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Mistakes to Avoid for Effective Payroll

11 Jul

Avoiding federal payroll compliance errors can save HR a lot of time and money. There are certain pitfalls as common as they are easy to avoid, while knowledge pertaining to these errors will help keep them out of your accounting.

Classify your co-workers correctly

Exempt or nonexempt? Employee or independent contractor? If you don’t know where employees fall in your company’s infrastructure, chances are you may not be submitting the right information to payroll, let alone the IRS. Failing to correctly report a worker’s status can result in a full overhaul of your accounting, an expensive and embarrassing process.

An exempt worker isn’t covered by the Fair Labor Standards Act (FLSA), so their hours aren’t paid individually. Rather, they get a set wage, regardless of how many hours they do or do not work. A nonexempt employee in the same circumstances would be entitled to an hourly rate plus time and a half for any hours worked past 40 in a single work week.

If you’re considering taking a shortcut on payroll software by classifying all workers as independent contractors, make sure they actually are first. An employer is only required to submit a 1099-MISC for all contract workers at the end of the year. Misclassifying any employee, though, can result in payroll compliance fines and possibly a lawsuit if he has been unjustly disallowed access to programs.

Take the right taxes

Once you know where each employee falls, make sure your payroll software is up to date and your HR professionals are trained on current practices as well. New legislation can change the amount of payroll withholding on everything from healthcare to Social Security, and programs within the company could change premiums or benefits at any time. If communication is a problem, this can result in internal dilemmas, but improperly calculating federal taxes can be a much bigger problem if the government catches it before internal accounting.

Mind the details

Retirement programs, life insurance and tax savings accounts all need to be calculated and reported correctly on W-2 and 1099-MISC forms where applicable. Incorrect information supplied to an employee and the IRS can lead to a spreadsheet nightmare of trying to track down the issue and sort out errors, creating a time-consuming and expensive problem that could easily have been avoided. Taking care in filling out forms may seem tedious, but it’s preferable to having to do everything over again and losing money for the business.

Need more information on government compliance? Visit our library of Human Resources Best Practices and Tools to download whitepapers like Avoiding Costly Fines: A 2012 Guide to Compliance Mandates or to view recorded webcasts like Wage and Hour—Staying on the Right Side of the DOL.

 

The Last Mile in Employee Services for the Automated HR Department

25 May

HR Employee Not Utilizing Carrier ConnectionsIn the last ten years most employers have invested quite a bit of capital on HRMS infrastructure such as online employee self service and benefits enrollment software.

Most of the investments have been focused on improving the administration, the efficiency, and productivity of the HR organization and making it easier for employees to communicate with HR and to make the HR information more accurate –  an inward focus.  But now, especially with health care reform legislation, there are new challenges in the areas of benefits administration that are coming about for employers and for insurance carriers, particularly in the areas of eligibility management and enrollment reporting.

So if you take these new challenges with where employers are today with their HR automation investments, it’s more important than ever to automate “The Last Mile” of the benefits admin process, and that’s the enrollment communication with the carriers on the back end.

Several Important Points HRMS Execs Are Realizing About the Last Mile

Carrier connections defined:

It is the process of automating the benefit enrollment data management through pre-built secure and fully-managed data integrations between HR system of record and all benefit insurance carriers and providers.  It’s an end-to-end communication process from your system to each of your carriers.

Automating carrier connections:

  • Improves the employee benefit experience at the point of service.
  • Offers opportunities to reduce HR Department overhead burden associated with benefits admin.
  • Elimination or reduced cost “leakages” – caused by inaccurate or inefficient reporting with the insurance carriers.
  • Better positions HR department to comply with current and evolving legislative and regulatory requirements.

Key Capabilities Needed

For an answer to enrollment communication with the carriers (carrier connections) the vehicle used must:

  • Be simple and reliable.
  • Be secure and private.
  • Support all benefit carriers.
  • Handle special enrollment reporting procedures.
  • Catch “missed enrollments”.

The Big Pay Off

All of this reduces HR administration burden.  A look at how many HR depts report enrollment changes to your carriers today will be a first clue to the increased efficiency a well designed connection carrier brings to the table. Enrollment without connection carrier process in place includes most of the following:

  • A carrier required custom report.
  • A multiplicity of benefit forms, paperwork.
  • Visiting a carrier web portal.
  • Signing on through a secure log-in.
  • Entering data manually. 

After all that there is no assurance that the carrier enrollment records are correct unless an enrollment audit or a data reconciliation is regularly completed.

Reduce Costs

Let’s frame this as enrollment cost “leaks”.  An enrollment cost leak is where, for instance, the employer is overpaying premiums for employees or dependents that should have been terminated off of coverage.

Then there is the opposite scenario or dependents that should be covered – you think they are covered, they assume they are covered but they haven’t been picked up on the premiums, and they might even actually be denied service. So in either case, you’re either underpaying now and overpaying later.

With new legislation it’s going to be harder to reconcile these past premium overpayments and get refunds for them. 

A well designed connection carrier system through its regular and automatic updating capabilities, tends to plug up these cost leaks so they don’t occur.

Are you doing all you can to ensure that cost leaks aren’t occuring or that your HR staff isn’t overburdened with administration work regarding benefits enrollment?

 

Payroll Cards: What Are They and Why Are They Important?

16 May

Sage Payroll PaycardIn response to the tens of millions of “unbanked” workers in the U.S., many employers have begun issuing payroll cards to their employees. These items work just like debit cards from banks but allow workers to dip directly into their company payrolls, as opposed to the more resource-intensive process of cutting checks.

Most payroll debit cards allow all employees within an organization to be enrolled in direct deposit, regardless of existing banking relationships. There are a number of benefits for both employers and workers. For example, companies are able to reduce the cost of issuing paper paychecks. Such devices are also more secure, as they minimize the risk of check fraud, offering an additional employee benefit as a result.

Workers benefit most directly from their convenience and security, as their wages are immediately available on payday. Furthermore, individuals without checking accounts or established bank relations do not need to establish one, and families can even receive multiple payroll cards for use.

Businesses of all sizes are looking for ways to improve payroll efficiency and employee satisfaction while also maintaining adequate security standards. Complete electronic payroll systems allow employers to meet these goals.

With the growing popularity of payroll cards, especially amid rising discontent with banks, a number of HR management and payroll associations – including the Association for Financial Professionals, Electronic Payroll Coalition, Electronic Payments Association and the American Payroll Association – have collaborated to develop a series of core principles for payroll debit cards. Employers and payroll managers considering electronic payroll systems should consider some of these standards:

  • Employee should have access to full wages at least once each pay period without cost.
  • Terms and conditions should be disclosed in a clear manner before the employee is enrolled in the payroll card program.
  • Employees should be allowed to check account balances via telephone or electronic platforms, such as online networks, and these services should be offered without cost to the employee.
  • The funds in a payroll card account shall not expire.
  • If the card has an expiration date, the employee should be provided with a free replacement card prior to that deadline.

Have you considered offering your employees access to a payroll card?  Learn more by visting the Sage Payroll Paycard website.

The Top 5 HR Trends to Watch in 2012

2 Jan

The Top 5 HR Trends to Watch in 2012As we close the books on 2011, many businesses are looking at strategies and tactics for the new year. Given recent waves of market uncertainty, this year poses a unique challenge for decision-makers and C-level executives. While there are numerous financial considerations ranging from healthcare compliance to tepid consumer confidence, human resource managers have been forced to align their practices with the evolving global economy.

With these considerations in mind, here are my five top HR trends to look for in 2012.

1. Succession Planning

With an aging U.S. workforce and an anemic job market, HR teams will need to develop strategies to help mitigate employee turnover and assuage executive departures. A Mercer survey released late last year found roughly one-third of U.S. workers are considering leaving their jobs, with younger workers more likely to quit.

The Mercer study pointed out that workers are feeling less attached to their organizations, both emotionally and psychologically. They don’t necessarily believe that the organization they work for has their interests in mind.

On top of low employee morale, the aging baby boomer generation will present even more challenges to HR managers. For these reasons, succession planning for leadership and high-skills professionals will be extremely important in 2012. Have you thought about how you could quickly replace certain positions at your company?

2. Social Media

While its role within the realm of marketing and customer service has been clear, social media has been more of an enigma to many HR professionals. Problematic workplace issues can arise when employees engage in social media without a formal company policy in place. For example, they may divulge trade secrets, violate confidentiality, or lessen their productivity.

The National Labor Review Board also ruled on a few cases this year regarding the role of social media in the workplace. Generally, the NLRB sided with employees and their freedom to post content without fear of work-related repercussions. However, savvy HR managers will tap the considerable benefits of a workplace social media strategy to engage employees.

3. Human Resources Technology

HR management systems and related technologies help boost efficiency and increase productivity in areas such as payroll compliance, employee scheduling, data management, recruiting, and security.

With a variety of budgetary, hiring, and regulatory constraints looming in 2012, HR managers and executives are apt to be overwhelmed. Demand will rise for HR technologies that help to allay these burdens.

 4. Aligning HR and Corporate Goals for Increased ROEI

In an uncertain business climate like today, HR mangers are consistently being asked to explain the costs and benefits of employee-related programs and benefits, their Return On Employee Investment or ROEI. But this is not readily quantified. Relative to other business units, HR departments cannot point to costs and revenues as a measure of effectiveness. This is a problem for HR managers. One evolving solution is “strategic alignment,” using HR metrics as appropriate. 

In broad terms, strategic alignment means using HR processes to align business units and individual employees with the strategic goals identified by senior management. For example, management needs clear, direct, and constant communication with employees to implement strategies. More specifically, it means that HR managers modify traditional HR processes—recruiting and hiring, employee retention and development, and compensation—to implement the strategies developed by senior management.

Human resource departments that align their goals with their organization’s goals will accomplish more and increase their productivity in 2012.

5. Healthcare Reform

The Patient Protection and Affordable Care Act will continue to be implemented in 2012, and it will impose new compliance burdens each year until 2018. While the law is likely to remain mostly intact, the U.S. Supreme Court is expected to make a monumental ruling on its constitutionality this summer.

Either way, HR managers will likely need to collaborate with other departments to address healthcare compliance standards. A recent Towers Watson survey found 38 percent of finance executives believe strategy development will be more of a shared role, compared to 24 percent among HR leaders.

Companies are only beginning to address the complex decisions triggered by healthcare, says Towers Watson. But these decisions will have a direct impact on the broader set of employee rewards.

So there you have it, my five key human resources trends to watch in 2012. I’d love to know what you think. Comment below or let me know on Twitter by replying to @SageHRMS!

 

How to Simplify Year End Payroll Processing and Compliance

7 Dec

Calculating Year EndAs 2011 draws to an end, companies large and small are closing out their payrolls to comply with state and federal reporting requirements. In addition, all employers are faced with the challenge of getting W-2’s to their employees.  Employers must give copies B, C, and 2 of Form W-2 to each employee and they must be received or postmarked by January 31, 2012.

Yet despite the clear advantages of HR software and automated payroll systems, many employers still rely on outdated methods of delivering W-2’s  and complying with payroll taxes and standards. The old way of doing things –  printing W-2’s  forms, addressing and stuffing them in envelopes and mailing them –  is simply unsustainable in today’s fast-paced, mobile economy.

Aside from the operational burdens associated with the old method, employers are forced to pay administration staff to complete such tasks, or worse, to pay knowledgeable and experienced HR workers to handle them, thereby pulling focus from more pressing workplace duties and responsibilities.

Some companies make pressures sealed W-2’s and checks, while others make machines that allow you to seal your checks and w-2’s, saving you the time from addressing and stuffing envelopes and avoiding the almost inevitable mix up that comes with placing one person’s W-2 in an envelope addressed to someone else.

Another solution is to take full advantage of HR technology that offers users the ability to create tax forms and file documents electronically. For a nominal fee services, such as Aatrix, allow you to have all your W-2’s filed with Federal and State, mailed to your employees, and posted online for future access.  Furthermore, reports can be automatically completed, reviewed and edited on screen, then e-filed in minutes for processing. These services ensure total compliance by including guaranteed delivery methods and eliminating filing expenses associated with printing or mailing activities.

TGIM: Rewards vs. Awards

28 Nov

Trophy - A Form of AwardToday we’re back with our TGIM series, or Thank Goodness It’s Monday.  Each Monday our posts will focus on employee engagement and we hope to hear your thoughts on Twitter using the #TGIM hashtag or with a reply to us @SageHRMS.  

Engaging employees is a constant challenge for managers. Factors ranging from the state of the job market to the natural lethargy of a Monday morning have the power to plague energy if not handled properly. Accordingly, managers often equip non-monetary incentives to keep workers confident, productive, and loyal.  It’s the type of incentives they employ though that impacts overall engagement levels. Usually, they boil down to this: rewards and awards. But what’s the difference?

Employee Awards

Employee awards are a fitting topic of discussion given the approach of the year’s end. While the enthusiasm for year-end awards tends to fluctuate from company to company, many organizations rely on them to inject some excitement into company culture. The end of the year is the perfect time to publicly acknowledge the specific accomplishments of individual employees. Organizations may want to create a host of categories and nominate several workers for each.

Some critics of these programs, however, argue that they isolate certain workers and may even breed resentment as a result. Proponents hold that they nurture healthy competition and engage workers by offering recognition. Even employees who are dissatisfied with their jobs may enjoy a spark of enthusiasm if granted an award. Another added benefit, that many of these awards are low to no cost to employers.

If you plan to initiate an awards program, you need to be careful about how it’s implemented. What kinds of traits do you want to address? There are a range of categories, such as most-improved, best salesperson, best attitude, top idea, most productive department, etc. Employers can also take a less serious approach, and offer awards in categories such as “funniest sales mistake” or “coolest office.”

Employee Rewards

Rewards programs are different in that they are ongoing and based on more measurable performance criteria, such as sales figures and growth projections. They are similar to awards programs in that they aim to motivate employees, but they differ in their fundamental strategy.

Rewards may be monetary – such as year-end bonuses and pay raises – or procedural – such as vacation days and scheduling benefits. They also vary in terms of their managerial strategy. Some rewards programs may be aimed at retaining or attracting talent, while others are focused on driving sales figures.

Like awards, rewards programs are usually based on individual performance and recognition. However, rewards tend to be less public, as they are focused on driving the motivation of an individual team member.

What are some other ways managers can engage employees through rewards? Let us know what you think on Twitter by tweeting with the hashtag #TGIM, or reply to us @SageHRMS.

The Salary Question

20 Sep

Over the course of an interview, hiring managers will ask the job applicant tough questions about work history, professional skills and future plans for growth. But as the session winds down and approaches the money topic, the tables will turn. Now you have to answer the difficult question.

What is the best way to bring the subject up and talk hard numbers? Here are a few ideas:

Survey the battlefield, and don’t go in unarmed. Before telling the applicant what you’re ready to give, ask him or her what kind of salary they are expecting and maintain a poker face. You will have to gently lower their expectations if the figure suggested is too high.

Have an open discussion. Employee pay is about more than the check – there may also be benefits, stock options, tuition reimbursement, the value of a short commute and more. Talk about these bonuses with the applicant to get a feel for the type of compensation he or she is looking for.

Don’t tie yourself to a price until you’re ready to offer the position. It’s better to give a price range and a summary of benefits rather than a concrete figure. Skill sets, past experience and salary history can all factor into the final offer.

Do you have a special technique for discussing pay?

Let HR Be HR

23 Aug

Empowering an Executive with HR AnalyticsSmall business owners, particularly founders, are understandably concerned about delegating responsibilities to employees or new hires. After building a company from scratch, it is difficult to trust new faces with tasks that the owner has come to perfect.

However, doing exactly that, delegating, is what it takes to grow a business. To adhere to old ways, to insist on certain methods, or generally discourage personal styles of doing business will only dampen a company’s productivity.

While micromanaging is rarely a valued management tactic, there is one area where it should be discouraged at all costs: human resource management.

Business owners want to focus on building team of people they can trust, but sometimes they let their own personal preferences get in the way of making important hiring decisions.

Chief executives and other managerial leaders need to leave compensation, benefits, healthcare and other personnel strategies – no matter how consequential – to the HR specialists. Of course, input and communication should always be stressed.

Interested in learning how human resources can provide strategic information to the C-Suite?  Download the What the CEO Needs From Human Resources white paper now.

Know Your Benefits Cost Per Employee

17 Aug

Health Benefits Can Be CostlyWith the continual uncertainty of the job market, employers need to recognize a few basic truths. First, conditions will eventually improve, even if it takes years. Second, when the market does begin to progress, it will become more difficult to hold on to talent and even top performers, as many will begin seeking opportunities elsewhere.

For that reason, HR departments need to implement effective retention strategies that include competitive compensation structures and benefits programs. More importantly, as this trend unfolds, HR teams need to assert their role as part of a greater corporate strategy.

Compensation may be the most costly aspect of running a business, but employee perks and benefits, which are usually credited for generating retention levels, are the second most expensive budget segments.

In recent years, the cost of benefits has been growing even more quickly than wage gains, especially with the skyrocketing cost of healthcare insurance. In fact, healthcare costs are also exceeding inflation rates and generating waves of uncertainty regarding compliance with new regulations such as the Patient Protection and Affordable Care Act of 2010. Accordingly, HR executives are finding a larger, more important role within the C-suite and executive strategy.

Chief executives need to leverage the most accurate data available in order to forecast revenue and expenses over extended periods of time – be it a year, two years or even five. However, HR planning is notoriously difficult, and given its emerging role within corporate and financial planning, assessment can become even more challenging.

For that matter, HR managers need to provide their CEOs and financial executives with HR expense projections for the coming year as soon as open enrollment is completed. Of course, such projections are much more difficult to obtain over longer time frames, so HR teams should narrow down projections as accurately as possible and include best- and worst-case scenarios.

Businesses also need to factor in the impact of healthcare legislation, as the new law is expected to roll out over the next decade, imposing new financial and regulatory burdens on small and large businesses all the while. For example, small firms that are not mandated to offer coverage for employees will need to weigh the ups and downs of doing so – while eliminating coverage may save money, it may also discourage workers and lead to departures.

To help paint a picture for executives regarding the company’s cost of benefits, HR teams need to provide them with an accurate assessment of the average employee’s share of total benefits costs. To do this, divide the total benefits costs by the total number employees. In drafting a benefits budget, be sure to Include healthcare costs, retirement plans, savings plans, tuition, life and AD&D insurance plans, reimbursement and automobile expenses.

How to Calculate the Benefits Cost per Employee

If the total benefits expense is high, HR managers need to provide the executive team with analysis that narrows down and targets what it is that is driving up costs. It may simply be rising healthcare premiums, in which case managers may want to adopt wellness programs to improve health or cut coverage for some employees altogether. Retiree benefits may also be racking the company’s benefits budget.

Such an analysis should also tackle how benefits are affecting employee retention and engagement levels. Draft ideas and strategies that could help contain and ultimately reduce these expenses.

Interested in learning more business metrics that can help human resources provide strategic information to the C-Suite?  Download our What the CEO Needs From Human Resources white paper now.

Why You Need to Provide Your CEO With A Compa-Ratio

10 Aug

HR Need to Help Determine Compensation StructuresIt used to be that human resources professionals were relied upon to manage data, diagnose problems and offer solutions for all concerns relating to employees and the various emotional factors that influence productivity levels.

But within the past several years, HR professionals have taken a strong footing within the day-to-day management and strategy concerns of running a successful business. After all, what drives a business can ultimately be delineated to its personnel, specifically their level of happiness and engagement, as well as the various strategies involved in hiring new talent.

Even so, what makes a business function is employee compensation – if workers are not afforded apt monetary rewards, productivity and retention rates will plummet. Even worse, poorly compensated workers – especially high-performers – may be lost to competitors.

However, payrolls are a business’ most expensive budget item, and over-compensation can inhibit corporate profitability goals. For this reason, CEOs need to engage directly with human resources executives to determine compensation structures that befit employee value.

HR departments should consider a number of factors in drafting compensation rates, including specialized skill sets and professional certifications, employee experience, the industry in question, business location and what competitors pay for similar skills.

Salaries are a frustratingly fragile business consideration. Deciding appropriate salaries is like striking a balance, with the need to reward and retain top performers on one end and a business’ bottom line on the other.

Strong salaries assert a business as an ideal employment opportunity and discourage departure to competitors, but they need to be as low as possible while still achieving such an end. Accordingly, chief executives and HR managers need to determine how much competitors are offering for equivalent positions and develop benefits packages that incentivize employees, including bonuses, stock options and retirement packages.

HR executives should provide corporate management with comparative analysis for both the industry and the business’ location. Determine how your company’s salaries compare to market rivals and how wages relate to your specific location’s average cost of living, as well as creative programs that can enhance the overall attractiveness of a compensation package.

In developing a compensation analysis for the C-suite, HR executives should include a common metric known as compa-ratio, which refers to the proximity of an employee’s salary to the midpoint of the salary range established by your company.

To determine compa-ratio, divide an individual employee’s salary (or the salary average of a group) by the median of the company’s salary range.

How to Calculate the Compa-Ratio

A compa-ratio of exactly 1.00 means a worker’s annual compensation is exactly at the company’s midpoint average, with higher figures indicating greater than the midpoint. These employees may be overpaid – a condition that requires careful maneuvering to address. Some HR managers would be better off leaving such salaries as they are to avoid discontent.

More importantly, employees who have been determined to have compa-ratios of lower than 1.00 are at risk for disengagement, dissatisfaction, lack of motivation and even departure.

This is one point where HR management begins to converge with business expansion and management and become an integral aspect of executive strategy. Tread this line carefully and be sure to involve the C-suite in such circumstances.

Interested in learning more business metrics that can help human resources provide strategic information to the C-Suite?  Download our What the CEO Needs From Human Resources white paper now.