Summer Payroll Pitfalls: How to Stay Compliant with Seasonal Staff

Summer Brings the Heat—And Payroll Complexity

Summer is prime time for growth in home service industries. More jobs mean more hands on deck—and for many business owners, that means hiring seasonal staff. Whether it’s extra field technicians, temporary office help, or subcontracted crews, your payroll process needs to shift to keep up.

But here’s the catch: summer payroll isn’t as simple as cutting a few extra checks.

With seasonal hires come a host of potential pitfalls—from tax misclassification to overtime violations and underreported wages. These compliance missteps can result in fines, audits, and damaged employee trust.

In this guide, we’ll walk you through the most common summer payroll mistakes and show you how to stay fully compliant while managing seasonal growth with confidence.

Section 1: Understanding Seasonal Employment

What Is a Seasonal Employee?

A seasonal employee is someone you hire temporarily during your business’s busy season, typically fewer than six months per year. For home service businesses, that often means:

• Landscapers for summer maintenance

• HVAC technicians for cooling system repairs

• Pool cleaners and pest control workers

• Construction laborers during dry months

Why It Matters

Seasonal staff are still employees—not independent contractors—unless you meet specific IRS and Department of Labor (DOL) criteria. Misclassifying them can result in steep penalties.

Section 2: Common Summer Payroll Mistakes (And How to Avoid Them)

1. Misclassifying Workers

One of the most common (and costly) errors is treating seasonal employees as independent contractors to avoid payroll taxes.

According to the IRS, one in five small businesses misclassifies workers, leading to potential fines of $50+ per misclassified employee per day, back taxes, and interest.

How to stay compliant:

• Use the IRS Common Law Test: If you control how, when, and where the work is done, it’s an employee.

• Use Form W-4 for seasonal employees.

• Only use contractors if they control their schedule, bring their own tools, and offer services to multiple clients.

2. Ignoring Overtime Laws

Just because someone is temporary doesn’t mean they’re exempt from overtime.

Under the Fair Labor Standards Act (FLSA):

• All non-exempt employees must receive 1.5x their regular rate for any hours worked over 40 in a week.

• This includes seasonal and part-time employees.

⚠️ In 2023, the DOL recovered over $250 million in back wages for wage and hour violations—many involving overtime mismanagement.

3. Failing to Withhold Payroll Taxes

Seasonal employees require:

• Federal income tax withholding

• FICA (Social Security and Medicare)

• State income taxes (where applicable)

• Unemployment tax contributions

Pro Tip: Set up payroll software like QuickBooks Payroll to auto-calculate withholdings—even for short-term employees.

4. Skipping New Hire Reporting

All employees—including temporary and seasonal—must be reported to your state’s New Hire Reporting Agency within 20 days (or less in some states).

This is critical for:

• Child support enforcement

• Unemployment tracking

• Preventing fraud

5. Overlooking Minimum Wage and State Laws

Many states have higher minimum wages or unique laws for minors and seasonal labor. If you operate across state lines or hire teen workers, double-check:

• State-specific wage laws

• Break/lunch time rules

• Work-hour limits for minors

Section 3: Payroll Tips for Managing Seasonal Teams

Tip 1: Use Time Tracking Tools

Manual time cards don’t cut it when you’re managing a mix of full-time and seasonal workers. Use tools like:

• TSheets or QuickBooks Time: Track hours by employee and job

• ClockShark: Geofenced clock-ins for crews on the move

This prevents payroll errors and protects you during disputes.

Tip 2: Create Unique Payroll Codes

Set up payroll codes by employee type (e.g., “Summer Technician”) so you can easily:

• Track costs by role

• Measure seasonal payroll expenses

• Stay audit-ready

Tip 3: Offer Direct Deposit and Self-Service Portals

Seasonal employees often want fast access to their pay. Use payroll systems that offer:

• Direct deposit

• Online paystubs

• Mobile access to W-2s

It’s faster for them—and saves your admin team time.

Tip 4: Budget for Payroll Tax Burdens

Even seasonal staff come with payroll tax costs. On average, you’ll pay:

• 7.65% for FICA

• 6% for FUTA (Federal Unemployment Tax)

• 2–5% for state unemployment (varies by state)

Tip: Add 15–20% to your wage budget when planning for seasonal hires.

Section 4: Real-Life Example—How a Landscaping Company Saved $12K in Fines

A Chicago-based landscaping business hired 15 temporary summer workers in 2023 but classified them all as 1099 contractors. After a routine state audit, they were hit with:

• $8,500 in back payroll taxes

• $3,600 in misclassification penalties

After partnering with Out of the Box Technology, they:

• Switched to proper W-2 classifications

• Implemented QuickBooks Payroll

• Created a separate seasonal staff workflow

This simple shift prevented future fines and simplified tax filing.

Section 5: How to Stay Compliant with Teen Workers

Summer often means hiring high school or college students—but there are special rules.

Key Considerations for Minor Employees:

Source: U.S. Department of Labor – Youth Rules

Make sure you:

• Verify age with ID or work permit

• Avoid assigning hazardous tasks

• Provide breaks as required by law

Section 6: Choosing the Right Payroll System for Seasonal Work

When your workforce fluctuates, your payroll system should flex with it.

Top Features to Look For:

Recommendation: Use QuickBooks Online + QuickBooks Payroll, managed by Out of the Box Technology, to ensure compliance and ease of use.

FAQs: Summer Payroll and Seasonal Hiring

Can I pay a seasonal worker as a 1099 contractor?

Only if they meet IRS guidelines for independent contractors. If you control their work schedule, provide equipment, or train them, they’re likely an employee.

Are seasonal employees eligible for overtime?

Yes. All non-exempt employees—including temporary and part-time workers—must be paid 1.5x their rate for any hours over 40/week.

Do I need to withhold taxes for a part-time summer worker?

Yes. Even short-term employees must have payroll taxes withheld unless they qualify for special exemptions (very rare).

How should I classify teenage workers?

Teen workers are still employees and subject to all payroll rules. However, there are additional labor restrictions depending on age and state laws.

What happens if I don’t report new seasonal hires?

Failing to report new hires can result in state penalties, potential tax issues, and non-compliance with child support enforcement efforts.

Final Thoughts: Summer Doesn’t Excuse Sloppy Payroll

You’ve got customers to serve, teams to manage, and work orders piling up. But skipping payroll compliance in summer is a recipe for audits, fines, and operational headaches.

The good news? You don’t have to do it alone.

At Out of the Box Technology, we specialize in helping small business owners in seasonal industries run smooth, compliant, and cost-effective payroll systems. Whether you need to set up a new hire flow, fix misclassified employees, or outsource your payroll entirely—we’ve got your back.

Get Help Managing Your Summer Payroll Today

Need help cleaning up your seasonal payroll process or getting ready for a surge in summer hiring?

For those seeking expert guidance, Out of the Box Technology offers tailored bookkeeping services, QuickBooks setup, and support to ensure your business runs smoothly and stays compliant.