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Rick Rossignol

Tips for Employers Who Outsource Payroll Duties

Posted by & filed under BLOG, Wage and Hour Compliance.

Many employers outsource their payroll and related tax duties to third-party payers such as payroll service providers and reporting agents. Reputable third-party payers can help employers streamline their business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.

Though most of these businesses provide very good service, there are, unfortunately, some who do not have their clients’ best interests at heart. Over the past few months, a number of these individuals and companies around the country have been prosecuted for stealing funds intended for the payment of payroll taxes. Examples of these successful prosecutions can be found on IRS.gov.

Like employers who handle their own payroll duties, employers who outsource this function are still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee’s share of social security and Medicare taxes. This is true even if the employer forwards tax amounts to a PSP or RA to make the required deposits or payments. For an overview of how the duties and obligations of agents, reporting agents and payroll service providers differ from one another, see the Third Party Arrangement Chart on IRS.gov.

Here are some steps employers can take to protect themselves from unscrupulous third-party payers.

Enroll in the Electronic Federal Tax Payment System and make sure the PSP or RA uses EFTPS to make tax deposits. Available free from the Treasury Department, EFTPS gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number, enabling them to monitor whether their third-party payer is properly carrying out their tax deposit responsibilities. It also gives them the option of making any missed deposits themselves, as well as paying other individual and business taxes electronically, either online or by phone. To enroll or for more information, call toll-free 800-555-4477or visit www.eftps.gov.
Refrain from substituting the third-party’s address for the employer’s address. Though employers are allowed to and have the option of making or agreeing to such a change, the IRS recommends that employers continue to use their own address as the address on record with the tax agency. Doing so ensures that the employer will continue to receive bills, notices and other account-related correspondence from the IRS. It also gives employers a way to monitor the third-party payer and easily spot any improper diversion of funds.
Contact the IRS about any bills or notices and do so as soon as possible. This is especially important if it involves a payment that the employer believes was made or should have been made by a third-party payer. Call the number on the bill, write to the IRS office that sent the bill, contact the IRS business tax hotline at 800-829-4933 or visit a local IRS office. See Receiving a Bill from the IRS on IRS.gov for more information.
For employers who choose to use a reporting agent, be aware of the special rules that apply to RAs. Among other things, reporting agents are generally required to use EFTPS and file payroll tax returns electronically. They are also required to provide employers with a written statement detailing the employer’s responsibilities including a reminder that the employer, not the reporting agent, is still legally required to timely file returns and pay any tax due. This statement must be provided upon entering into a contract with the employer and at least quarterly after that. See Reporting Agents File on IRS.gov for more information.

Human Resources Audits

Posted by & filed under BLOG, Fair Labor Standards Act, Human Resources, Wage and Hour Compliance.

Over the last three years, employers have paid out record numbers of wage and hour claims. The list of wage and hour violations, include misclassification of employee status, missed meal and rest periods, off the clock overtime, unpaid overtime, not paying overtime based on the regular rate, not providing an employee an itemized wage statement. The Department of Labor has created apps for employees to record their hours, and track their pay.
To complicate matters California passed The Wage Theft Prevention Act. The new legislation amends existing laws (Labor Code sections 98, 226, 240, 243, 1174, and 1197.1), and adds new requirements (Labor Code sections 200.5, 1194.3, 1197.2, 1206, and 2810.5) which criminalizes willful violations.
Conducting an Audit of the Human Resources system is the only way employers can protect themselves. They need to have an outside HR Expert conduct the audit of their employment practices. Having an outside person take an objective look at their practices will produce unbiased results. Are they following the Fair Labor Standards Act? Do they have payroll records needed to show compliance?
An HR audit involves an objective look at the company’s HR policies, practices, procedures and strategies to protect the company, establish best practices and identify opportunities for improvement. An objective review of the company’s “current state” can help you evaluate whether specific practice areas are adequate, legal and/or effective. Some of the areas an employer needs to reviews are listed below:

 

Hiring

  • Do job descriptions exist?
  • Are job descriptions up to date?
  • Are I-9 forms and acceptable documentation reviewed annually? Are I-9’s maintained in a file separate from personnel files?
  • Are job openings offered to current employees?
  • Are applicant references checked?
  • Are turnover rates monitored?
  • Are selection processes used with reference to the Uniform Guidelines?
  • Are all applicants required to fill out and sign an application form?
  • Are applicants asked to voluntarily identify their affirmative action information?
  • If applicable, do application forms identify the employment relationship at the organization “at-will”?
  • Do employment applications refrain from requesting protected information?
  • Are pre-employment physicals required?
  • Are background checks completed for all prospective employees?
  • Are motor vehicle reports obtained for employees that will be required to drive?
  • Are independent contractors accurately identified?
  • Are all new hires reported to the IRS?
  • Do new employees fill out W-4 forms?

 

New Employees

  • Are workplace policies in place?
  • Do policies focus on your workplace?
  • Are policies communicated?
  • Are policies enforced?
  • Is there an employee handbook?
  • Is the employee handbook specific to your workplace?
  • Do employee orientations take place?
  • Is safety training part of the orientation?
  • Are employees trained on policies and work rules?

 

Wages and Hours

  • Are compensation levels monitored and reviewed?
  • Are employees correctly designated as exempt or nonexempt per FLSA?
  • Is there a formal pay structure?
  • Is the compensation structured reviewed regularly?
  • Is working time documented?
  • Are paid time off (vacation, holidays, etc) structures developed?
  • Are non-exempt employees compensated at least one and one-half times their hourly wage for any hours worked beyond 40?
  • Are appropriate payroll withholdings performed?

 

Benefits

  • Are employees informed about their benefits?
  • Are Summary Plan Descriptions provided to plan participants?
  • Are general COBRA notices provided to plan participants?
  • Are employees allowed up to 12 weeks of leave under the FMLA?
  • Are plan documents in compliance with ERISA?
  • Are supervisors and managers trained to report employee absences of more than three days to HR for FMLA purposes?
  • If there is a health care plan, is protected health information kept private?
  • Are all Form 5500s completed and reported?

 

Employee Relations/Performance Evaluation

  • Is there a system for performance evaluation?
  • Does the system check for the effectiveness of the evaluation?
  • Is the quality and quantity of work evaluated?
  • Is performance tied to compensation?
  • Are workplace policies flexible?
  • Are disciplinary actions for violating workplace policies flexible?
  • Is there a process for employees to lodge complaints?
  • Are there a variety of individuals to whom employees may lodge complaints (supervisor, HR representative)?

 

Safety and Security

  • Are safety hazards reported to the appropriate personnel?
  • Are workplace accidents, near-misses, injuries, and illnesses reported and investigated?
  • Are results of investigation used to implement new prevention strategies?
  • Are employees encouraged to promptly report incidents, and suggest ways to reduce or eliminate risks?
  • Are measures in place to prevent intruders from entering the grounds or buildings?
  • Is bright, effective lighting installed indoors and outdoors?
  • Are measures in place (access badges, traffic control, etc.) to keep unauthorized persons from entering the facility through normal entrances?
  • Is there a reliable response system in place in the event an alarm is triggered?
  • Are structures readily accessible to disabled employees?
  • Is there an active Safety Committee?
  • Are minors prohibited from performing hazardous work?

 

Discrimination and Employee Rights

  • Are employees trained on discrimination issues?
  • Are supervisors and managers trained in anti-discriminatory practices?
  • Are employment practices in line with the various anti-discrimination laws?
  • Are minors prohibited from working more than their hours allowed by the Fair Labor Standards Act?
  • Are effective policies in place to prohibit retaliation against employees who exercise their rights?

 

An HR audit involves an objective look at the company’s HR policies, practices, procedures and strategies to protect the company, establish best practices and identify opportunities for improvement. An objective review of the company’s “current state” can help you evaluate whether specific practice areas are adequate, legal and/or effective.

Human Resources Audits

Posted by & filed under Benefits, BLOG, Fair Labor Standards Act, Human Resources, Talent Management, Wage and Hour Compliance.

The rules have changed being in compliance with the spirit of the law is not enough? An employer must be in strict compliance with wage and hour laws. Failure to be in compliance costs money and talent. Between aggressive Plaintiffs’ Attorneys and Department of Labor, the employer’s employment practices are under attack. Wage and Hour violations account for over 1 billion in claims. The DOL estimates that 80% of employers have misclassified employees. This means that your profits are at risk of wage and hour claims.

How can employers protect themselves? HR audits are a best practice for managing your employment risk. An HR audit involves an objective look at the company’s HR policies, practices, procedures and strategies to protect the company, establish best practices and identify opportunities for improvement. An objective review of the company’s “current state” can help you evaluate whether specific practice areas are adequate, legal and/or effective. The results can provide decision-makers with the information necessary to decide what areas need improvement.

Get Results when Outsourcing Human Resources

Posted by & filed under Benefits, BLOG, Fair Labor Standards Act, Human Resources, Outsourcing Human Resources, Talent Management.

When Outsourcing Human Resources Get results!
Strong human resource management is crucial for growing companies studies show that HR issues are those most likely to keep CEOs up at night. Companies are always struggling with the question of when to consider outsourcing the many functions of an HR department. Mishandling such a strategic decision can prove costly.
The cost of not getting Human Resources right can bankrupt your business. Getting expert human resources advice is critical to developing your organization. Your organization needs an employment brand… You need a strategy for attracting and retain your talent. The strategy connects the performance and engagement of the company. Your employees are your competitive advantage. They represent how you compete in your market. Your Talent strategy is critical to your ability to grow and execute your business plan.

 

When you outsource be sure to get the expertise you need to grow your business!

 

  • Make certain your organization gets the Human Resources expertise it needs. It’s not administrative it strategic.
  • There is no solution that the employer can transfer your employer liability to another.
  • You need HR Expertise to navigate, the challenges of managing employees, being in compliance, and developing the HR programs that will keep your talent.
  • You need the expertise to ensure that you are not recruiting talent in the dark ages. You need a brand, to use LinkedIn, Twitter, company websites. The world is changing fast and does not get stuck in the dark ages.

HealthCare is Changing in California

Posted by & filed under BLOG, Healthcare.

AB 1083, which would implement the federal Patient Protection and Affordable Care Act provisions for small businesses. California law requires health insurers to sell coverage or “guaranteed issue” of coverage to small businesses with 2-50 employees. Rates may vary by 10% depending on the health status of the employees, age, geographic region, and family size. The bill eliminates pricing of premiums based on health status:

  • Limits the range of premiums based on age to no more than 3:1 for age-rated plans.
  • Add the self-employed to those eligible for guaranteed issue of coverage.
  • Expand the rules to employers with up to 100 employees.

 

In addition, AB 1083 requires the waiting period for eligibility for non-grandfathered plans to be no greater than 60 days of employment for employers with less than 50 employees.
In 2014, California defines a small group as an employer with “at least one, but no more than 50” employees (California Health and Safety Code § 1357.500(k)(1)(A)). Since ACA applies to groups with more than 50 employees, there really is no conflict in 2014 or 2015. The policies, for the most part, must meet the essential health benefit (EHB) requirements found in the Patient Protection and Affordable Care Act (ACA) and must be available on or after October 1, 2013.

Can an Employer just hire part time and temporary employees and not have to worry about the Affordable Care Act?

Posted by & filed under BLOG, Healthcare.

Just when you thought it was safe to go back in the water. The IRS released the rules for calculating full-time employees. The rules for determining full-time employee are designed to not allow employers to make all employees part-time, or to use a temporary agency and not have to comply with the affordable care act. Employers need to be strategic, build models, that track the hours of all employees. Examine how they currently use temps? Not understanding the rules could be costly. Organizations that split jobs because they can not afford the cost of benefits could get a big surprise! I suggest employers use the IRS rules and test the 3 months how many FTE”s do you have? How many employees are covered on insurance?

 

  • A “full time” employee is one who was employed on average at least 30 hours of service per week. The regulations use a 130-hour standard as a monthly equivalent of 30 hours per week.
  • For purposes of determining hours of service, the proposed rule incorporates the guidance set forth in Notice 2011-36 providing that an employee’s hours of service include the following: (1) each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and (2) each hour for which an employee is paid, or entitled to payment by the employer on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.
  • Provides rules for hourly employees and non-hourly employees, generally consistent with the approach outlined in Notice 2011-36.
  • The rule includes specific hours of service requirements for teachers and other employees of educational entities; employees compensated on a commission basis; adjunct faculty; transportation employees; and temporary staff members, among other special employment situations.
  • Codifies the “look back” method for determining the number of an employer’s employees.
  • Although through at least 2014, employers are permitted to use a reasonable, good-faith interpretation of the term “seasonal employee” for purposes of this notice, the IRS notes that final regulations may provide a specific time limit.

 

So let’s take a look at how the formula affects employers.

Example: During each month of 2013, an employer has 20 full-time employees, each of whom averages 35 hours of service per week, and 40 part-time employees, each of whom averages 90 hours of service per month. In this example, each of the 20 employees who average 35 hours of service per week count as one full-time employee for each month. To determine the average number of full-time equivalent employees for each month, take the total hours of service of the part-time employees (up to 120 hours of service per employee) and divide by 120. The result is that the employer has 30 full-time equivalent employees each month (40 × 90 ÷ 120 = 30). By adding the two categories of employees together, the employer would have 50 full-time and full-time equivalent employees. Therefore, the employer is an applicable large employer for 2014.

In general, there are two potential penalties (both non-deductible for tax purposes) that could be imposed on an employer for failure to satisfy the mandate. The first penalty, known as the “no coverage” penalty, is based on whether an employer fails to offer group health plan coverage to its full-time employees and their dependents. In this case, the annual penalty is $2,000 per full-time employee (minus 30 full-time employees) if at least one employee receives a premium tax credit for Exchange coverage. The second penalty, known as the “unaffordability” penalty, applies when an employer offers coverage that fails to meet certain affordability and minimum value requirements. In that case, the annual penalty is $3,000 for each full-time employee who receives a premium tax credit for Exchange coverage, but no more than what the “no coverage” penalty would be if it applied. The Proposed Regulations clarify that an applicable large employer may avoid the “no coverage” penalty by offering coverage to all but 5% of its full-time employees and their dependents. However, if any of the employees in the small group of full-time employees who are not offered coverage receives premium tax credits for Exchange coverage, the employer will be required to pay the “unaffordability” penalty for that employee.