WageTime is payroll for professional services firms: $50 a month per company plus $10 per person paid that month, with unlimited runs, so semi-monthly pay, off-cycle bonus checks, and a quiet January all cost what they should. Salaried associates, hourly support staff, tiered commission for the business developers, and 1099 contract professionals settle in one run, with W-2s and 1099s both included at year-end. And when someone moves to another state, withholding follows them: all 50 states plus Puerto Rico, 11,000+ local jurisdictions, resolved from the address itself.
Professional, scientific, and technical services runs about 1.79 million US establishments employing 10.8 million people (BLS), and most of them are small: a few partners, a dozen professionals, an office manager, and a payroll that quietly mixes four legally different kinds of pay. Average billable utilization across professional services organizations fell to 66.4% in 2025, a record low (SPI Professional Services Maturity Benchmark), so every firm is watching hours obsessively. The cost side of those hours deserves the same instrumentation.
The IRS has held since 1969 that bona fide partners are not employees of their own partnership: partner pay is a K-1 matter, not a W-2 one, while an S-corp owner must run reasonable W-2 wages before taking distributions. Add salaried associates, hourly admins, and a contract professional or two, and one small firm is running four tax treatments at once. Promote an associate to partner and payroll has to let go of them mid-year, cleanly.
The federal exemption tests care about duties and a salary floor ($684 a week after courts vacated the 2024 increase), not about whether you call someone salaried. DOL opinion letters treat paralegals as presumptively non-exempt, and the same logic reaches bookkeepers, billing coordinators, and admin staff. Busy season at a CPA firm is exactly where unpaid Saturday hours turn into a wage claim, and a billable-hours bonus for a non-exempt employee re-prices that overtime retroactively.
Your best candidate lives two states away now, and hiring them creates registration, withholding, and unemployment obligations where they sit. New York and Pennsylvania tax some remote days as if they were worked at the office under convenience-of-the-employer rules, and New Jersey and Connecticut retaliate in kind. A downtown office adds municipal wage taxes on top: Philadelphia alone withholds at roughly 3.7%.
Hours live in your practice management or PSA system, coded to matters and projects at billing rates, feeding utilization dashboards to the decimal. Then payroll runs on a different planet: someone re-keys non-exempt hours, reconstructs bonus inputs, and labor cost per client or matter never gets computed at all. Utilization tells you what an hour earns. Almost nobody can say what it cost.
Year-end bonuses, billable-hour thresholds, origination credit, new-business commissions: variable pay is how professional firms compete for people. On per-run-priced payroll, every off-cycle bonus check is an invoice, so bonuses get batched, delayed, or pushed through as ad-hoc “adjustments” that distort withholding and the GL alike.
A few high earners plus a small support staff is the textbook way to fail 401(k) nondiscrimination testing, and a failed test means taxable refunds to the very partners the plan was meant to serve. Meanwhile state auto-IRA mandates now reach firms with a handful of employees, so “we’ll set up benefits later” stopped being an option.
The answers below are sized for a managing partner’s Tuesday, not an HR department’s roadmap.
How do you pay a firm where nobody is paid the same way? WageTime runs them side by side: salaried exempt professionals, hourly support staff with overtime, business developers on base plus tiered commission structures, and your 1099 contract professionals in the same run as W-2 staff, with W-2s and 1099s both included at year-end. Bonus and off-cycle runs cost nothing extra, so the year-end bonus batch and the mid-quarter spot bonus go out when they should instead of waiting for the next scheduled Friday. Pay frequency is configuration, not a plan tier: weekly, biweekly, semi-monthly, or monthly, per company. And when an associate makes partner, their W-2 record closes cleanly mid-year while the rest of the run carries on.
| Person | Comp track | Basis | Amount |
|---|---|---|---|
| Elena Marsh senior consultant | Salaried exempt | Semi-monthly salary | $4,375.00 |
| Dana Okafor business development | Base + tiered commission | $2,500.00 base + $1,410.00 commission | $3,910.00 |
| Ruth Calder office manager | Hourly non-exempt | 86.5 hrs at $25.00 | $2,162.50 |
| Miguel Reyes contract analyst | 1099 contractor | Project settlement | $5,200.00 |
Replaces the commission spreadsheet, the bonus tracker, and the contractor-invoice pile that never agree with the register.
Which state do you withhold for when an associate works from another one? WageTime resolves it from the addresses themselves: every work and home address is geolocated to rooftop level across 11,000+ local jurisdictions, all 50 states plus Puerto Rico, with state reciprocity, withholding overrides, and effective-dated tax setup for the mid-year move. Hire the analyst in Denver and their state comes online from the first check; the hybrid associate splitting weeks between a New Jersey home and a New York office carries the setup their situation calls for, adjusted deliberately instead of discovered at year-end. Every federal, state, and local filing and deposit is handled automatically, and a firm with multiple entities files each EIN under its own account with one login across the group.
| Person | Home / office | Setup applied | State |
|---|---|---|---|
| J. Whitfield remote | Charlotte NC | Work-state withholding | NC |
| A. Brennan hybrid | Hoboken NJ · NY office | NY withholding, NJ resident credit tracked | NY |
| L. Osei office | Philadelphia PA | Philadelphia wage tax applied | PA |
| T. Vance remote | Denver CO | New-state setup effective Jul 1 | CO |
Replaces the call to your CPA that starts with “so our new designer lives in Colorado” and ends with three registration forms.
How do billable hours connect to payroll cost? In WageTime, time tracking flows straight into payroll, and we import clock hours so there’s no double entry: tell us your practice management, PSA, or time-and-billing system on the demo and we’ll confirm the exact flow for your setup. Hours and pay are coded to jobs and cost codes, with codes up to 40 alphanumeric characters adjustable to your matter, project, or client numbering, so labor cost reports by engagement instead of one firm-wide blob. Your utilization dashboard already prices the revenue side of every hour; this is the cost side, from actual payroll instead of a blended guess. Finished payroll posts to QuickBooks mapped by department, with a configurable GL export (CSV, IIF, fixed-width) for everything else.
| Client / job code | Staff | Hours | Labor cost |
|---|---|---|---|
| Meridian Foods MERID-BRAND | 5 | 214.0 | $9,416.00 |
| Halstead Health HALST-WEB | 4 | 168.5 | $7,245.50 |
| Bluff City Tourism BLUFF-CAMP | 3 | 96.0 | $4,032.00 |
| Internal / new business INT-PITCH | 6 | 58.5 | $2,574.00 |
Replaces the quarterly exercise where someone multiplies headcount by a blended rate and calls it project cost.
Are salaried employees automatically exempt from overtime? No: exemption turns on duties and a salary floor, and DOL opinion letters treat paralegals, like much firm support staff, as presumptively non-exempt. WageTime keeps the hours side defensible: time tracking flows into payroll, timesheets carry employee attestation, audit-ready change logs, and locking, and break and meal rules with rounding options are configured per your policy. When a non-exempt employee works two rates or roles in one week, overtime computes on the weighted-average regular rate automatically, with minimum-wage processing underneath every hour at federal, state, and local levels. And a billable-hours bonus for a non-exempt employee runs as a pay code inside the same engine, not as a side calculation someone remembers in April. Busy season becomes four extra lines on an attested timesheet instead of a stack of reconstructed Saturdays.
| Person | Role | Reg / OT hrs | Period pay |
|---|---|---|---|
| Sam Delgado non-exempt | Staff accountant | 80 + 12 OT | $2,744.00 |
| Nora Kim non-exempt | Bookkeeper | 80 + 6 OT | $2,136.00 |
| Ivy Chen non-exempt | Client services coordinator | 80 + 9 OT | $2,150.50 |
| Reg Whitaker non-exempt | Admin assistant | 78 + 0 OT | $1,638.00 |
Replaces the April true-up when someone finally counts the busy-season Saturdays.
What has to run behind a package that keeps professionals from leaving? In WageTime, 401(k) administration enforces annual IRS limits: elective deferrals stop automatically at the §402(g) cap, with the employer match applied per your plan’s terms, so a partner’s December deferral doesn’t become February’s correction. Benefits elections sync to payroll deductions each cycle, and enrollment data is reconciled against carrier data to catch mismatches before they compound. Crossing 50 full-time equivalents? ACA eligibility, hours-of-service, affordability, and look-back measurement are tracked from payroll data, with 1094-C and 1095-C forms generated and e-filed. And the licenses your firm runs on (CPA licenses, bar admissions, PE stamps, producer licenses) live on the employee record with date-driven expiration alerts at 30, 60, and 90 days.
| Person | Election | This period | Status |
|---|---|---|---|
| Grace Lin PE | 12% traditional | $625.00 | Nearing annual cap |
| Omar Haddad project manager | 6% + employer match | $270.00 | On track |
| Faith Mbeki civil engineer | 8% Roth | $310.00 | On track |
| Neil Prasad principal | 15% traditional | $780.00 | Nearing annual cap |
Replaces the January spreadsheet reconciling carrier invoices against what payroll actually deducted.
Bona fide partners are generally not employees of their own partnership for employment-tax purposes (IRS Rev. Rul. 69-184): partner compensation typically flows as guaranteed payments on a K-1, not a W-2. How your firm structures that is a decision for you and your CPA. WageTime runs everyone else: W-2 professionals and staff, 1099 contract professionals, and multi-entity groups under one login.
The IRS expects S-corp shareholder-employees to take reasonable W-2 compensation before distributions, and it can recharacterize distributions as wages when they don’t. What “reasonable” means for your firm is your CPA’s call. In WageTime, the owner’s W-2 payroll runs alongside the rest of the team, with every federal, state, and local filing handled automatically.
No. Exemption depends on a duties test plus a salary floor ($684 per week federally, after the 2024 increase was vacated in court), and several states set higher bars. Paralegals and much firm support staff are presumptively non-exempt per DOL opinion letters. WageTime tracks their hours with attestation and locking, and computes overtime automatically, including weighted-average overtime on multi-rate weeks.
Generally the state where the employee actually works, and a few states add convenience-of-the-employer rules that can reach remote days too; the specifics are fact-dependent. WageTime geolocates every work and home address to rooftop level across 11,000+ local jurisdictions, applies reciprocity and withholding overrides, and files in every state and locality automatically.
Inside WageTime, we import clock hours so there’s no double entry: tell us your practice management, PSA, or time-and-billing system on the demo and we’ll confirm the exact flow for your setup. Those hours carry job-cost codes matched to your matter or project numbering, so payroll and labor-cost reporting come from the same import.
$50 a month for the company plus $10 for each person actually paid that month: a 10-person firm is $150 in a normal month. Runs are unlimited, so semi-monthly cadence, off-cycle bonus checks, and a partner distribution month with fewer people paid all cost exactly what the formula says. No long-term contracts; cancel anytime.
The commission tiers, the busy-season timesheets, the remote roster, and one contractor you’re not sure about. Twenty minutes with a payroll specialist on a live demo company: you’ll see a mixed W-2 and 1099 run, multi-state withholding resolved from addresses, and labor cost coded to your matters and projects.
Book a 20-minute demo