There has been some recent press on For-Profit companies and their treatment of interns. It is difficult to meet the standards for a trainee – which the employer does not have to pay. Here are the standards of which all must be met in order for the person to qualify as a trainee. 

Fair Labor Standards Act:  “…If the worker is a trainee as opposed to an employee under the FLSA, then he or she is not covered by the FLSA’s minimum wage and overtime provisions.”

“The specific facts and circumstances of the worker’s activities must be analyzed to determine if the worker is a bona fide “trainee” who is not subject to the FLSA or an “employee” who may be subject to the FLSA.  …The U.S. Department of Labor’s Wage and Hour Division (WHD) has developed the six factors below to evaluate whether a worker is a trainee or an employee for purposes of the FLSA: ”

1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction; 

2. The training is for the benefit of the trainees; 

3. The trainees do not displace regular employees, but work under their close observation; 

4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded; 

5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and 

6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training. 

If all of the factors listed above are met, then the worker is a “trainee”, an employment relationship does not exist under the FLSA, and the FLSA’s minimum wage and overtime provisions do not apply to the worker. The message is loud and clear. Tread carefully if you choose to hire interns without paying them or are paying them under minimum wage and you’re running a FOR-PROFIT business. 

We hear this question all the time. How many exemptions (or dependents) should I claim?

The W-4 form asks for name, address, social security number, married or single status, and how many exemptions you wish to claim. Most people can get through all but the exemption piece with very little assistance. It’s the number of exemptions that’s the stumper question.

Most people realize that the more exemptions they claim, the higher the paycheck they’ll receive. Of course the counter to that is you’ll receive a lower refund (really not so bad) or you will owe (perhaps really bad) come tax return time. It’s a little bit of a dance choosing the appropriate number of exemptions.The W4 worksheet can be helpful which is the upper part of the W4. A more helpful worksheet is the IRS W4 calculator.

You can use the IRS worksheet calculator by going to this address:

http://www.irs.gov/individuals/article/0,,id=96196,00.html

And then there’s the state. Many states actually have higher taxes at the lower tax brackets. That’s because the federal government doesn’t tax you until you have met a minimum amount. Some states have their own W4 and some states use the federal w4. Regardless, you may always specify that you want more or less exemptions for your state income tax withholding.

Everybody’s income tax return varies and what’s right for your buddy who looks like they make the same as you may not be the case. Use the calculator or at least the worksheet. Review each year after you have filed your tax return. You may want a lower refund so claim more exemptions. Of course you may still be stinging from that unplanned check you had to write to the IRS or your state – claim fewer in that case.

You may also specify that you want additional amounts of tax to be withheld in addition to whatever the tax tables are calculating. Perhaps you are married and you know you need more money or the stimulus bill may have given you back too much money through your paycheck. You may have extra income from investments. Review your paycheck halfway through the year and ask yourself – does my withholding equal about half of what I withheld last year? Am I pretty close to the same income as last year? If either answer is no, make adjustments.

Happy claiming,

Bryan Dear

www.payrolldept.biz

When it comes to payroll, the following statements would be best to avoid:

I don’t have to pay overtime because I didn’t authorize it. (It doesn’t matter – you may choose to discipline the employee, but you still have to pay them for the hours worked including the overtime premium).

I’m tired of paying overtime. I’ll just put them on salary. (Bad idea. The question is whether the employee is exempt from overtime. Paying an employee a salary is irrelevant to this determination).

It’s easier to pay my employee as contract labor. (Do you like wearing a big bullseye that says, “Audit me.”? The IRS and more importantly, the states are looking for as much money as they can in these times of declining tax revenues – don’t get in their path.)

I don’t need an I9 or an Affirmation of Legal Work Status from the Colorado Department of Labor -  all of my employees are legal. (Doesn’t matter – audits can either be no big deal or a real pain depending on how prepared you are. Get both of the these documents dealt with when you hire each employee).

All retirement plans are not only pre-tax for federal and state, but are pre-tax for social security and medicare also. (No, no, no.)

This garnishment can wait when the employee can better afford it. (Not a good idea unless you want to pay the garnishment instead of the employee).

All of the above done the wrong way could cost an employer a lot of time, aggrevation and money. If you’re unsure, google the question. If we can help, contact us.

We’ll help you keep your head out of the sand.

Bryan Dear

www.payrolldept.biz

Comp time is time off earned for time worked over a certain amount, usually 40 hours in a week. What comes as a surprise to many employers is that there is no such thing as legally paid comp time for non-exempt employees unless you are a  municipality. If your employee exceeds the 40 hour work week limit, you must pay overtime.

But let’s say you have exempt employees that you would like to set up a comp plan for. It’s your plan – you don’t have to offer one – so you may be very creative in how you establish your plan.

 You could reward your exempt employee and yet minimize cash flow by offering a comp plan for them to take off hours based on hours worked over 40, 45 , 50, etc. in a week. You could base the plan on billable hours that exceeded a weekly total.  When you award the hours, you could reward hour for hour or at time and a half.

You would want to be consistent with your exempt work force by creating the same plan for employees who could be classified together. And you would want to track comp time earned as well as comp time used – preferably on the employee’s check voucher.

Comp time is a tool to reward your work force. It just can’t be used for your non-exempt work force (unless you work for a muncipality and even then there are rules to live by).

Cheers,

Bryan Dear

www.payrolldept.biz

It’s summer or some seasonal kind of hiring time and you’re interested in hiring that reliable fifteen year-old down the street. So, what are the three general areas to know?

•  Age,
•  Hours, and
•  Hazards.

Age: In general, the FLSA establishes the minimum employment age of 14. For instance, a child under 14 may deliver newspapers, baby-sit on occasion, or work in a business completely owned by the parents. Most importantly, the job must not involve hazardous activities prohibited under the FLSA.

Hours: Employers have no federal restrictions on work hours for 16- and 17-year-olds work. On the other hand, workers 14 and 15 years of age may only work up to three hours on school days, eight hours on non-school days, 18 hours per school week, and 40 hours per non-school week. Moreover, their work hours must be between 7 a.m. and 7 p.m. (9 p.m. from June 1 until Labor Day).

 Hazards: Generally prohibited for workers under 18, the U.S. Department of Labor (DOL) deemed many types of non-farm work activities as hazardous.

IN other words, there should be no overtime for that fifteen year-old. The list is long what hazardous materials they should not be around. And don’t even think about having them work the forty hour week over Thanksgiving.

Some states can add their own restrictions above and beyond the ones carried under the federal ones.

There’s no need to avoid hiring the under age of 18 – just be familiar with the rules.

Bryan Dear

www.payrolldept.biz

It might be a better time to review your unemployment insurance rate before you receive your next rate notice. In Colorado, rates are assessed once a year that cover the period January 1 to December 31.  The period in which the rates are based on is the prior year beginning July 1 to June 30 so if someone is separated and they start receiving insurance in August, your experience rate won’t be affected for almost a year and a half.

So how are rates calculated? There’s a macro and micro effect. The macro effect is how the fund is doing overall. In times of rising layoffs and lower employment, the fund can be swiftly reduced and the rate may go up for every employing entity. The micro effect is how many claims are filed on you as an employer. These two factors determine your rate with your own experience carrying most of the weight.

How do you keep your rate in check? If an employee resigns there is no penalty to your rate. If an employee requests unemployment benefits and you think he/she was rightfully terminated, you may contest his/her benefits by responding to the notice sent to you by the state department of labor. Don’t waste time – respond as soon as you receive the notice because the response time is very short as in seven days.

You can contest for almost all the reasons that you would fire an employee (from stealing to refusing to work a non-overtime shift), but your documentation better be good because lacking that, you will be wasting your time and no doubt becoming frustrated to boot.

The world of unemployment insurance may become a bit more expensive in the next few years. Consider minimizing your costs by hiring right and documenting behavior that impacts the employee’s job quality. Your rate will stay lower than most.

Here’s to keeping a low rate of turnover and insurance,

Bryan Dear

www.payrolldept.biz

There’s a federal minimum wage and there’s a state minimum wage. There’s a tip credit which you may use against these minimum wages in many states, but not all of them. And depending on the administration and the current majority in Congress and in the states, there are pushes to expand or slow these rates of pay.

There are good many arguments for having a higher minimum wage as well as good many arguments for abolishing the minimum wage. We’ll leave that discussion for another day.  But it is important to be aware of upcoming changes. In Colorado, voters approved a minimum wage based on the increase in the cost of living that changes each January 1. At the very least, employers should plan for the impact this could have on their finances.

I had a question asked of me recently regarding how much should this new employee be paid. I answered, “The minimum wage,” pause for effect, “that the employee will perceive as an more than fair.” It can’t always be like that, but an employee who gives you the maximum deserves more than the minimum.

Very few employers have their wages dictated by the minimum wage directly. The impact comes from a general rising of the floor with a sinking feeling by the employee above minimum wage that they’re not making much more than minimum wage and by golly it’s time for a raise.

Governtment intervention is a wild creature – there are some wages that would be lower if minimum wage law wasn’t present, but there are a lot of bureaucrats spawned in our system just to enforce this kind of legislation.

May your revenues grow at least as much as your wages much increase,

Sincerely,

Bryan Dear

www.payrolldept.biz

There are credit garnishments, child support garnishments, student loan garnishments, and tax garnishments for both state and federal taxes. There may be a few more that I have yet to see.

Each has different rules regarding how much of a paycheck can be garnished with the states weighing in with their own rules. A credit garnishment, in which an employee defaulted on an obligation (car loan, store credit card, etc.), is not even allowed in all states and the amount that can be garnished greatly varies.

A child support garnishment can be as much as 65% of net disposable pay depending on whether the garnishment is past due and depending from which state the garnishment is issued. Net disposable pay is generally calculated by taking gross pay and substracting the required tax amounts (FICA, Medicare, federal withholding, state witholding and local taxes) resulting in net disposable pay.

When an employee has two or more orders, then the process can become complicated depending on priority (child support for example trumps a credit garnishment regardless of which garnishment was received first).

When you receive a garnishment, take your time to go through it. Call the agency that issued the garnishment if you have questions. Don’t take any actions against the employee because of the garnishment. (Some states will allow you to charge the employee a monthly fee because of the additional paper work required).

Regards,

Bryan Dear

www.payrolldept.biz

We don’t pretend to be experts in the administration of COBRA – the continutation of health insurance when an employee separates from the business or organization for which they were employed. We’ll leave that to others who are specialists. But with the new legislation, payroll companies like ours, became players. That’s because as part of the stimulus bill, employees who were involuntary terminated and who elected COBRA after September 1, 2008 may receive a 65% credit off their COBRA insurance. They get this credit from their employer who in turns receives the same credit on their payroll tax deposits (941 payments) which is then reflected on their quarterly payroll tax form (Form 941) – get all that?

As a payroll provider to such an employer, we need the ex-employee information and the amount the company paid on the employee’s behalf to cover their COBRA payment. We then add that information to the payroll we are running thereby reducing the amount the employer owes the IRS and reflecting this information on the Form 941.

It’s simple, yet complex. There is a labyrinth of questions that can complicated the process regarding employee eligibility, negative liabilities, overpayment by the company of the COBRA amount, etc. I would add that the administration of this benefit is yet another reason to outsource payroll. We keep up with the legislative changes on this issue, we work with multiple employers regarding this issue keeping us current on multiple fronts and we keep our systems up to date in order to insure complicance.

The eyes may roll up at yet another government change – but we’re there for you.

Sincerely,

Bryan Dear

www.payrolldept.biz

Classifying an employee as exempt means the employee is not only exempt from overtime, but also from other wage regulations and less recordkeeping is required. However, docking an except employee’s compensation does take some care. The U.S. Department of Labor lists eight situations where you as an employer are allowed to deduct from their salary. The group of  exempt employees for this discussion are the ones classified as executive, administrative or professional

1)      If the employer has a sick plan in effect and the employee exhausts the sick pay plan, the employer may make deductions in increments of days. The employer may not make deductions in increments of hours. If an employee is out a day and a half, then the employer may only deduct a day’s pay.

2)      When there is an absence that is not related to sickness, but is at the employee’s own whim or will, the employer may only make deductions in full-day increments.

3)      Deductions may be taken for jury duty.

4)      Deductions may be made for military leave.

5)      Deductions may be imposed in good faith for infractions of safety rules of major significance.  

6)      Unpaid disciplinary suspensions of one or more full days may be imposed in good faith for workplace violations.

7)      An employee’s salary may be pro-rated if the employee doesn’t work the entire week while taking intermittent leave under the Family and Medical Leave Act.

8)   An employee’s salary may be pro-rated during the first and the last week of employment.

If we process your payroll, we do our best to keep you aware of such

situations – because it’s not always obvious what is the right thing to do.

Cheers,

Bryan

www.payrolldept.biz