New paid leave laws have been recently passed in the states of Washington, Arizona and the District of Columbia. However, these laws have also become the subject of scrutiny, with new developments occurring regularly. Below are some things that employers based in these states should know.
The Department of Labor in this state, in preparation for the new law which will go into effect in January 2018, has established the 1433 Site to provide the public with guidance as it mandates the two rule sets which will be used to describe and enforce the new law. 1433 is an initiative which received approval in 2016 that requires businesses to give paid sick time to the majority of their workers. It also increases the minimum wage automatically for a number of years consecutively.
Those employed in the state of Washington are expected to gain one hour of paid sick time for each forty hours they work, which gives them time to take care of themselves and members of their family. Public hearings for the first group of rules, which pertain to reporting requirements, notification procedures and the management of records, were held in August. Various businesses in Washington are opposed to this measure and have begun protesting it.
The Chamber of Commerce in Arizona has challenged the requirement that businesses based in the state give employees a minimum of three days of paid sick time which went into effect in July of 2017, which resulted from a measure that was approved by voters. The constitutionality of the law has been challenged, to the extent that business owners and the Chamber of Commerce filed suit to block implementation, stating that it is a violation of state law. Their argument is that the ruling is a violation since it mandates the state to use funds without specifying a source of revenue.
Washington D.C. passed its Universal Paid Leave Act in 2015, which went into effect in April of 2017 and is expected to be funded completely by the fiscal budget for 2018. Regardless, a minimum of five repeal measures are now being reviewed by the D.C. council, particularly the UPLA Amendment Act, which was revealed on June 20th. This measure focuses on alternative ways of establishing paid leave, such as lower payroll taxes for small businesses and employer mandate for larger businesses, or exempting those employers who already give paid leave to their employees.
The UPLA is expected to be funded through at payroll tax of 0.62 percent that employers will pay into a pool which is administered through the government of the District of Columbia, which will distribute the benefits to employees working in the area. The duration of sick leave remains the same, which is 8 weeks for parents who have recently had a child and six weeks to provide care to sick relatives.
It is important for employers to establish a process for recording the noncash and cash payments to ensure that the correct taxes are withheld for expat employees. A number of businesses employ individuals who live overseas, and it is important to ensure that their payroll is properly managed.
Electronic systems which are used to record the payments which are made to expats must account for the payroll systems which are used in their host countries. This includes transactions which are accounts payable as well as expense reports. The job positions within the company should be specified which are responsible for offering data which is related to the compensation of expats, as it allows for accumulation tracking and procedural documentation.
The problem with using the names of employees as opposed to job positions within the procedural documents is that any requests which are made for payroll could be incorrectly sent to parties that are no longer responsible for tracking the payroll data of expatriates.
Compensation accumulation is one of the most important aspects of expatriate payroll management. It allows for payroll filings to be accurately completed and is essential for the completion of expat tax returns. Furthermore, compensation accumulation makes it simple to build an administration process. If a company doesn’t do a great job at this, or lacks formal procedures, compensation accumulation will be problematic to say the least.
Procedures and systems for audits which are used for expat payroll must be able to recognize and eradicate any errors in regards to data collection, as these will cause problems that necessitate the filing of adjustment forms or paying extra to fix. It is best for these audits to be performed at regular intervals.
Payroll staff must be responsible for carefully reviewing the taxability for the various payment types which are tracked for compensation accumulation, and they must be able to recognize the payments which must be taxed differently due to the host country where the expat is based and the home country where they originate. This is necessary to guarantee compliance with the nation’s tax code as well as their filing requirements.
A number of employers outsource the compensation accumulation for expats to third party firms, but should carefully scrutinize the ability of these vendors to account for the procedures and tax laws for both the home and the host country when payment data is processed. A vendor that does not correctly track the nuances between host and home country taxation could cause mistakes which the business that hired them will end up being responsible for.
Businesses that develop plans for expat payroll must recognize that treaties may exist between host and home countries which could determine how the expat employees are taxed. Employers must carefully study double taxation laws, which in many cases will use a 183-day period as the maximum number of work days within a year that an employee working overseas can go without being taxed by the host country.
The fourth quarter of 2017 is near, which means that more states will begin revealing the new rates for unemployment tax which is expected in 2018. States may alter their unemployment tax so that they can maintain the balance of their trust fund. Below are some things employers should know so that they’re prepared.
The unemployment tax is federally mandated and imposes a tax on employers which are used for the purpose of funding workforce agencies. Employers are expected to send this tax yearly, usually by completing Form 940 which is then transmitted to the Internal Revenue Service. The unemployment tax will cover a portion of unemployment insurance administration, as well as job service systems in each state. It also pays a portion of unemployment benefits which are extended, but like most taxes it is subject to change over time.
Some states will set up a single range for tax rates, which is referred to as a rate table or schedule. From these every employer is given a rate which is determined by their unemployment in association with their yearly payroll. Other states instead maintain multiple schedules, which are determined by the balance of their trust fund. Those which are expected to finalize their unemployment taxes for 2018 include South Dakota, New Hampshire, Wisconsin, Oklahoma, Georgia and Arkansas.
Oklahoma and Georgia both have multiple schedules which are determined upon a primary group of rates. Georgia actually uses 6 schedules which are essentially altered versions of the primary schedule, where every schedule denotes a percentage for which the employer’s primary tax rate schedule may be adjusted.
Oklahoma could utilize basic rates from either one of the four factors which are conditional, or from the unadjusted range which is 0.1 to 5.5 percent. The conditional factors will typically go into effect whenever the state’s trust fund balance is beneath a specific level. Every factor which is conditional will denote assessments which will be added for the tax rate of every rate group.
New Hampshire and Arkansas both have a single set of rates for employers that are experienced, and for the most part these rates won’t change. Additional surtaxes, rate reductions or assessments can be applied to the basic rate of employers depending on trust fund balance and whether the employer has a negative or positive rating.
Both Wisconsin and South Dakota will use multiple schedules. These schedules will go into effect based on the balance of the trust fund for unemployment. South Dakota is expected to select rates from up to two schedules for the very first time next year, under measure H.B. 1097 which was signed in March by Governor Daugaard. To learn more about unemployment taxes which are scheduled for release in 2018, review the Unemployment Insurance Chart.
Technology is truly miraculous. It has brought us wireless computing, networking and greater access to information than our ancestors could have dreamed of. However, this technology is not without its downsides. Payroll fraud has become a serious problem for businesses of all sizes, and it is being fueled by technological advances.
Fraud involving payroll occurs in many different ways, and as technology continues to advance, criminals will come up with new ways to exploit it. This is why employers must be vigilant, keeping abreast of industry changes and implementing the proper measure to ensure that sensitive data is never compromised. Some fraud is connected to attendance or time, while others involves the counterfeit of benefits, or gaining access to balances and checks for processing.
Fraud can be either external or internal, meaning parties outside the organization attempt to gain access to unauthorized information, or it may be internal, where employees within the organization leak information or use it for their own benefit. Many argue that internal fraud is the most dangerous, as this comes from individuals which the company trusts, who have greater and easier access to information than nonemployees.
While smartphones have provided a number of benefits to both employers and employees, they are also being used to commit payroll fraud. This is possible with the camera that is now installed in most of these devices. An employee can surreptitiously take photos of checks using their smartphone, which can then be used for deposits.
Smartphones have many other capabilities, which are why many high security buildings and installations require them to be placed in a container near the entrance, as visitors are prohibited from carrying them around the premises. Due to the fact that employees working in payroll have access to sensitive documents, companies should consider prohibiting them from carrying their smartphones into these secured areas, as this prevents them from taking photos of documents.
Employers that handle their payroll in house should review their security measures carefully, particularly when it comes to password protocols. Both copiers and printers should be situated in areas that are secure, and access to them and the payroll department itself should be restricted. It is highly recommended to implement an automated clearing house if you don’t already use one.
Processing Payroll Through A Third Party
Many small businesses choose to use a third party firm in order to process their payroll. This saves them time and energy, but also places them in a position where a mistake made by the payroll processor could have disastrous consequences. Those who use third parties for their payroll should learn about the security measures they have in place to prevent fraud, and should not do business or provide their payroll data to firms that do not have or maintain adequate security protocols.
Recent storms such as Hurricane Harvey, Irma, Jose and Maria have reinforced the need for small businesses to prepare by backing up their data. This is true even for companies that are not in hurricane zones. Important records must be safeguarded and emergency plans should be established to help the organization maintain its continuity in the face of the unexpected. Below are some tips for doing this effectively.
Companies should make a habit of duplicating documents which are critical, such as bank statements, payroll records and tax returns. They should be stored in containers which are waterproof and which are stored in locked areas which are separated from normal documents. Documents should also be stored electronically and placed on a flash drive, DVD or other forms of removable storage. Storage technology will change and advance over time, but the need to store data won’t.
If your company uses third party payroll, it is critical to find out if they provide fiduciary bonds. The reason for this is because these bonds will protect your company in the event that the payroll service defaults. Many companies make use of third party services to process their payroll more efficiently.
Hurricane season starts around June and ends by November 30th, so companies which operate in Florida, the Gulf Coast or Caribbean should be aware of this and prepare accordingly. But preparation isn’t limited to companies that operate in Hurricane zones. Natural and manmade disasters can occur anywhere and jeopardize the operations of businesses which are present in the region.
For instance, any company based near an active volcano should be prepared for the possibility of an eruption. Any businesses that operate in California, which has a history of earthquakes, should be prepared for that eventuality. Organizations which operate in unstable countries known for political upheaval or terrorism should have contingencies set in place to rapidly evacuate and protect employees and valuable data.If a nationwide disaster occurs which is federally declared, companies may contact the IRS at 866-562-5227 to talk with someone trained to respond to such emergencies. Employers have the option of asking for backup copies of tax returns which were filed in the past, along with attachments such as tax statements and W-2 forms. This can be done by completing Form 4506.
Companies that fail to prepare for the unexpected runs the risk of being completely destroyed when disaster occurs. The recommendations here are more for smaller businesses than larger businesses, as most fortune 500 and 1000 corporations have elaborate contingencies including underground vaults and bunkers. It is small and medium sized businesses that have a greater tendency to be lackadaisical when it comes to preparedness, which may partly stem from having access to fewer resources. Regardless, businesses of all sizes must prepare the best way they can.
Maintaining a good relationship with your vendors is important. The company will benefit by having someone that will provide an affordable delivery cost and enhanced service levels. The human resources department will benefit since the vendor’s solution won’t generate extra or distinct payroll work with regard to the delivery model. Below are some ways in which a stronger relationship with vendors can be fomented:
There are three teams whose input is essential for strong relationships with vendors, and these three teams are executive steering, service implementation and delivery, and relationship management. Executive steering is responsible for creating and strengthening the strategic direction of thelarge business, and will provide various assets while managing relationships with clients. Some of their assets consist of equipment or consultants, along with employees.
The implementation and service delivery team is responsible for daily procedures, and will monitor change initiatives while evaluating performance. This team will communicate with vendors regarding updates that need to be made as well as how they should be implemented. Prior to implementation, the client and vendor will need to perform a product overview and create flow charts to show how improvements will occur.
It is also important for clients and vendors to have trust, respect and mutual benefit in working together. Any relationship where these three components are not present will not last. Trust should be considered the foundation of the relationship, and mutual benefit involves the advantages that each party gains by working with the other. Vendors are notorious for over promising and under delivering, so this is something that every business has to consider when deciding if it wants to collaborate with them.
Both parties will need to establish an agreement so that the services which will be rendered can be defined. It is also important to note the time period which the agreement covers. The agreement must designate a specific service level which is agreed to by both parties, and it should identify every fee to be incurred as well as the responsibilities of both groups.
A good agreement will always consist of a provision for disaster recovery. It should be kept up to date and receive the approval of an external auditor, and should include a provision which specifies how sensitive information will be handled in the event of the termination of the agreement. It can be helpful for the vendor and client to establish an advisory board which is comprised of a consortium of clients who will be responsible for giving support and guidance on key issues.
A good advisory board could consist of approximately 5 to 10 people who would serve terms of two years each. It isn’t necessary to have a board which is even numbered since it is the client who would have the final say.
Payroll is without a doubt one of the most confidential things that small and large businesses are responsible for managing. Should this data fall into the wrong hands, the consequences can be both far reaching and detrimental. Therefore, knowing how to secure payroll processing is essential, and below are some tips which will show you how to do it.
Payroll data entails information involving your employees, such as their Social Security Number, birth dates, home address and bank account numbers. Clearly, if this information is acquired by identity thieves or other criminals it leaves both you and your employees vulnerable to payroll fraud and identity theft. There are two ways in which payroll is compromised, and this is either internally or externally.
Your employees are arguably the greatest potential threat, since they have direct access to the information, particularly if they work in the HR department. Even employees who do not have access to payroll may still attempt to steal it from their co-workers. Even if you believe your employees can be trusted, research shows that small businesses are much more susceptible to payroll fraud than larger institutions. External threats involve criminals and groups that attempt to acquire information through phishing, malware or computer hacking.
Payroll should be processed in a secured room that only authorized employees have access to. The room should be locked and also have security cameras present which show who enters the room and when. By restricting payroll to only a handful of employees, if the data becomes compromised you can quickly narrow down the most likely culprits.
The computers which are used for payroll processing should be equipped with the latest firewalls, and should be regularly updated. Any passwords which are used to secure the computers should be robust, and should be changed regularly with employees who have been recently terminated denied further access. Computers responsible for payroll processing must also use a professional, corporate level anti-virus scanner to ensure they do not become infected. Every company computer should use filters for email spam and employees should be kept up to speed on phishing schemes.
You will also want to regularly perform an audit for payroll. An internal audit is one which is conducted by someone within the organization, while an external audited is carried out by someone outside the company. The purpose of an audit is to ensure the process and numbers are accurate. Employees must also be instructed never to share their personal details with others, even their co-workers. Some companies still maintain their payroll data in physical paper documents, and while these are protected from cyber thieves, you still have to worry about traditional theft. Therefore, physical payroll documents should be placed in filing cabinets which are locked and only accessible with certain keys. Only specific people should have keys to these cabinets and a paper shredder should be used when physical documents need to be disposed of.
Controlling costs is a fundamental aspect of running a small business, and nothing can increase them faster than labor. For many corporations labor costs will be their most significant expense, and while many attempt to mitigate the issue by paying their employees less, at best this is a temporary fix that will create long term issues. Below are some ways to maintain reasonable costs for labor over long periods of time.
There are some projects which do not require the work of a full time employee, and can be delegated to a freelancer instead. Examples of this include website redesign or tax management. Freelancers don’t require the benefits that many employees must receive by law and as such are responsible for their own healthcare and other things of that nature. Recruiting freelancers can save you substantial amounts of money over the long term.
Employees who prove themselves to be responsible, ambitious and quick learners should be cross trained, or taught multiple skillsets simultaneously. While we live in a society that is increasingly moving towards specialization, being a generalist has its benefits, particularly when it comes to lowering labor costs. An employee that can perform multiple tasks and roles reduces the need to bring in new workers, which keeps costs for labor low.
While profit sharing may not seem like a way to reduce your costs for labor, it is. Consider how much you spend on advertising and marketing. What if your employees were offered the opportunity to market and sell the products or services on your behalf, with the understanding that they would receive a cut of the profit by doing so? This would be much more cost effective than hiring new workers, and you would also reduce marketing and advertising costs.
Whereas with advertising and marketing you’re required to spend money up front with the expectation that the exposure will result in increased sales down the road, with profit sharing you only pay employees “after” they’ve already sold your product or service, which is far more efficient and lucrative. While many employers foolishly attempt to keep their costs of labor low by paying their employees less, with profit sharing you can keep your costs low by paying your employees more.
The times in which your employees work are just as important as how much they get done. If your weekly schedule is disorganized, you will actually end up paying more than you should be. You should have specific employees working on specific tasks at certain times and if they are cross trained they can focus on different tasks on different days, perhaps rotating with other employees. Time management is a key component in being able to lower costs of labor. The better your time and that of your employees is managed, the more money you’ll hold onto.
Workplace safety is a necessary and fundamental part of the daily operations of every business. OSHA, or the Occupational Safety and Health Administration, have recently established a new law which places increased accountability on businesses that employ more than twenty people. This rule is called OSHA 300A, and here is what you need to know so that your organization will be in compliance with this regulation.
This new ruling establishes that current OSHA reports must be conducted electronically. The date whereby this new law will go into effect hasn’t yet been revealed, but it doesn’t mean that employers should not begin preparing for it in advance. 300A is also referred to as the “Summary of Work Related Injuries and Illnesses,” and will be a type of form that has to be transmitted once a year for any business that has over twenty employees.
The key thing to know regarding OSHA 300A is that it has to be transferred in an electronic manner. Traditionally, companies weren’t required to do this, but things have changed as various government agencies continue to update their computer and networking equipment to adapt to new technologies. Submitting the form electronically reduces the paperwork, which is good for the environment, while also lowering administration costs.
Any business that has more than 250 employees must fill out additional forms electronically such as the OSHA 300 and 301, on top of the 300A. The ruling applies to companies in specific industries, and you will want to check out the OSHA’s official site to find out if the industry your company operates in is included.
The form will need to be completed on the official OSHA website, using three possible options – CSV file, API or web form. The CSV file is best for those who want to file numerous establishments simultaneously, while the API is ideal for companies that already utilize an electronic record-keeping system. The web form option will meet the needs of those with basic filing capabilities.
The primary explanation from OSHA regarding the 300A is that transmitting it electronically will enhance the safety of employees throughout the country. Some of the data will be published publically by the agency, which allows both existing employees, the general public and recruitment candidates to know how well companies are doing in regards to the safety of their workers.
OSHA has also stated that acquiring the data electronically will better enable it to focus on compliance assistance as well as enforcement. It is ultimately believed that this new rule will have a positive effect on the profits of many companies as they see a steady decrease in the occurrence of workplace accidents in the high costs that are associated with them.
Eventually even the best employees will find themselves dealing with problems outside of work, which are significant enough to interfere with their duties. This will typically come in the form of illness, a death in the family, or another catastrophic event that will require them to take time off work. The employee may find that the savings they have is not sufficient to cover the emergency they’re dealing with. In this scenario the employee may request a payroll advance from you to help them, but before you grant it to them here are some things to consider.
The advance is a loan which is provided to employees. It is taken out of wages that you intend to pay them in the future. It differs from the typical loans that are given between friends or family members. Whereas a friend or loved one may back you back at some future time once they get the money, there is no specific time in which this is expected.
An advance from an employer, on the other hand, is much more formal. There will be repayment terms which you’ll be expected to meet, with consequences if you do not. The repayments will usually be taken out of your future earnings, and you can use an entire paycheck to pay it off or spread the payments across multiple checks to keep some funds in your pocket. No employer is required by law to give such advances to their employees, but there are a number of best practices that should be followed.
Favoritism should be avoided when it comes to issuing these advances. In other words, if you’re willing to give it to one employee then you should also be willing to grant it to all of them. Generally, it is best to maintain a policy which is established so that everyone can be held to the exact same standards. For example, employees should work for you for a minimum time period before you’re open to granting them a loan, such as 12 months.
You should also set limits on how much an employee can request. It obviously doesn’t make much sense to issue an employee an advance which is substantially higher than their monthly or quarterly earnings, because then they can quit and you will never get the money back. Limits should also be placed on the number of times that an employee may request an advance within a single year.
Also, another critical factor to keep in mind is that when you issue an employee an advance, the deductions that you take out of their check must not result in them earning less than the federal or local minimum wage, otherwise you would be in violation of the law. You should also consider charging interest on the advance for the simple courtesy of providing the service along with the paperwork that you will be required to process.