How to Do Payroll in Tennessee: Step-by-Step Guide

Last reviewed: July 2026

Tennessee is a straightforward state to run payroll in: no state income tax means no withholding tables to track. You still have a federal EIN to get, an SUI account to open, a payday schedule to follow, and W-2s due every January. Here is the process in order.

1. Get a Federal EIN

Every employer needs an Employer Identification Number from the IRS before doing anything else. Apply free at irs.gov/ein, and you'll have the number within minutes if you apply online. You'll use it on federal filings, your Tennessee registrations, and your business bank account.

2. Register With the State

Tennessee collects no personal income tax, so there is no withholding certificate and no withholding account to open. Depending on what your business sells, you may still need to register with the Tennessee Department of Revenue for sales tax, business tax, or franchise and excise tax through the state's TNTAP portal. Check which registrations apply to your business type before your first payroll.

3. Set Up Your SUI Account

Your required state payroll tax registration is unemployment insurance. Register with the Tennessee Department of Labor and Workforce Development as soon as you have an employee. New employers pay a standard premium rate of 2.7% on the first $7,000 of each employee's wages for 2026. Tennessee reviews rates twice a year based on the state's unemployment trust fund balance, so check the current table each January and July.

4. Pay Frequency and Workers' Comp

Tennessee law requires wages at least once a month. Monthly payers must pay wages by the 5th of the following month; employers on a semimonthly or more frequent schedule must pay first-half wages by the 20th and second-half wages by the 5th of the next month. The state's minimum wage follows the federal rate of $7.25 per hour, since Tennessee has no minimum wage law of its own.

5. Report New Hires

Federal and state law require reporting every new or rehired employee within 20 days of their start date through the Tennessee New Hire Reporting Program. The report needs the employee's name, address, Social Security number, and start date, plus your EIN. Most payroll software files this automatically.

6. Run Payroll and Make Deposits

Each pay period, calculate gross wages, withhold federal income tax from the employee's W-4, and withhold FICA (Social Security and Medicare), matching the employee's share as the employer. Deposit federal withholding and FICA on the schedule that applies to your business, either monthly or semiweekly. File Form 941 each quarter to reconcile what you withheld and deposited. With no state withholding to track, your federal deposits and Form 941 filings are the whole story on the tax side, apart from the SUI wage reports filed with the Department of Labor and Workforce Development.

Use our paycheck calculator to check gross-to-net math for Tennessee employees, and send new hires to our W-4 helper for their federal withholding form.

7. File Year-End W-2s

By January 31, issue Form W-2 to every employee and file copies with the Social Security Administration. File your fourth-quarter Form 941 and annual Form 940 (federal unemployment) by the same date. Your final SUI wage report for the year follows the normal quarterly schedule. Because Tennessee has no income tax, there's no state W-2 reconciliation return to file at year-end.

Skip the Paperwork and Let PDS Run It

All of this is manageable for a small team, but it takes real time every pay period, and the deadlines don't forgive being late. Because Tennessee has no state income tax, payroll here is mostly federal filings and deposits plus quarterly SUI reporting, and Pacific Data Services, in business since 1969, handles that combination remotely for Tennessee employers. No software subscription to babysit, and no wondering whether a deposit went out on time.

See how Pacific Data Services handles Tennessee payroll remotely →

Frequently Asked Questions

Do Tennessee employers withhold state income tax?

No. Tennessee has no state income tax on wages, so there is no state withholding form and nothing to remit for withholding purposes. The old Hall Tax on interest and dividends was fully repealed starting with tax year 2021, so Tennessee payroll runs on federal withholding plus the state SUI tax alone.

How often must Tennessee employers pay employees?

Tennessee law requires wages to be paid at least once a month. Employers who pay monthly must pay by the 5th of the following month, while employers who pay semimonthly or more often must pay wages earned in the first half of the month by the 20th, and wages from the second half by the 5th of the next month.

When is workers' compensation insurance required in Tennessee?

Most Tennessee employers must carry workers' compensation insurance once they have 5 or more full-time or part-time employees. Construction industry employers must carry coverage starting with their very first employee, with no 5-employee threshold to rely on.

What is the SUI wage base and new employer rate in Tennessee for 2026?

For 2026, Tennessee's SUI taxable wage base is $7,000 per employee, and the standard new employer premium rate is 2.7%. Tennessee sets rates twice a year based on the state trust fund balance, so employers should confirm the current rate table each January and July.