Cannabis Payroll Processing: What Are the Required Steps?

Processing payroll for cannabis employees can be complex and much more strenuous than processing payroll for the average business. However, there are a few key steps that businesses can follow to ensure that their employees are paid accurately and on time.

How to Process Payroll for Cannabis Employees

Due to the unique banking and regulatory challenges of the industry, processing cannabis payroll is no simple task. That is why it is crucial to partner with a Cannabis Payroll Service that understands the industry inside and out. However, understanding why cannabis payroll companies are important is just the first step to success in the industry.

Once you have understood how to set up cannabis payroll, you are ready to start paying employees. 

Aside from things that every payroll manager should know, here are the steps to paying cannabis employees:

Step One: Choose a Cannabis-Friendly Payroll Provider

Not all payroll providers are willing to work with cannabis businesses due to the challenges of the cannabis industry, so it's important to choose one that has experience and expertise in the industry.

A cannabis-friendly payroll provider will be able to help you navigate the unique challenges of cannabis payroll, such as banking restrictions and tax regulations.

Step Two: Collect Employee Data for Payroll

Once you have chosen a payroll provider, you will need to collect certain information from your employees, such as their name, address, Social Security number, and tax withholding information.

You will also need to track their hours worked and pay rate.

Step Three: Calculate Wages and Taxes

Once you have collected employee information, you can begin calculating their wages and taxes. In order to do so it is essential that businesses learn all they can about 280E compliance.

This can be a complex process, but your payroll provider will be able to help you. It is important to note that cannabis businesses are subject to the same tax laws as other businesses, so you will need to withhold the appropriate federal, state, and local taxes from your employees' paychecks. 

It is still a good idea, however, to ensure a proper understanding of cannabis payroll tax reporting.

Step Four: Generate Cannabis Paychecks

Once you have calculated wages and taxes, you can generate paychecks for your employees.

This can be done electronically or manually. If you are generating paychecks manually, be sure to sign each paycheck and include all of the required information, such as the employee's name, address, Social Security number, pay period, and amount of pay.

Step Five: Deliver Cannabis Paychecks

Once you have generated paychecks, you need to pay your employees.

This can be done by direct deposit, check, or cash. If you are paying your employees by cash, be sure to keep detailed records of all cash payments.

Other Things to Consider When Paying Cannabis Employees

In addition to the above steps, there are a few other things that cannabis businesses should keep in mind when processing payroll.

Ensure Cannabis Compliance

Make sure you are compliant with all applicable laws and other cannabis HR regulations.

Cannabis payroll is subject to a variety of federal, state, and local laws and regulations. It is important to make sure that you are in compliance with all of these laws and regulations in order to avoid penalties and fines.

Keep Accurate Cannabis Records

Cannabis businesses are required to keep accurate payroll records for a minimum of four years. This includes records of employee hours worked, wages paid, and taxes withheld.

Cannabis employers should also ensure that they properly track and record cannabis business expenses.

Use a Cannabis Payroll Service

Payroll software can help you automate many of the tasks involved in payroll processing, such as calculating wages and taxes, generating paychecks, and paying your employees.

This can save you time and money, and help you avoid errors.

Get Started

Need help processing payroll for your cannabis employees? While ensuring that you use best practices for cannabis payroll is important, having a cannabis payroll company at your back is doubly so. 

PayNW is a leading provider of payroll services for cannabis businesses. We have the experience and expertise to help you navigate the unique challenges of cannabis payroll, and we can help you ensure that your employees are paid accurately and on time.

Contact us today to learn more about our payroll services.