What You Need to Know About Cybersecurity

Cybersecurity

In today’s sophisticated world, cybersecurity is an ever-growing concern. There isn’t a day that goes by that you don’t hear about cybersecurity breaches in the media. For example, in recent days, a private security company notified the U.S. Cybersecurity and Infrastructure Security Agency about a “major computer intrusion,” whereby federal, state, and local government computers, and thousands of private companies and organizations were hacked. And, what’s worse, this has been ongoing since March 2020 and continues to pose great risk.

So, what is cybersecurity? It protects computer systems and networks from theft or damage to hardware, software, or electronic data, as well as disruption or misdirection of the services they provide to businesses. An online breach can cripple a business and be very costly.

These security problems are compounded, because they affect each business differently, yet they touch every segment of a business and the risk factors associated with them. Protecting data privacy that each business is entrusted is a universal goal and includes:

  • Types of data your business have. Do they include credit card information, health information, criminal history, or biometrics?
  • Which departments have access to your data?
  • Who are your data service providers and what are their credentials?
  • Which personnel have access to your data?
  • What steps has your company taken to protect your data? Encryption? Back-up? Internal controls?

Protecting Your Data

Currently, there are no federal laws in place to protect your data; however, at least 31 states have established laws regulating the secure destruction or disposal of personal information. Of those, 12 states (Arkansas, California, Connecticut, Florida, Indiana, Maryland, Massachusetts, Nevada, Oregon, Rhode Island, Texas, and Utah) have imposed broader data security requirements, while others are considering legislation, including New York.

California, the home of Silicon Valley and many global technology companies, is a pioneer on the data privacy front. Plus, the California Consumer Privacy Act of 2018, which went into effect January 1, 2020, mirrors the General Data Protection Regulation (GDPR) instituted by the UK, commonly known as the Data Protection Act 2018. It’s the UK’s implementation of the General Data Protection Regulation (GDPR), meaning that everyone responsible for using personal data has to follow strict rules called “data protection principles.” They must make sure the information is used fairly, lawfully, and transparently.

Any company doing business in a nation that has adopted the GDPR must comply with its consumer protections regarding data privacy. The GDPR spans many types of data, such as:

  • Personal-identifiable data (e.g., names, addresses, birth dates, Social Security numbers)
  • Web-based data (e.g., user location, IP address, cookies, and RFID tags)
  • Health (HIPAA) and genetic data
  • Biometric data
  • Racial or ethnic data

This means that U.S. businesses that operate in multiple jurisdictions must consider these and other categories pertinent to their industry, as they segment data they’re holding, with the understanding that the data is essential to instituting the right level of privacy safeguards.

How to Safeguard Your Data

Cyber-attacks on payroll, especially for small businesses, can cause far-reaching and long-lasting damage, because they involve personal information and sensitive data. Your business risks losing employee trust, damaging your brand image, and facing possible penalties and legal action.

Your payroll department needs to securely store sensitive information on your employees, including bank account details, home addresses, health care information, Social Security numbers, and wage information. Employees who have their data compromised face ongoing attacks by cybercriminals, including re-routing their wages and even identity theft.

Okay, now that we’ve got your attention, here’s what you can do to protect your data.

  • Understanding your data is the first step to securing it.
  • Be knowledgeable of the relevant laws and regulations your business must comply with.
  • Stay alert for any indications of a breach. Unfortunately, many data breaches can go on for quite some time (as mentioned above) before being detected. Knowing the time lapse between when the data is hacked and when it’s discovered allows hackers to continue accessing vulnerable data. As a result, data must be constantly monitored for breaches. Watch for signs of a breach, which could include an unanticipated spike in bandwidth usage. It could represent a red flag and indicate a problem.

COVID-19 Poses New Cybersecurity Concerns

With the coronavirus, businesses have to pivot/adjust to their employees working from home. Despite this, employees still require technology to do their jobs and they need to be even more vigilant of cybersecurity. Businesses can’t function today without computers, the internet, and Wi-Fi to fulfill job responsibilities. However, employees working from home expose themselves to a host of cyber risks that are reduced when in the work environment.

As with any tragedy, COVID-19 has opened the door for hackers finding new ways to steal data from unsuspecting users, requiring employers to be even more vigilant, while constantly reminding employees to keep their computers secure. As an employer, here’s what you should know.

  • Make cybersecurity top of mind. It’s one thing to provide a safe and secure office environment and another when your employees work from home, because you can’t control all the factors in a home environment. Any breach can be devastating to your small business, so you need to be hypervigilant. According to Emil Sayegh, contributing writer at Forbes, “Today we are witnessing a rapid rise of opportunistic cybercriminal activity taking advantage of the chaos created by COVID-19.” And for businesses that are already fighting to remain afloat due to challenges faced during the virus, a cybersecurity breach could quickly shut them down. Sayegh warns that businesses navigating this “new normal” must address weaknesses in their IT strategies exposed by COVID-10 and consider implementing a better preparedness plan to avoid long-term damage.
  • Scams involving “masks” are a possibility. Not the masks you wear to avoid COVID, but scammers posing as wolves in sheep’s clothing. Instruct your employees not to click on suspect email, particularly if it relates to COVID-19. Computer criminals try to get people to click on malicious links that install ransomware, a type of malware that threatens to publish the victim’s data or perpetually blocks access unless a ransom is paid. An example is cities and towns that have had their sensitive data held ransom, crippling their operation until money has been paid.
  • Scammers use phishing to fool people into giving up money or sending credentials. It’s a fraudulent attempt to obtain sensitive information or data, such as usernames, passwords, banking, credit card details, and passwords by disguising themselves as trustworthy entities by featuring similar logos and other identifying information in an electronic communication. Targets are contacted by email, telephone, or text message by someone posing as a representative of a legitimate institution to lure individuals into providing this kind of data. This information is then used to access important accounts and can result in identity theft and financial loss.

Your employees shouldn’t open suspicious emails or links included in those emails. If unsure an email was sent by someone the employee trusts, it’s best to call the person to confirm they sent the email and/or attachment.

  • While numerous passwords are an inconvenience…to say the least, they provide another layer of protection from scammers. While it’s convenient to use the same password for multiple accounts or files, once a scammer gets hold of a password, they then have cart blanche to a broad range of files and sensitive information.

Stress the importance of using strong passwords consisting of upper and lower-case letters, numbers, and symbols, ideally, one that contains eight or more characters.

Finally, make sure your employees DO NOT share their passwords, either via email or text message.

  • Employees working from home using Wi-Fi pose a new level of risk for employers. Work computers should be exclusively dedicated to employees doing their jobs from home. They need to be protected from family members or visitors using them or anyone else entering the home, including service workers. And, updates or security patches need to be routinely installed immediately to protect them from malware, a software that’s placed on a computer or other device with the intention of doing harm.
  • When your employees use a website, have them look for “website certificates,” signs that indicate a site uses encryption to protect the user. There should be either a closed padlock, which, depending on your browser, is located in the status bar at the bottom of your browser window or at the top of the browser window between the address and search fields OR a Uniform Resource Locator (URL) that begins with “https:” rather than just “http:”.
  • Cybersecurity training is still a good idea for employees working from home. Knowledge is power in terms of what employees should look for on a daily basis. Plus, the training serves as a top-of-mind refresher.
  • Start with reminding your employees not to leave passwords or other confidential information out in the open.
  • If they use flash or thumb drives, they need to use make sure they have been approved prior to use.
  • Remind employees what websites are approved for use during working hours, make sure they deactivate pop-ups, and don’t download software from unreputable places.
  • Email is a portal into cybersecurity breaches. While email filters catch spam and suspicious email, employees still need to be vigilant in reporting suspicious email.
  • If visiting social media sites isn’t part of your employees work duties, it should be banned on work computers to protect them from phishing attacks.
  • Make sure all your employee software is update, secure, and routinely monitored for scams.
  • ALWAYS backup your data, use multi-factor authentication for additional security, and check that all systems have secure firewalls.
  • Keep IT support on standby, as needed. Employees need to know how to reach IT support, even if they have innocuous computer-related questions.
  • Consider purchasing cyber liability insurance. It can help to cover business’ liability if customers’ personal information is taken. If your business has been hacked, the cost can be very high, but cyber insurance can help your business recover from the incident. According to the International Risk Management Institute, cyber insurance can cover expenses, including the cost of notification and credit monitoring.

Hire a Payroll Provider You Can Trust

Your payroll data is very important to cybercriminals. While hackers continue to get better at personal engineering to obtain sensitive data, IT companies remain one step ahead by using the latest developments to keep businesses and their sensitive data secure. When you partner with ASAP Payroll Service, be assured they use a cloud computing service that’s agile and delivers fast results. Whether your business is large or small, ASAP Payroll Service can help you choose the development platform or programming model that makes the most sense for your business. And you can choose which services to use, one or several, and how you use them. This flexibility frees you to focus on innovation, not infrastructure. Plus the cloud computing service they use is a secure, durable technology platform with industry-recognized certifications and audits.

 

Plus, ASAP Payroll Service teams with an outside IT company that handles all the firewalls and constantly monitors for hackers.

 

Contact ASAP Payroll Service to learn how they can protect your business from cyber criminals and give you peace of mind. They can be reached at 317 887-2727 or by fax at 317 887-2741.

Online Payroll

Online-Payroll

What is It?

 

Online payroll is only available on the internet. Your payroll is processed via a secure Internet connection when you access a login to a user software application. Your data is stored in the cloud or on servers provided by your payroll software provider. You can perform all necessary payroll functions, including:

  • Keeping track of employee tax information
  • Helping employees view and update their benefits, retirement, or insurance information
  • Handling special payment circumstances legally and correctly, including disability, employment and family leave
  • Tracking paid time off (PTO) and attendance information
  • Administering and collecting various important human resources forms
  • Send an important quarterly reports or key data sets to select groups
  • Running payroll, printing paychecks, and running necessary payroll reports for W2s, 940s, 941s, and 944s.

 

There’s a small monthly fee related to using online payroll software; it’s usually the equivalent of or less than the cost of traditional downloadable payroll software.

 

What to Look for with Online Payroll Software

As a business owner, you may be able to pay your employees consistently; however, it’s more challenging to track the right paperwork, pull reports, or handle special circumstances. With medium-sized businesses, it’s often one person’s dedicated job to handle payroll or part-time workers. It’s even more challenging for small businesses; the process is generally very time-consuming, and owners frequently struggle to keep up.

 

Preparing payroll requires training, time, money, and accuracy, which is why many businesses turn to online payroll companies. Because payroll data is the most confidential data in any organization, in the past, it made sense to manage it manually. However, times have changed, along with technology. Over a period of time, the payroll procedure can become a time-consuming headache for nearly anyone. Therefore, investing in cloud-based payroll technology can help you automate your payroll and help you grow your business, based on the time saved.

 

When shopping for online software, as a business startup or when running a small or medium-sized business, think about what parts of your business will require additional software or services support and what areas you think you’ll be able to handle on your own. You’ll need to consider everything from back office operations to the success of your sales force. Therefore, it’s important to weigh the pros and cons of why you should invest in payroll software when you only have a handful of hourly employees or when you primarily employ contractors on an as-needed basis.

Then, too, if you’re planning to expand your business, again a payroll software solution can play a crucial role in strengthening its foundation. Choosing the proper payroll system can be determined by assessing the needs of your organization.

Keep in mind a few main points while selecting your payroll management software, such as the size of your company, the requirements of your organization, and your budget. An automated payroll system requires no manual effort. A payroll software solution can calculate deductions, like national insurance and tax, and can also integrate with a time-tracking system.

Don’t make the mistake of thinking that the payroll process is a no brainer, because, as your business grows, the payroll process can become even more complex and challenging to manage. Remember: there’s NO room for error

Payroll is not the place to cut corners. Accuracy is critical when it comes to paying your employees. You’ve looked long and hard to find good employees who support your business. If you’re late in paying them or short them on their pay, not only will you incur legal consequences, fines and penalties, but you’ll risk losing their loyalty and trust. Then, too, as your business grows and you add more new employees, your payroll process will become more complex and no longer will be the simple process it once was.

Here are important considerations to keep in mind related to online payroll:

  • For a payroll solution to truly prove its value, it must have reliable, on-time payroll processing that’s easy to use. Then, too, your payroll software needs to grow with you and go beyond the basics. You need to keep in mind not only salaries and wages, but also tracking bonuses, deductions and more. And the software needs to have an easy-to-navigate interface that you, the employer, and your employees, can use.
  • With the help of employee calendars, you can manage employee sick leave, overtime, and days absent. Payroll management software will provide you with detailed information, such as how long the employee is out, how many leaves they have taken, etc. Planning becomes much easier with payroll software.
  • Make sure your payroll software can handle payments to both your contract workers and vendors, in addition to handling employee hourly wages, salaries, and other employee compensation.
  • Check to see if your payroll software can handle automatic benefit deductions and tax withholdings. And it needs to be able to document this information to your employees in a way that they can easily understand.
  • Can your online software handle multiple pay options, including splitting direct deposit across multiple bank accounts? Features like this can help your employees gain trust in your business. Plus, it’s a good idea to send payday emails and easy-to-understand breakdowns to your employees to help personalize their pay experience, without adding extra work to your HR resources.
  • To maintain compliance with federal and state employment laws, in all likelihood, you’ll need some help from your payroll software. Navigating these government regulations isn’t easy. For example, for the 2018 fiscal year, the IRS assessed 4.9 million in civil penalties related to employment taxes, all due to issues pertaining to accuracy, delinquency, failure to pay, and more. In dollars and cents, this amounted to more than $29.3 billion in penalties. Ouch! Can you afford to incur the potential risk of these kinds of tax fines or penalties in your small business?

If not, then your payroll software should be able to calculate, withhold, and pay federal, state, and local payroll taxes accurately. Plus, make sure it can file quarterly reports and generate year-end forms like W-2s and 1099s. These can be life savers for you and your business. When it comes to business taxes, the more preparation you do can mean more money saved and less time wasted.

  • An automated payroll software easily calculates the withholding tax for every employee, based on data entry, thus, lowering the risk for payroll tax errors.
  • You have the peace of mind that your payroll data is secure. Payroll software can protect your personal information from potential threats (cybersecurity, among others). It helps to amend privacy notices, ensuring that they comply with any new or updated regulations.
  • If you use different systems to collect your data, such as attendance, leave, and other employee information, this can be a tedious process, causing you to continuously switch between systems to configure. When using online payroll software, all important inputs will be auto updated when needed. This saves time and avoids manual data entry work.
  • An ideal online payroll software solution has multiple features, business policies, and rules based on the needs of the specific business. With a single click, every employee’s payroll gets processed and pay slips get published immediately. Important inputs for employees, including attendance data, salary structure, LOP information, etc. is automatically updated.

 

When you run into a snag, particularly when it comes to online payroll, naturally, you’ll want to be able to reach live customer support 24/7. Even if you’re equipped with the best payroll tools available, there’s nothing more reassuring than having live human support for backup. What’s better than that support being available around the clock? You don’t have to wait for the business to open the next business day to resolve a problem. This takes the stress off of resolving potential issues when your time and energy could instead focus on running and growing your business. Then, too, before deciding on an online software, find out what others are saying about the customer support they receive.

To quickly recap, is it worth the effort of using an online payroll service? Do your employees have easy access to it or does it cause more questions or add more work to your already overloaded administrative team? Do your employees still go to HR to get payroll-related answers? If so, then your payroll software isn’t delivering on everything it should. Look for a solution that provides easy access to your employees. They should be able to log in and have access to everything they need, from digital pay stubs, to benefits breakdowns, to year-end tax forms. They must also be able to update their personal information, including bank account information and withholdings, and navigate through their pay stubs hassle free.

ASAP Payroll Service can help you get set up with online payroll services. You’ll get everything you need to run payroll for your small business, including HR benefits that can help negotiate mixed workforces (e.g., W2 employees and independent contractors). ASAP Payroll will also work with the IRS on your behalf if any tax issues come up. Plus, it’s easy to add on services like employee health, dental, workers’ compensation, and retirement plans. Contact ASAP Payroll Service today at (317) 887-2727 or visit the website at: www.asappayroll.com for more information.

Nonprofit Payroll

Nonprofits parallel corporations in that they have paid employees and regularly scheduled paydays. It’s important for them to file withholding payroll taxes accurately; if they don’t, they can face unique obstacles, such as needing to stay within a tightly limited budget, using grant money for certain payroll expenses, and determining reasonable executive compensation.

Typically, nonprofits are registered as 501(c)3 organizations, meaning they provide their services as a public good without rendering a portion of their earnings back to the government. Likewise, individuals and companies donating to these organizations can write off their contributions as tax-deductible.

As 501(c)(3) nonprofit organizations, they don’t pay Federal Unemployment Tax Act (FUTA) taxes, which is an employer-only payroll tax. However, not all tax-exempt nonprofits are 501(c)(3) organizations. They must apply for an Employer Identification Number (EIN) and file Form 1023. Those nonprofit organizations without 501(c)(3) status are required to pay FUTA taxes to the federal government.

According to the IRS, to be considered a 501(c)(3), your nonprofit must qualify as:

  • Charitable
  • Religious
  • Educational
  • Scientific
  • Literary
  • Testing for public safety
  • Fostering national or international amateur sports competition
  • Children or animal cruelty prevention

When managing payroll taxes for non-profits, the employees on staff, despite the organization having tax-exempt status, are still subject to payroll taxes, just like for-profit organizations. Federal income tax and FICA (Social Security and Medicare) taxes must be withheld from employee paychecks, along with paying the employer portion of FICA taxes.

 

In addition:

  • While State Unemployment Tax Act (SUTA) tax rules vary by state; nonprofits can elect to forgo quarterly SUTA tax payments and pay the state directly for unemployment benefits paid to their former employees.
  • If an employee is paid less than $108.28 in a calendar year, that organization doesn’t need to withhold FICA (Social Security and Medicare) taxes from that employee’s wages.
  • While rewarding your volunteers is appreciated, make sure you don’t offer taxable rewards. If you do, taxes must be withheld from gifts and the volunteer must report their value to the IRS as taxable income. In lieu of this, you can offer parking passes, on-site meals, educational training, etc.

Closely monitor tax law changes to maintain your tax-exempt status and remain compliant.

In addition, nonprofits must be careful when paying workers. There’s a difference between employees, contractors, volunteers, and board members. And any board members who are compensated must be paid a reasonable amount per a special IRS test.

Other types of nonprofit organizations include:

  • 501(c)(1): Nonprofits organized by Congress, such as a federal credit union.
  • 501(c)(2): Holding corporations for exempt organizations. This means they can own properties for an exempt nonprofit. A church establishing an organization with the sole purpose of holding the title to its properties is an example.
  • 501(c)(4): Social welfare organizations and civic leagues that focus on providing education, charity, and community welfare.
  • 501 (c)(5): Labor, agricultural, and horticultural organizations that are educational and are created to improve work conditions and efficiency. Labor unions are an example.

Nonprofits other than 501(c)(3)s have different rules regarding eligibility, lobbying, and tax exemption. However, in general, every organization must withhold Social Security, Medicare, and federal income tax from employees’ wages.

How to Pay Nonprofit Workers

As a nonprofit, when handling payroll, you need to decide how much to pay your workers. Federal law dictates that all employees must be paid a minimum wage of $7.25 an hour, but this doesn’t apply to volunteers. There are 17 states and territories with rates that match the federal minimum wage, but most of the others are higher. Check your state’s minimum wage before making job offers. Commissions and bonuses should be avoided, because the IRS will likely view them as red flags, because they’re typically tied to performance and can open the door to fraudulent activity.

Some nonprofits hire employees with disabilities; this allows them to pay a lower rate than the minimum wage law allows. You’ll need to request a certificate from the DOL’s Wage and Hour Division before implementing. You can also pay employees under the age of 20 a minimum rate of $4.25 an hour for their first 90 days of employment.

Independent Contractors Working for Nonprofits

Independent contractors are workers who provide goods or services to an organization per a contract or other agreement. Similar to other employers, nonprofits don’t have to withhold or pay payroll taxes on payments made to independent contractors. They simply have them complete a W-9 form that will collect their tax identification number and other information to make it easy for you to report their annual earnings on a 1099 at year’s-end.

There’s a difference between an employee and an independent contractor. If you fail to withhold and pay taxes on amounts paid to an independent contractor and the IRS discovers that your contractor is actually an employee, you could face penalties and additional payroll taxes. Contractors generally have more control over their time, pay, and work method than employees.

Consider Grants to Pay Employees

Another option for nonprofits to pay employees is to use grants to fund specific projects that support their overall mission. Grants can cover payroll expenses for select staff members who work on projects related to the grant.

These employees need to track their time and the activities they perform back to a specific grant, because some of the work they perform in a given pay period might qualify for grant dollars, while some may not. This makes tracking critical.

This is where a time system that allows the employee to track time spent on grant-related work via a mobile app is important. The employee’s time spent is captured in real-time, and the data flows to the payroll application. This makes it easy to report on payroll expenses connected with a specific grant. The administration can then run reports to determine payroll expenses allocated to the grant, and those that flow to a designated general ledger account in their accounting system.

Executive Salaries

Reasonable compensation for executive salaries means the amount of compensation that would be provided by a similar organization in similar circumstances. Total reasonable compensation includes the employee’s salary, compensatory and fringe benefits, and other cash and non-cash compensation.

Because nonprofit organizations are generally led and directed by a board of directors who guide the future of the organization without having direct financial ownership, they must meet IRS requirements of reasonable compensation. According to the IRS, reasonable compensation is “the value that would ordinarily be paid for like services by like enterprises under like circumstances.” Reasonable compensation considers total compensation, including wages, fringe benefits, PTO, professional development costs, bonuses, health insurance, and more. While many nonprofits operate with very small payroll budgets, those with highly compensated employees should regularly review salaries to ensure they’re keeping compliant with IRS rules.

They should research an appropriate salary range for a particular position. Members of the group shouldn’t have any conflict of interest at work, meaning they shouldn’t have any benefits or losses from the determined salary. The group should record how they reached a decision on “reasonable compensation” so it can be reported on taxes and in case they are questioned.

Religious Organizations

 

A specific type of nonprofit charity, minister pay, is handled differently from that of other employees. Typically, ministers are set up as employees of tax-exempt organizations, though in some cases they may be considered self-employed if certain requirements are satisfied. Like other employees, ministers are paid a salary subject to income tax, however, some differences include:

  • When calculating Social Security and Medicare tax, ministerial employees are considered self-employed, meaning the nonprofit does not withhold those taxes from the minister’s pay, and the employee is responsible for paying both the employee and employer’s portion of the tax. Ministers’ can request an exemption from self-employment tax from the IRS.
  • Ministers’ pay may include housing or a housing allowance. This amount is reported by the religious organization on Form 990-T and is excluded from gross income for income tax purposes. However, as with wages, housing allowances are subject to self-employment, Social Security, and Medicare tax unless the minister has been granted an exemption.

There is a way that 501(c)(3) religious organizations can request exemption from the employer portion of Social Security and Medicare taxes on all employee wages. If the exemption is granted, all employees of the organization will be responsible for their self-employment taxes, paying both the employee and employer portions of the tax.

Handling Payroll Tasks

Employees at nonprofits often perform more than one job function. Unlike larger corporations that can hire dedicated HR and payroll staff, nonprofits might have payroll managed by someone who has another role within the organization. That’s okay unless the individual managing payroll doesn’t have the proper experience and training. Payroll can be complicated and can put your organization at risk if you fail to comply with federal, state, and local tax laws.

And for security reasons, you should always have a second individual verify all payroll data prior to processing and issuing checks or direct deposits. Make sure that no single individual can safely enter, approve, and process payroll for your organization.

Here are the payroll taxes nonprofits are generally subject to pay or withhold from employee paychecks:

  • FICA: Social Security and Medicare taxes, 6.2% and 1.45%, respectively; you pay approximately 7.65% from your bank account and withhold the same from your employees’ wages.
  • FUTA tax: You pay FUTA taxes on the first $7,000 of each employee’s wages at a rate of 7%. This is to cover unemployment benefits for employees in the event of their termination. Employees are not responsible for paying this tax; 501(c)(3)s are exempt.
  • SUTA tax: SUTA tax rates can vary from 2.7% to 3.4%, and can sometimes be even higher for new employers who don’t have claim history. Nonprofits can pay into the tax fund regularly or reimburse the state when former employees make claims.
  • Federal income tax: You should collect a W-4 form once your new employee is hired; it will show all of the allowances claimed so you can withhold the proper amount of federal taxes for each period.
  • State income tax: You may have to withhold state income taxes if your state requires it, and the employee is not exempt. If your nonprofit is in certain states like Florida or Texas, you don’t have to withhold state income taxes.
  • Local income tax: Some localities, like New York City, charge their own tax outside of the state income tax. You’ll need to check your state and local laws to verify how much needs to be withheld.
  • Workers’ Compensation: Nonprofits are required to comply with state workers’ comp laws. This ensures your organization is covered if an employee suffers injury or death as a result of work performed on the job. Rates depend on position, claim history, etc.

Nonprofit Payroll Service Costs

The cost of processing payroll for your nonprofit can be cheaper than processing payroll for regular businesses. Some payroll services offer special discounts to nonprofit organizations, and those that don’t are generally inexpensive. Depending on your needs and how much research and work you’re willing to do, you can process payroll for a nonprofit with 12 employees at a cost ranging from $0 to $100 a month or more.

Here are the three cost levels you’ll generally find when researching payroll software:

  • Inexpensive: An inexpensive payroll software for nonprofits can span $10 to $90 a month. You usually have access to some add-ons, like time and attendance, but not to high-end software. The interface is typically user-friendly.
  • High-end: A high-end payroll for nonprofit service could cost $90 a month for 12 employees, depending on whether you add on á la carte features. You’ll usually have more HR support, which lets you can ask about specific compliance issues when they arise. However, once you reach 50 or more employees and need to provide insurance and FMLA leave, you’ll have to spend hundreds of dollars per month to reap the benefits of a high-end service.
  • Free: Free payroll software for nonprofits limits the number of employees it can support and can sometimes be less up-to-date and intuitive. You should be able to run payroll and print checks, but the system might be cumbersome.

Health Insurance Benefits & Other Deductions

When processing payroll for your nonprofit, taxes aren’t the only consideration; health insurance benefits and other deductions must also be withheld and paid. You’re not required to offer health insurance unless you have at least 50 full-time equivalent (FTE) employees, but it could be a morale booster. You might also consider 401(k), commuter, dental insurance, and other benefit options.

Health Insurance Requirements Under the Affordable Care Act (ACA)

Again with 50 or more employees, the ACA requires you to offer health insurance. A full-time employee represents 30 hours worked per week. This means that two 15-hour employees (15 + 15 = 30) are the same as one full-time employee. When calculating net pay for employees, be sure to deduct any health insurance premiums you require them to pay.

Other Benefits & Deductions

You might also want to offer a 401(k), dental insurance, vision insurance, flexible spending accounts, and health savings accounts. These are all employee benefits that you can contribute to partially or fully. Remember, any contributions you make are considered expenses your organization pays, but any premiums you collect are just deducted from employee paychecks.

If you’re dealing with a wage garnishment, this is a court-issued order requiring you to withhold a certain amount from an employee’s check to pay one or more of their debts. Know that you have a certain number of days to respond and you must begin withholding the specified amount immediately, or you could be liable.

Here are some of the labor laws you should be aware of:

  • Paid time off: This includes holiday, sick leave, vacation, and so forth. Federal law doesn’t require you provide paid vacation nor does it dictate when employees can use it. Some states require you to roll over unused vacation time from one year to the next.
  • Overtime: Is generally paid at 1.5 times the employee’s regular rate for any hours worked over 40 in seven consecutive days. California requires you to pay overtime for any hours worked over eight in a day and double-time when it’s over 12 hours.
  • Meals and breaks: The DOL doesn’t require you provide lunch breaks, but any breaks taken in 20-minute increments (or less) must be compensated.
  • FMLA leave: If you have 50 or more employees, you must provide up to 12 weeks of unpaid, job-protected FMLA leave annually. Employees will sometimes use this for maternity leave or to care for a sick family member.
  • Recordkeeping: You must keep organized records on each employee that include their name, occupation, hours worked each day, weekly overtime earnings, etc.
  • Labor law posters: The DOL requires that you place certain posters in your workplace so they’re easily accessible to employees. You will need the Federal Minimum Wage poster and possibly the Equal Employment Opportunity poster, if you receive federal funds.

Labor Laws for Nonprofits

Nonprofits are expected to follow labor laws, including overtime rules, mealtime laws, and paid time off policy requirements. Nonprofits are generally exempt from these when it pertains to volunteers, but it’s important to be aware of labor laws when setting human resource policies for employees. You should also consider state-specific laws, because they can differ from federal.

Filing Annual Returns

Generally, nonprofits recognized as tax-exempt are obligated to file an annual information return with the IRS. Exceptions include those for certain religious organizations, schools, and political organizations. This reporting allows the IRS and the general public to audit nonprofit operations and maintain tax-exempt status. Form 990, Return of Organization Exempt From Income Tax, requires a significant amount of data, including payroll taxes, number of employees, and executive compensation. Forms for smaller organizations require less information.

  • Form 990 (for organizations with gross receipts greater than or equal to $200,000 or total assets greater than or equal to $500,000 at the end of the tax year)
  • Form 990-EZ (for organizations with annual receipts of less than $200,000 and total assets at the end of the year less than $500,000. This group has the option to file Form 990 instead.)
  • Form 990-N (for small organizations with annual receipts less than or equal to $50,000) This form must be filed electronically. Certain types of organizations are ineligible to submit this form.
  • Form 990-PF (for private foundations, including nonexempt charitable trusts treated as private foundations, regardless of financial status)
  • Form 990-T (business income tax return to report unrelated business income)
  • Form 990-W (to report estimated tax on unrelated business taxable income)

Accurately completing these forms each year is important. The IRS will reject incomplete paper and e-file returns or filing the wrong form. And, it’s critical to file every year, because organizations’ may be assessed penalties for late forms and may put their tax-exempt status at risk if they fail to file for three years.

In Conclusion…

…the most challenging part about doing payroll for a nonprofit is balancing the budget and other resources with compliance. Knowing you’re not subject to FUTA taxes or that you don’t need to pay volunteers a significant amount for their services is important to minimize penalties and save money.

ASAP Payroll Services can help you navigate the ins and outs of managing your particular payroll needs. Plus we offer a 10% discount to nonprofit organizations. Reach out to us at 317 887-2727 or by fax at 317 887-2741.

Why Integrate Your Payroll with Time and Labor?

Time and labor (also referred to as time and attendance) tracks your employees’ work start and end times, early departures, late arrivals, breaks taken, and absenteeism. If you’re not familiar with payroll processing, it comes across like a simple mathematical equation, where you multiply the number of hours worked by the hourly rate and voila! Your employees receive paychecks. Ultimately, payroll has to make sure employees are paid correctly, based on their time-labor records. However, it’s not that simple when you have to calculate tax deductions, benefit elections, and overtime. It all starts with you, the employer, knowing how many hours your employees have worked. The most common/universal way to do this is time tracking.

Because employees are the life blood your business and drive it, it’s critical for them to be set up for success, in order to attract, recruit, and retain the best in your field. Did you know that 49% of U.S. workers leave a job after experiencing two problems with their paychecks? This leads them to think, if their time and pay can’t be accurately configured, why would they trust you, their employer, with their development, performance, and management?

Historically, the functions involved with paying your employees were blended, making it difficult for employers who relied on stand-alone systems to manage each function. Today, thanks to software developers, these functions can now be merged into a single system. And, with fewer working parts, there’s less of a chance an error will be made. Plus, when time-labor is integrated with payroll, employers can now increase their efficiency, save time and money, and make the process less stressful for employees and the payroll staff.

Why Merge Time and Labor with Payroll?

When you use a solution that incorporates timekeeping and payroll capabilities, you increase your chances of not having a payroll error rate by 44%. This saves payroll administrators, managers, and other employees hours of administrative work tracking the origin of errors, in addition to not having to reissue checks or incur expensive compliance fees. Another benefit to creating efficiency in the process is that it allows your payroll team to focus on other projects and devise new ways to add value to your company’s operation. It’s been reported that businesses with integrated timekeeping and payroll exceeded their revenue targets by 7%.

More reasons include:

  • An integrated system captures and stores your employees’ time-labor data electronically, thus eliminating the need for timesheets and the physical space to store it.
  • Reduces timecard fraud. The American Payroll Association reports that more than 75% of U.S. employers lose money annually due to “buddy punching” (the fraudulent practice of coworkers punching in and out for each other). This is a serious, costly issue that can be addressed by integrating a biometric time-labor system with your payroll software, because it identifies a specific individual.
  • Helps keep your timekeeping and payroll errors to a minimum, thanks to an integrated system that lessens the chance of errors. This means that your payroll staff no longer have to manually calculate timesheets or enter timekeeping data into the payroll system. An integrated system enhances accuracy by digitally collecting time-labor data in real time and automatically transfers the information to the payroll system, which then calculates it based on the data entered, plus any subsequent edits. The system calculates employees’ time and ensures that the time is rounded up or down, accordingly.
  • Requires less staff to manage timekeeping and payroll data entry. As mentioned earlier, this frees up supervisors to better focus on mission-critical tasks and spend less time tracking attendance.
  • Keeps you, the employer, in regulatory compliance. Today’s regulatory environment constantly changes, which makes it difficult to keep up with compliance. Irrespective of the size of your business, managing workforce compliance is a complex, high stakes undertaking. Any time you can maintain compliance with federal and state wage laws, it lightens your burden, because when accuracy is improved, employees register fewer wage and hourly complaints, which result in fewer penalties from the government. Noncompliance penalties can cripple your company financially and in terms of time and resources. You run the risk of damaging your company’s reputation in the instance these violations become public. By replacing timekeeping and payroll tools with a single technology system, your employees’ data is secured in a single location, providing you with consistent, accurate, and a real-time opportunity to reduce your compliance risk. Another benefit is that your payroll administrators are free to analyze data, rather than enter it.
  • Enhances reporting. With an integrated solution, you have more dynamic reporting options compared to a stand-alone system. Since your data is centralized, there’s no need for your payroll staff to log into different systems to generate reports. One login can create reports on work hours, break times, absences, regular wages, overtime, and more.

Is it Worth Integrating Payroll with Time and Attendance?

Integration is a time-saver. It can streamline your time and attendance process. For example, payroll and timekeeping errors can be extremely costly, especially when labor is your largest expense, particularly for service contractors, such as janitorial and security businesses. One way to reduce these kinds of errors is to move to a system that integrates your time and attendance process with your payroll system. You can only get away with using a subpar system for a limited time before you’re forced to keep up with the times. According to the IRS, these kinds of errors are costly, often in the range of billions of dollars annually. The American Payroll Association shows an error rate of between 1-8% of total payroll in companies that use traditional timecards, with roughly 40% of small businesses incurring an average of $845 a year in IRS penalties due to mismanaged payroll processes. What if you could reduce those numbers? How much money would your company save annually? In addition to cost savings, here are a more benefits of having your time and attendance fully integrated with your back-office payroll system.

  • Simplifies your timekeeping and saves you money. By automating your timekeeping processes, you eliminate paper time sheets. You can better control your labor costs, because you can quickly identify over-budget jobs or projects. You also have a better handle on overtime. If you use a solution that offers tools like location and voice verification, you can confirm your employees arrive onsite and on time.
  • Lets you address attendance issues immediately to make sure all shifts and sites are covered, and your contract requirements are being fulfilled. This can also help prevent issues, such as ghost employees, which could be extremely costly.

Reduce Data Entry Time and Errors

When your time and attendance is a stand-alone process, you spend more time on redundant data entry, compared to integrating your timekeeping information with your operations and workforce management solution. If you’re process falls short, your software probably isn’t doing its fair share of the work. Every company reaches a tipping point where the processes and technology it has relied on for years are no longer sustainable. Your company grows, markets change, and software ages. However, with an integrated system, you could reduce your payroll processing by as much as 90% if your data is integrated with a holistic Enterprise Resource Planning (ERP) solution. Timekeeping information is immediately ready for seamless payroll, invoicing, and reporting, so you can spend more time on high-value activities. Plus, it’s easier to meet IRS requirements for retaining employee tax records when they’re stored digitally in your back-office payroll system.

Lower Your Compliance Risk

Compliance requirements are very likely to increase. No matter the size of your business, managing your workforce’s compliance is essential to maintaining the success of your business. When you have messaging features as part of your time and attendance system, you have a trail of timekeeping records and message responses should you ever need them in the instance of an audit. You can also lower your wage fraud compliance risk when you integrate your time and attendance with your payroll system, because you can ensure that you’re paying your employees for the exact amount of time they’ve worked.

Based on your experience as a business owner, you know that there’s no single, simple equation or fundamental task that guarantees the success of your business. Think about your payroll as a set of dominos. Striving for perfect paychecks, accurate timekeeping, compliance, and a positive employee experience can keep those dominos standing. However, if a single domino falls, it can ripple down and have a negative impact on other areas of your business.

When you integrate your timekeeping and payroll, you’re not merely addressing a solution to a business problem. You’re taking a proactive step to avoiding problems with employee morale and compliance. You need to constantly evaluate these processes to make sure that your employee data is accessible and accurate and that you’re eliminating the possibility of human-error that can occur by handling payroll manually. With this in place, you can now focus on enhancing the experience of your multi-generational employees and reduce their chances of looking or considering leaving your company by 52%, because of compensation.