower Threshold	Upper Threshold	Base Withholding	Rate on Excess
Single	$0	$316	$0	0%
Single	$316	$1,111	$0	10%
…	…	…	…	…

Then use nested IFS or VLOOKUP to find the right row:

=VLOOKUP(AdjustedWage, TaxTable, 3, TRUE) + (AdjustedWage - VLOOKUP(AdjustedWage, TaxTable, 1, TRUE)) * VLOOKUP(AdjustedWage, TaxTable, 4, TRUE)

Update this table each January from IRS Publication 15-T.

Employer Tax Section

For each payroll run, you also owe employer-side taxes. Track these separately:

Tax	Rate	Notes
Employer Social Security	6.2% of gross	Up to same annual wage base as employee side
Employer Medicare	1.45% of gross	No cap
Federal Unemployment (FUTA)	6.0% on first $7,000	Usually reduced to 0.6% with state credit
State Unemployment (SUTA)	Varies	Check your state’s rate

Employer Tax per employee: =(Gross Pay * 0.062) + (Gross Pay * 0.0145) + FUTA_Applicable + SUTA_Applicable

True Labor Cost: =Gross Pay + Employer Taxes + Benefits — this is the number that shows what each employee actually costs your business.

Running Totals and Year-to-Date Tracking

Add a YTD Summary tab that tracks per employee:

• YTD Gross Pay
• YTD Social Security Wages (cap at annual limit — $176,100 for 2025, verify)
• YTD Federal Income Tax Withheld
• YTD Social Security Withheld
• YTD Medicare Withheld
• YTD Net Pay

These numbers feed directly into your 941 quarterly forms and W-2s at year end.

Use SUMIF to pull from your payroll register: =SUMIF(PayrollRegister[Employee], A2, PayrollRegister[Gross Pay])

What This Spreadsheet Doesn’t Do

Be clear-eyed about the limitations:

• It doesn’t automatically deposit taxes to the IRS (you do that via EFTPS)
• It doesn’t file 941s, 940s, W-2s, or state forms for you
• It doesn’t handle complex situations: garnishments, benefits-in-kind, tips, commissions with specific rules
• It doesn’t update when tax rates change — that’s your responsibility each year

If any of those friction points are costing you time, payroll software (Gusto, QuickBooks Payroll, Rippling) at $40-100/month eliminates all of them and costs less than one IRS penalty for a late deposit.

Next Step

Set up your Employee Setup tab with your current employees’ information. Then run a parallel calculation for your next payroll: use both your spreadsheet and your current method, and compare. If the numbers match, you have a working system. If they don’t, find the discrepancy before you go live. The IRS has no patience for wrong numbers.