Payroll taxes in and of themselves are complex, but becomes more so for large businesses that operate in multiple states. This is because these taxes are subject to federal, state and local regulations, which can change at any time. Therefore, it is in the best interests of HR departments to keep abreast of these changes, because if they don’t the company could be held liable. The Affordable Care Act has muddied the waters further, particularly in regards to common ownership, which is a reference to businesses that have franchises or which operate in numerous locations. Below are some additional things regarding payroll taxes to consider.
Pay Close Attention To Withholding
Withholding for income taxes can be tedious for companies that operate within one state, but those that operate in multiple states must exercise additional caution. The general rule of thumb is that taxes must be withheld for states in which employees work, but each region is distinct and may have their own specific guidelines. Therefore, the Human Resources department must understand the tax withholding rules for every state in which company employees are present.
Employees On Leave
The Family and Medical Leave Act was established by the federal government to mandate certain rules that employers must follow in regards to employees that must take time off work to tend to family health issues. However, in addition to this law, individual states have their own laws regarding absence, and while the FMLA does not require employers to pay for employee time off, some states do, such as New Jersey and California. Payroll teams should know the specific rules for the states in which company employee’s work.
In many states the minimum wage for workers has increased steadily, which has been a hotly debated topic among regulators, business owners and unions. Regardless, companies that operate across state lines must keep up to date on any changes that occur, and must make sure they’re in compliance. The minimum wages for employees working in one state may differ from that of employees working in another. Then there is the federal minimum wage, which as of this writing is $7.25. If the minimum for a specific state is higher than this, then that is the wage you must pay.
There is little doubt that payroll taxes for different state can be a source of stress and hassle for the human resources team. One reason for this is because such taxes are in a constant state of flux. In fact, the obligations have become so extensive that many firms of all sizes are switching to payroll software, which provide the advantage of being affordable, easy to maintain, and automated so that many payroll processes that in the past had to be performed manually can now be done automatically. This saves time, money, and reduces the human error that can lead to a variety of problems.