Archive | Payroll Compliance RSS feed for this section

4 tips for managing payroll accurately

11 Nov

Payroll Accuracy

The recent “American Payroll Association “Getting Paid In America” survey revealed that 92 % of American employees are confident that their paychecks are accurate every pay period. The survey reported a three percent increase from last year.

Are your employees’ paychecks consistently accurate? This is essential in building employee trust, credibility, and ultimately, loyalty to the company. Payroll mistakes can lead to complex issues beyond employee compensation and can be very costly for your company.

Here are 4 tips to keep you on track with payroll:

Collect Time and Attendance

According to the Department of Labor, on December 1, 4.2 million Americans will become eligible for overtime pay under the new Fair Labor Standards Act changes. The new rule states that anyone who makes less than $47,477 annually will be required to receive time and a half pay for any overtime hours clocked. Collecting accurate time and attendance will become more important for small and medium-sized business around the country. Time and attendance software makes this process seamless and saves you time.

Constantly audit your processes

As your company continues to build and expand its workforce it’s important to constantly audit your payroll process. Auditing payroll allows you to verify all of your employee data, generate accurate reports, assess your current policies and update employee benefits.

Stay informed on new payroll tax and overtime laws

Payroll tax laws vary from state to state and are becoming more complicated every year. Staying informed with the latest rules and regulations related to the payroll is industry is important. Check out our recent blog post on how to staying compliant while working in payroll.

Accurately document onboarding data

As new employees come on board at your company a lot of new data is being added to your system. Compiling accurate data is vital when onboarding new employees into your database. Make sure you have a great checks and balance system in place to help make the on-boarding process a lot easier for you and your staff.

Worried about compliance? Five tips for getting payroll right every time

19 Oct

payroll compliance: tips on getting payroll right each time

Everyone finds it challenging to keep up with the ever-changing payroll laws. We’ve got five tips that will help you stay compliant and get payroll right every time.  

Don’t stress! You’ll be relieved to discover that majority of companies have experienced issues like this at some point.

According to a report by Ernst and Young in 2013, 59% of companies experienced local tax authority audits and queries. Similarly, according to research by Fundera, a third of businesses are penalized for payroll compliance mistakes.

Today, new laws are impacting compliance too.

In the US, many states are planning to raise minimum wage requirements over the next few years and enforce new overtime laws. Once these new changes go into effect payroll will be processed differently.

When you also factor in the challenges of an international workforce operating under different tax laws, it’s easy to appreciate the risks involved.

Errors in payroll not only leave businesses vulnerable to government penalties; they also negatively impact employee morale and performance.

According to research by Sage, more than a third of employees would seek alternative employment after just one payroll error.

In the same study last year, 90% said they would not want to work for a company with a history of payroll mistakes, over 50% said a payroll error would cause them to lose trust in their employer, and 44% said they wouldn’t enjoy their job thanks to an issue with payroll.

“Payroll is something employers must get right,” says Jonathan Dowden, Payroll Expert at Sage. “With a clear potential to transform staff morale, influence employee engagement and make an employer more appealing to current or future talent, it should be brought out from the shadows and into the spotlight for businesses.”

It is critical that businesses get payroll right by meeting government rules and regulations to keep employees on their side. Here are five tips that will help you do just that:

  1. Get personal information right

This may seem obvious but make sure you have the right personal information for each employee and get them to confirm their personal information with you in writing. Don’t be fooled into thinking this is a once-off job. Personal information that affects payroll regularly changes – e.g. employee status, addresses, marital status, bank account details etc.

Consider scheduling a regular check-in with your employees when you can confirm the personal information you hold on file is still up to date. Don’t assume the relevant departments will automatically keep you informed of changes in pay or hours. It’s your responsibility to maintain employee records accurately for the duration of their tenure.

  1. Don’t assume that people know as much as you do

Keep an open dialogue with your employees and don’t be afraid to check, check and check again that they understand their obligations in terms of remaining compliant, such as adhering to your expense policies or keeping overtime records.

Let’s be honest, when you start a new job you get a lot of paperwork that often finds its way into the drawer marked ‘Read Later’.

Just because a policy is put in place doesn’t mean that everyone’s has read it or knows how it works. You may need to educate employees regularly on their responsibilities and how to document expenses and overtime properly, so you don’t get caught out at the end of each month.

  1. Roll on enrollment

Are there certain benefit packages that your employees need to be enrolled in? Government websites are a good place to start when it comes to checking what employees need to be enrolled in and the contributions you and the employee are required to make.

  1. Understand local legislation

If your business operates across multiple states it’s important to be informed what the tax and payroll laws are for that region. It’s your job to keep up-to-date about these changes. Areas to monitor include: changes to legislation particularly concerning the minimum wage, employee tax reporting and maternity leave. Similarly, different states will have different laws covering how businesses handle expenses and overtime.

Many states have experienced legislative changes with payroll over the past year and are planning to enforce new rules in 2017.

Staying up-to-date with changing legislation is a challenge. Outsourcing payroll can help your organization stay-up-date on the local legislation that may affect your business.

  1. Don’t forget there are people on your team

Do you know who knows a lot about compliance? Your accounting department. If you have questions, you should set up a meeting them. They have a deep knowledge of accounting and compliance laws and can help you to make sure that you’re getting it right.

Keep tracking of a complex and constantly changing set of rules and regulations seems like an impossible task. While it’s unlikely that all of your colleagues are aware of the challenges you face, remaining compliant will help you protect the future of your business.

The expert’s guide: Five advantages to outsourcing payroll

13 Oct


Our new series, The Expert’s Guide, covers trends surrounding the human resources and payroll industry. One of the hot topics in the payroll industry right now is if outsourcing payroll operations is right for businesses. Preparing payroll can be tedious, time-consuming, and prone to human error, yet it’s an integral function for every business. Successful companies want to handle payroll efficiently, so it’s best to leave it to the experts. Your employees depend on you to get it right with payroll so they can get paid accurately and on time.

Today we are discussing five advantages to outsourcing your payroll needs.
1. Leave it to the experts who are skilled in payroll

Outsourcing your payroll operations will also allow you to focus on other areas of your business that need greater attention. Leave payroll to the experts who are certified professionals and up to date on the latest trends and laws in the industry.

2. Relief from tax penalties

Having an outsourced payroll service helps large and small companies stay compliant and avoid tax penalties. When it comes to your federal and state taxes, don’t cut corners when handling your payroll. An outsourced payroll service can help you avoid tax penalties by automatically and electronically filing on your behalf; filing quarterly and annually, making your state and federal tax payments, and processing your year-end 1099 and W-2 forms for your employees—all with little action required on your part. What’s more, if they make a mistake, many companies will pay the mistake and any penalties or fines that result.

3. Time-savings

You and your team will be amazed by the amount of time and money you will save by outsourcing payroll. Leaving payroll to an outside resource can help reduce the stress levels your existing team is facing to push out your weekly payroll reports.

4. Access to a customer service team round the clock
One of the major benefits of having an outsourced payroll system is having access to a customer service team before and after office hours. If a last minute emergency happens, an outsourced team can help relieve stress from your in-office staff having to put in extra hours to resolve the issue.

5. Constant back-up of payroll data
Does your company have the internal storage space to house all of your payroll data? In the digital world of payroll, it’s important that your data is constantly being backed up and on hand should you be audited. In some businesses, reports are pulled on a daily basis. Outsourcing payroll allows your employee data to be housed in a safe and secure place without taking up your valuable internal server space.

Handling payroll is often a daunting task for most small and medium businesses. With so many federal and state laws and looming deadlines, it’s not hard to see why you would want to put your payroll in the hands of a professional service. Deciding to use a full-service payroll service is a huge step, and it pays to do your research. Choosing the right one can give you peace of mind when dealing with payroll compliance and make your HR and payroll staff more productive by removing a time-consuming burden from their work day.

Interested in learning how to get payroll right and discuss outsourcing your payroll, contact us at 1-866-271-6050 or visit our website.

The 2016 FICA: What’s changed?

14 Mar

The Federal Insurance Contributions Act changes on a yearly basis. The amounts employees and other individuals must pay  into programs such as Social Security, Medicare and Supplemental Security Income can vary, based on each agency's funding needs. There were a lot of adjustments made in  2015 to take into account the enactment of particular provisions of the Affordable Care Act. With this in mind, what changes were in store for FICA in 2016? As it turns out, very few adjustments happened. For the vast majority of businesses in the United States, the situation is unchanged. This means a payroll manager has little to worry about.

The more things change
There were only two adjustments for FICA rates and thresholds for 2016, according to the IRS. These changes relate to election workers and domestic household workers such as nannies, cleaners and other similar employees. The former is important, since 2016 is a presidential election year.

For election workers, the threshold to pay for Social Security and Medicare increased. Now, they must earn at least $1,700 before they pay taxes for these two benefits, up from $1,600. Domestic household workers also received an increase in their threshold, from $1,900 to $2,000.

The more they stay the same
Otherwise, practically everything else in the FICA rates and thresholds remains unchanged, for there were no cost of living adjustments. Employers and employees should expect to pay 6.2 percent of their compensation to Social Security. This contribution has a taxable earning limit of $118,500 dollars.

For Medicare, employees and employers will pay 1.45 percent of their compensation in taxes. There is no limit on maximum taxable earnings. For those employees exceeding $200,000 in compensation, there is an additional 0.9 percent tax on Medicare. This brings the total rate to 2.35 percent.

Self-employed persons keep their total taxable pay rate of 15.3 percent, with 12.4 percent for Social Security and 2.9 percent for Medicare. The maximum amount a self-employed worker would pay into Social Security is $14,694.

For those around retirement age, the means test remains the same. The maximum earnings exempt limit while under retirement age – which is still 66 – is $15,720. In the year a person reaches the age of retirement, the exempt limit is $41,880 in the months before that birthday and no limit after. The maximum monthly benefit for workers at full retirement age is $2,639.

Supplemental Security Income remains the same as well. The payment standard is $733 for individuals and $1,100 for couples. Resource limits are $2,000 for individuals and $3,000 for couples.

Release Schedule for OT Rules

11 Feb

Employee overtime rules in the U.S. will change, the question is when? The Society for Human Resource Management reported the Department of Labor pushed back its original expectation for when updated overtime regulations would go into effect. Current estimates suggest this drastic change to payroll operations won't become law until late 2016, and even then, it may be a slow adoption process.

Here is what is currently known about the DOL's schedule for OT rules and how small businesses can prepare for the legislation:

The late 2016 start date
The DOL wants to raise the minimum salary threshold for overtime pay from $23,660 to $50,440. This would be a drastic increase and industry experts predict the final number will probably be something closer to $40,000.

The ongoing debates about terms is one of the reasons OT regulations keep getting pushed back. If current projections hold, rules will go into effect in late 2016 – July is a front runner. The DOL may push the deadline late enough, however, that businesses won't have to comply until 2017. At this point, companies may want to create projections for all possible outcomes but should favor a start date before the 2016 election.

The 2016 presidential election
Should a Republican nominee win the 2016 presidential race, it's quite possible the party will alter or outright kill the proposed changes to the overtime rules. For this reason, the DOL is motivated to pass the regulations before the election results.

If a Democrat wins, however, it's more than likely that he or she will be in complete favor of the changes. Small businesses should follow the election to anticipate schedule shifts. Depending who's in the lead, OT alterations could come much faster or slower than expected.

A phased-in approach
Using the current approach, businesses have 60 days to comply with OT rule changes. The election and the example of cities that passed similar regulations may create a different schedule for compliance, however.

It's possible the DOL will introduce regulations through a phased-in approach. The rules may pass incrementally, with the first part going into effect before the election, making it harder for a conservative president to stop it. This option is much more likely if the DOL regulations try to change a number of things like introducing automatic increases to the threshold and duties test to qualify applicants.

However and whenever the DOL passes the new OT rules, small businesses needs flexible HR software to respond to alterations. 

Exempt employee status change on the horizon

19 Jun

Coming soon to a workplace near you: changes in overtime pay for employees in a variety of positions. The Obama administration plans to unveil its new regulations for employers paying workers overtime wages. These new guidelines would, among other things, include a new definition for exempt and nonexempt worker classification.

Who is exempt?
Currently, employees are exempt from being paid for working overtime, which means more than 40 hours per week, if they are executives, administrative professionals or workers in the computer, creative arts, science or learning industries, according to the Department of Labor. The position an employee holds in one of these industries determines his or her exact exemption status. In general, however, exempt employees are salaried and make no less than $455 per week, or $23,660 per year.

Nonexempt employee status covers just about every other role in the book. These workers are entitled to one-and-a-half times their regular pay rate if they work more than 40 hours in one week, according to the Fair Labor Standards Act.

What changes are on the horizon?
The Obama Administration is considering increasing the threshold for exempt workers from $23,660 to somewhere between $45,000 and $52,000, according to Politico. If the DOL raises the threshold to $42,000, The Economic Policy Institute estimates an additional 3.5 million workers will be eligible for overtime pay. Should the DOL try to account for inflation and raise the threshold to cover the same percentage of workers as were nonexempt in 1975, the threshold would have to be $69,004, subsequently covering 65 percent of salaried employees in the U.S.

How can human resources prepare for this change?
While no final figure has been reached yet, HR departments across the nation may want to prepare now for future changes. Outsourcing payroll is a positive step in the direction of compliance. Rather than entering salaries and overtime hours and then adjusting overtime wages manually, an outsourced payroll solution automates this process, freeing up HR to focus on other pressing issues. Penalties for failing to comply with any DOL or FLSA stipulations could cost businesses money and their reputations, making it more difficult to recruit and hire top industry talent.

It's imperative HR professionals ensure accuracy when it comes to both salaries and overtime pay, especially if these changes do take place and companies across the U.S. are given a fixed amount of time in which to make their own employee status adjustments. 

Preparing for FLSA changes with personnel management software

21 May

Personnel management software can help businesses during times of intense transition, especially when it's unclear whether certain changes will occur.

Potential amendments to overtime exemption
Last year, President Barack Obama issued a memorandum calling for a revision of the Fair Labor Standards Act. Obama appealed to the secretary of labor, stating the existing overtime regulations for white collar workers needed to be streamlined and changed to include more employees. 

Since then, the U.S. Department of Labor has announced several different dates on which it planned to release the proposed regulation changes. First December 2014 and then February 2015 was supposed to be the date of issuance. Then, in March 2015, the Supreme Court ruled "a federal agency does not have to go through the formal rulemaking processes" when deciding to make amendments to current regulations. This means should the DOL decide to make significant alterations, it doesn't need to provide a period of time for the public to make comments.

However, it's now April, and there is no word on when employers can expect the definitive new regulations. That doesn't mean businesses should sit quietly and wait it out. There are actions employers can take to prepare themselves for any transition that may soon appear.

FLSA regulations today
Currently, the FLSA overtime regulations state any full-time worker who makes $455 per week, or $23,660 per year, or less can be considered exempt from receiving overtime pay for working more than 40 hours in one week. CNN Money stated employers classify these workers as exempt and make the choice to pay them salaries instead of an hourly wage. Today, only 12 percent of workers qualify for overtime.

Employees affected by this white collar exemption policy include managers, administrative professionals, sales workers, teachers and other professionals in careers that require advanced knowledge in science or the arts, according to the DOL website.

What regulations could look like tomorrow
President Obama's goal is to increase the baseline salary required for workers to be exempt from overtime pay. While regulators have proposed no exact increment, many speculate the DOL will mandate the amount is raised to somewhere between $42,000 and $52,000. This would make 3.5 million and 6.1 million more workers, respectively, eligible for overtime pay.

The Economic Policy Institute and the National Employment Law Project hope the threshold is increased even higher. Ideally, for these groups, the number would get bumped up to $51,168 per year. This would mean 47 percent of workers would be eligible for overtime pay.

How does this affect employers?
Even though no announcements have been made yet, employers cannot ignore this issue. After the Supreme Court decision in March, new guidelines could become reality at any time, and businesses need to be ready to accept the changes and transition.

One thing employers cannot do is forget about state laws. It's possible that the new stipulations could change the way employers reconcile differences between minimum wage guidelines in their states and the FLSA. Employers have to comply with both.

The Society for Human Resources Management stated employers should review current job descriptions to ensure duties, exemption status and responsibilities are clearly expressed to candidates. It also may take several months for the new guidelines to take effect. Should a business have to reclassify a large number of employees, companies may find themselves redefining certain roles or expectations. Preparing options now for potential changes later is a good idea. 

Personnel management software can help businesses not only prepare for a future change but also handle it better when the announcement finally rolls in. 

The Affordable Care Act: One year later

16 Jan

It's been about a year since the Affordable Care Act came into effect. The so-called employer mandate was originally to begin impacting companies in 2014, but was delayed until 2015, according to CNN Money. Now, companies are beginning to become more affected by the ACA than previously. Businesses will face fines if they don't offer coverage that isn't affordable or comprehensive.

Fortunately, there is an easy way to determine if a company will have to pay those fines or not. The first is very simple: If no employee chooses subsidized insurance from the ACA individual exchange and opts instead for either no insurance or a company policy, then the business will not incur the penalty.

After that, if someone chooses an individual plan versus the plan set up by his or her employers, then the company faces two more tests. The first is whether the insurance is affordable. If workers have to spend more than 9.5 percent of their income on insurance, it's not considered affordable.

The second test is comprehensibility. If the policy pays for at least 60 percent of the staff's entire medical expensive, plus offers other health benefits like prescriptions, then the plan is considered comprehensive.

What this comes down to for companies
Ultimately, what this means is that large businesses have all begun to make changes to their existing policies in order to guarantee compliance.

"Almost all large employers are having to tweak their benefits somewhat," said Larry Levitt, senior vice president at the Kaiser Family Foundation.

Remember that the obligation to provide health care doesn't apply if a company has fewer than 50 people. Businesses with 50 to 99 people will have to start providing health care in 2016.

Some companies are struggling to meet compliance
One business in Tennessee has been having trouble making its way toward complying with the ACA, according to NBC-affiliate WBIR.

"The main way it's affected us is we've seen our rates skyrocket. Over the last three years they've probably gone up 15 percent to 18 percent," said Terry Turner, owner and president of All Occasions Party Rentals in West Knoxville.

One of the issues with the new rule is that more employees are choosing their company's policy than before. Because of the influx of workers in various states of health, different businesses have been experiencing different levels of change in their rules.

Companies that will be affected in 2016 may wish to begin making changes to bring about compliance sooner rather than later. Those in charge of human resources planning have a responsibility to comply with the ACA.

What impact will the OFCCP’s proposed rule on wage data collection have?

2 Oct

The Office of Federal Contract Compliance Programs may not be a household name, but it assumes an important role for those who do business with the federal government.

Out of the ashes of the Employment Standards Administration came the OFCCP, as well as three other independent entities that report to the Secretary of Labor. In 2009, the agency assumed responsibility for enforcing contractual agreements relating to affirmative action and equal opportunity among federal contractors.

Specifically, the OFCCP provides guidance to businesses working with the federal government to understand regulations and perform compliance evaluations and investigations to ensure contractors are complying with government policies.

However, recent proposed changes to OFCCP guidelines will likely have a significant impact on human resource planning and will require federal contractors to adjust their internal processes to comply with the new rules.

What's expected under the new Equal Pay Report requirement?
The Department of Labor's recent proposal will likely change the way many federal contractors and subcontractors operate to some extent. It requires them to submit compensation-related information to the OFCCP. However, the proposal doesn't impact everyone, Inside Counsel explained. The change would affect federal contractors and subcontractors that:

  • File Employer Information report EEO-1
  • Have more than 100 employees
  • Are under contract with the government for at least $50,000
  • Have held the contract for a duration lasting more than 30 days

The OFCCP asks for companies that meet these requirements to supply an Equal Pay Report containing three specific pieces of information. First, contractors and subcontractors need to provide the total number of employees who fall under EEO-1 job categories by race, ethnicity and sex. Second, employers need to supply total W-2 wages following the same EEO-1 standards. Finally, companies have to supply the total number of hours worked for these employees.

What are EEO-1 job categories? The Equal Employment Opportunity Commission developed a very thorough list of these job groups. While there are nine distinct categories, each one has an extensive listing of defined roles that qualify. Included in the classifications are officials and managers, professionals, technicians, sales, office and clerical, craft workers, operatives, laborers and service. For further clarification, it's worth the time to look at the more specific job titles.

What's the logic behind the proposal?
According to the OFCCP, the agency will use the data for enforcement purposes. In essence, the information will provide evidence and support for allegations of pay violations and other noncompliance issues.

It's also using the opportunity to develop public reports – keeping employees' personal data confidential – that will summarize aggregate data for each industry in hopes of clarifying any pay gaps based on race and gender. From these reports, employers can review the broad metrics and proactively address any disparities in their own organizations.

What if the data gets into the wrong hands?
One of the biggest question marks for the proposed rule change is how the information will be transmitted between contractors and the OFCCP. The agency is hoping to leverage many of the existing electronic submission processes in place. For instance, human resource software that keeps track of payroll records and W-2 earnings. The OFCCP also indicated it will develop a Web portal that employers can use to communicate with the agency.

However, data security is a high priority. Contractors and subcontractors are often competitive when seeking out agreements with the government. According to the DOL, all information will be kept private to the extent that it can under the Freedom of Information Act. In addition, the OFCCP said it wouldn't publicly release any information that may have negative influence on contractors that are currently active. This could be a big factor for many employers. What happens when a competitor submits a FOIA request about pay and gender disparities? If made public, this information can do a lot of damage.

As with many government projects, details will likely emerge as time passes. However, data security will likely be a key factor for many companies looking to do business with the federal government. Given the rise in cybercrime, it remains to be seen whether or not the government agencies can keep information transmitted over the Internet secure.

ACA-Related Updates HR Departments Need to Know

30 Jun

The Affordable Care Act continues to change and evolve, and HR professionals need to continuously update their knowledge of the ACA for employee benefits management. Here are three of the latest ACA developments that HR departments must understand:

Penalties for Moving Sickest Workers to Exchanges
Many employers have chosen to ask their heaviest healthcare coverage users to go on the health insurance exchanges next year to find coverage. According to Kaiser Health News, employers have been asking benefits consulting firms about this strategy for some time, as it can mean lower healthcare costs for employers and can often benefit the workers who purchase their own plans through the marketplace. Many employers have even looked into health savings accounts (HSA) or health reimbursement arrangements (HRAs) to help workers purchase plans and pay their premiums.

This was a gray issue for some time, and the Internal Revenue Service has ruled that this strategy is not in compliance with the ACA's mandates. According to the IRS, employers can't dump workers on the exchanges and then provide them with tax-free cash to fund their healthcare coverage because these employer payment plans are considered group health plans, which need to comply with healthcare reforms. In short, the funds need to be taxable. Employers that don't comply with this ruling could receive a $100 a day penalty for each employee. Companies that still want to ask workers to go on the exchanges can instead up employees' pay, which is taxable, according to The New York Times. 

Developments in Reporting Requirements
There are also updates on the reporting requirements for employers. The IRS and the U.S. Treasury Department issued two reporting documents in particular that provide employers guidelines on the minimum essential healthcare coverage that need to be reported. The Information Reporting of Minimum Essential Coverage rule offers information on this for those companies covered under section 6055 of the Internal Revenue Code. The second rule, Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans, is for those covered under section 6056 and 4980H of the same code.

New COBRA Notification Requirements
The Consolidated Omnibus Budget Reconciliation Act (COBRA) remains in effect, and employers need to comply with both COBRA and the ACA. Employers need to provide workers who lose their health coverage through the company with new COBRA general and election notices so they know they have the ability to go on the marketplace to receive health coverage, according to an article in Lexology.