Best Practices for Remote Employee Timekeeping

The coronavirus situation has affected the global economy and shattered lives. But it has facilitated one notable change that has transformed markets across sectors. Organizations are now more enthusiastic about remote work, and millions of staff now complete their tasks from their living rooms.

Some of the world’s leading entities now work with full-time remote staff, including social giants Facebook and Twitter. Even companies that weren’t open to the idea, now acknowledge the massive impact of digital migration and remote work tech solutions.  Even with the right technology and a large team, it’s still not easy to achieve your efficiency and remote timekeeping goals. But, you’ll always stay on track if you follow the following remote employee timekeeping best practices:

Plan First, Action Next

Before assigning the different remote tasks, it’s crucial to create an effective plan of replicating the office experience in productivity and time efficiency. You may create a document highlighting what’s expected from each team member while working from home. Also, come up with a practical means of tracking the progress of different tracks then create a strategy for remote problem-solving.

While creating a plan, ensure your employees don’t feel too restricted. Give them the space to discover other things on their own. For instance, if you have teams in different time zones, create a plan to keep them in sync without taking up too much of their personal time.

Encourage Staff to Switch Off from Work

When working from home, remote employees are likely to lose track of time. Since the house now also serves as an office, they may have the urge to continue working until late at night. To avoid this, create and maintain a fixed number of working hours to keep a healthy work-life balance.

Encouraging them to switch off their work chat and email means they’ll never feel exhausted when they begin working on the next day’s tasks. They’ll stay productive and efficient and save lots of time.

Communication Rituals

Developing a more efficient and centralized communication system within the organization can mimic regular rituals that you’d have in your headquarters. This gives a feeling of camaraderie that all staff members are around are working towards the same goals. As a result, they’ll be committed to complete their part of the task in good time, or probably earlier, so that they can take care of other personal business.

One common ritual among organizations is leaving a “Hi” on the company’s general chat platform when they check in. This brings the everyday experience into the digital space, giving staff the feeling that everyone’s reporting to work and handling their tasks. Another communication ritual is that every remote employee submits regular updates on their tasks’ progress at specified milestones.

Provide The Right Tools for Recording and Tracking Time

Instead of being the overseer of their timekeeping efficiency, it would also help to be part of the solution. You can avail electronic timesheets and spreadsheets or have them send their work hours via email to their supervisors, but these approaches are outdated and will waste even more time.

Various time-tracking and efficiency tools are available on the web, and providing them to your staff would benefit you in different ways. For instance, ASAP’s payroll tracking system eliminates assumptions regarding your staff’s actual hours, allowing you to track the hours by phone or computer from any location.

Monitor Projects

It’s not easy to track projects and know what’s being handled when a worker is away from your headquarters. But if you want your projects to be easier to follow, project monitoring software would come in handy.

These tools allow everyone to see what everyone is currently working on, completed projects, and those still in progress. You can also monitor how long your staff are taking to complete their tasks. If anyone is taking more time, ensure they understand your expectations.

Of course, addressing all these while focusing on core business isn’t easy. That’s why you need a professional specialized in payroll, human capital management, and time and attendance. ASAP Payroll has been an industry leader in this, providing custom solutions and comprehensive services since 1989.

Reach out to us to get your free quote, or sign up for our newsletter.

Sick Leave Laws: Are There Laws Against Working While Sick?

According to Indiana sick leave laws, no employer is required under law to provide paid or unpaid sick leave to their employees. However, many employers give it as part of the employee benefit. Minor illnesses like flu are not part of the sick leave laws that provide legal protection against working while sick under federal law. Disability or severe medical conditions that present non-typical health complications or make a worker feel very sick are addressed under sick leave laws.

Laws concerning working while sick

Safety Violation

An illness or a particular medical condition can make the working environment unsafe. OSHA, a federal agency that deals with safety violations, will offer legal protection if there are safety concerns and your workers cannot report for duty. Workplace safety laws require that you grant sick leave to employees who cannot report to work, especially if they suffer from a contagious illness. Some industries, like health or food service sectors, are particularly more concerned about working while sick. Other non-regulated industries may also require workers not to report to work if they are ill.

Small Employer

The American With Disability Act will not offer any legal protection if an employer has a maximum of 14 employees. Unless the local laws of a specific state cover the employer, it means that there is no legal protection against working with a disability for a small employer. The Family and Medical Leave laws will protect employers with 50 employees and above within a radius of 75 miles. This means that if you have less than 50 employees, the Family and Medical Leave laws will not offer you any protection for serious conditions due to disability.

Serious Medical-Condition

Family and Medical-leave laws allow up to 12 weeks of sick leave for a serious medical condition. The law applies if an employer has a minimum of 50 employees within a radius of 75 miles. It also states that an employee must have worked for at least one year and 1250 hours within a year. This means that there are sick leave laws that protect in cases of severe medical conditions. However, there are specific conditions that have to be met.

According to the department of labor, the term “serious” has specific definitions. For example, “serious” means a period of treatment due to patient care in a hospital, hospice, or medical facility. It can also be a period of incapacity, among other definitions. You must understand these definitions before allowing a paid sick leave or unpaid sick leave.

Disability

An employer with 15 employees and more covered by the American With Disability Act must provide reasonable accommodation to workers with a disability. An example of reasonable accommodation could be allowed time off in case of illness related to the disability. The law, in this situation, offers protection as long as there is sufficient evidence that an employee has a disability. It is essential to familiarize yourself with the specific definitions of the term disability.

Final Thoughts

Some laws provide protection against working while sick as long as the situation meets certain conditions. In such cases, an employer should grant sick leave. If the situation does not meet these specific conditions, then you are under no legal obligation to grant sick leaves. However, you are at liberty to give sick leave as a work benefit. Laws regarding sick leave can be complex and present a tough topic. Employees need support during leave time, and at the same time, the work environment is competitive. ASAP Payroll helps companies navigate difficult topics like this. Contact us today for more information.

The Frequently Asked Questions (FAQs) About the Indiana Workers’ Compensation

workers compensation

Every year, employees in any occupation get injuries or become sick due to factors beyond their control. Statistics by the BLS indicate that the private industry alone reported more than 2.8 million work injuries (non-fatal) in 2019.

In 1915, the Indiana General Assembly approved the Worker’s Compensation Act, which is in effect up to date. The Act creates a system that regulates the provision of benefits to the injured or sick workers. If you are an employer, it is safe to be conversant with the Act to avoid legal issues. Unfortunately, most people find it difficult and confusing to understand the Act. Below are the frequently asked questions about Indiana Workers’ Compensation.

Who Qualifies for Workers’ Compensation Benefits?

Employees are eligible for worker’s compensation if injuries or illnesses occur while on duty. If it occurs when they are off duty, they don’t qualify for the compensation. 

Does the Workers’ Compensation Act Cover the Independent Contractors?

The Indiana workers’ compensation does not cover independent contractors.

What Action Should a Worker Take after an Injury?

The worker must notify the employer about an injury any time before the 30th day; otherwise, they may deny your claim. For the best of your interests, ensure you report immediately you get an injury. It allows sooner commencement of your compensation benefits.

What Happens If The Worker Has To Stay Out Of Work Due To Injury?

If you have to stay out of work for one day or more, the employer must fill and send the Employer’s Report of Injury form to you and the insurance company within seven days.  The insurance company has to file the report with Indiana Workers’ Compensation Board.  Additionally, the insurance company must either accept or deny the claim within 29 days.

Does the Act Cover a Minor?

The Indiana Workers’ compensation act covers minors who are below 17 years at the time of injury. The minor could even receive double benefits if there were an infringement of the Indiana labor law.

Does the Act cover Psychological Injuries?

Yes, provided the psychological injuries arise during the employment tenure. The injured worker has to undergo thorough psychological tests to prove that.

What if an Employer Denies The Claim?

The workers can pursue an appeal if the employer denies the claim or where the insurance company disputes any portion of the claim. The process involves filing an Application for Adjustment form with the Workers’ Compensation Board of Indiana.

After that, a hearing is held, and the workers’ compensation judge issues a written decision. If an employee doesn’t agree with the Judge’s decision, they have 30 days to file an appeal with the full board.

Who is Subject to Litigation?

The workers should use the Indiana Workers’ compensation if the injury occurred in Indiana. Rather than suing the employer, they may consider other settlement options other than workers’ compensation. Manufacturers, other contractors in the workplace, or particular safety supervisors could be subject to liability depending on the injuries.

Do Employers have to reveal their Worker’s Compensation Carrier?

It is a requirement that the employers display the details of their insurance carrier, including name, telephone line, and address, in a conspicuous location. If employees can’t find the information, the Act requires them to reach out to the Indiana Workers’ Compensation Board.

Reduce Compliance Risk!

Accurate timekeeping is among the most crucial aspects of a successful business. That is why every employer should consider investing in an automated timekeeping system for organization survival. This powerful savings tool eases the arduous task of manual time recording. It reduces paperwork, costs, errors, and compliance risk while maximizing efficiency and increasing labor-related savings.

ASAP Payroll can assist you in devising a system that suits your needs. Contact us at (317) 887-2727 or visit our site for more information. 

Will Indiana’s Minimum Wage Increase in 2021?

Minimum Wage

In the United States, each state is allowed to set its own minimum wage or follow the Federal minimum wage.  Indiana is one of 21 states that uses the Federal minimum wage as their state minimum wage, currently at $7.25 an hour.  In Indiana, employers that have two or more employees must pay at least the minimum wage. 

Will Indiana increase its minimum wage this year? 

The short answer to that question is probably not. 

Most states increase their minimum wage based on calculations and estimations made through the consumer price index. Indiana had not raised the state minimum wage since 2009, when it increased by $.70 from $6.65 to $7.25.

How do the Indiana State Minimum Wage Laws work?

The Indiana Department of Labor administers the minimum wage and overtime provisions of the Indiana Minimum wage law. 

The Indiana Minimum Wage Law generally requires employers to pay employees at least the minimum wage for all hours worked and 1.5 times their regular pay rate for overtime when they work more than 40 hours per week. 

Indiana law requires that every employer subject to the Indiana Minimum Wage Law must furnish every employee a statement of the hours they worked, the wages that were paid, and a list of the deductions made.   

Exceptions to Indiana’s Minimum Wage in 2021

Here are the exceptions to Indiana’s minimum wage:

  • Tipped employees in Indiana must be paid a minimum of $2.13 an hour with tips making up $5.12, in total equaling Indiana’s state minimum wage.
  • New employees can receive a training wage of $4.25 an hour for the first 90 days of employment. However, employees must be under 20 years old. 
  • Full-time students can be paid at least 85% of the state minimum wage, which is about $6.16 per hour. Students eligible for this wage must work 20 hours a week or less and are classified as a full-time student.

What Factors Affect Changes in Minimum Wage?

Minimum wage rates are determined by poverty threshold, prevailing wage rates as determined by the Labor Force Survey, and socioeconomic indicators such as inflation, employment figures, and gross regional domestic product.  This ensures better worker protection. 

So, Will Indiana Increase Its Minimum Wage This Year?

In 2018 a bill was introduced to the Indiana General Assembly to increase the state minimum wage from $7.25 an hour to $10 an hour starting June 30, 2021.  It would increase to $13 an hour by 2022 and $15 an hour by 2023.  It did not pass.

In 2019, there were three proposals to increase Indiana’s minimum wage.  One suggestion would increase the wage to $9 an hour after December 31, 2019, then increase $.50 per year until it becomes $12 per hour in 2026. 

The second proposal would increase the minimum wage to $11.12 an hour, but it would not start until July 2020. 

A third proposal would increase the minimum wage to $15 an hour as soon as July 2020.  The minimum wage would increase annually based on the increases by the Consumer Price Index for the preceding year. 

None of these bills progressed any farther.  

In January of 2021, another bill was proposed to raise Indiana’s minimum wage to $10 an hour.  So far, in 2021, 20 states have increased their minimum wage.  As of this writing, the bill is in its early stages. 

They are also having problems raising the Federal minimum wage.  President Biden is trying to get legislation passed for a $15 an hour federal minimum wage, but it’s on hold for now.  Critics say raising the minimum wage could force employers to cut jobs.  They say it would especially hurt teens and less educated workers. 

Based on these recent trends, and concerns, it doesn’t look like Indiana will increase its minimum wage anytime soon. 

Where to Look for More Information

If you want more information on Indiana’s Minimum Wage Laws, here are some resources:

If you need help managing your payroll, contact us today to give you peace of mind.  

Indiana Overtime Laws for Salaried Employees: Everything You Need to Know

overtime labor laws

The Indiana Overtime law also referred to as the Indiana Minimum Wage Law, echoes the Federal Fair Labor Standards Act (FLSA) in multiple ways. The two require employees to receive 1½ times their regular hourly pay rate as overtime from their employers, for all hours they work above forty hours during a workweek.

However, there are some significant differences between the two laws. According to the Indiana overtime laws for salaried employees, an individual has a right to get overtime pay if the number of employees under the same employer exceeds 40. On the other hand, the federal law does not specify a threshold on the number of employees but instead points out to employers with a gross income of 500,000 dollars.

The Indiana overtime laws for salaried employees and federal laws also differ in the statute of limitations. Under Indiana law, the employee has a maximum of three years to collect the unpaid overtime money from the date of earning. On the other hand, the Federal law sets the period at two years and a maximum of three years if the employer was deliberately infringing the overtime legislation.  

Exemptions

Careers differ in their working hours and the nature of the work environment. Therefore, you find that the eligibility to overtime in Indiana has a wide variety of exemptions. Depending on the employee, they could be exempt or non-exempt. Exempt employees are ineligible for overtime pay.

The major exemptions cited in the Federal overtime law are similar to those in the Indiana overtime laws for salaried employees.  Exempt employees are in four main categories. A job that fits into one of them means that the Indiana and Federal overtime laws do not protect the specific employee working in that position.

• Executive

If the full-time responsibility of a job is to manage at least two employees, it lies in the category of executive position.

• Administrative

If the job’s primary responsibility is non-manual activities such as management policies, administrative training, or business operations, it falls in the administrative position.

• Professional

A job in this category involves one where the main responsibilities require advanced knowledge and extensive education. It includes positions such as skilled computer experts, certified teachers, and artists.

• Outside Sales

Suppose an employee’s main responsibilities are to make sales or deliver orders to places outside the employer’s workplace. In that case, their job is in the category of an outside sales position.

As an employer, you should note that employees whose positions fall under the above categories are not eligible for an overtime premium according to the Federal and Indiana labor law. These laws majorly protect the hourly wage earners, especially those in blue-collar industries, due to high vulnerability to exploitation. The objective is to cushion workers from exploitation by employers.

Penalties

Although overtime may be appropriate during the peak periods, employers must monitor and control overtime levels to slash excessive use. Besides, failure to adhere to the overtime legislation may lead to penalties and accrued overtime payments.

Employers who intentionally fail to pay overtime are subject to liquidated damages. That provision is the same in both the Indiana overtime laws for salaried employees and federal overtime law. Liquidated damages involve a requirement to pay an extra amount of money equal to the owed amount to punish the employer.

Final Thoughts

Regardless of the size of a business, overtime costs can have a lot of financial impacts. Dependence on manual tracking of employees is inefficient, and you might find yourself out of compliance. That is why companies are keen to avoid overtime by integrating payroll and timekeeping services. It is a cost-effective system that reduces overheads and increases data accuracy, allowing real-time tracking of employees.

Contact ASAP Payroll today at (317) 887-2727 or visit our site for more information.

How Indiana Labor Laws Regarding Vacation Pay Can Affect Your Business

labor laws

As an employer in the state of Indiana, you are not required to offer paid or even unpaid vacation time to your employees.  That being said, there are some laws that govern vacation pay and how it is administered.  If you currently do not have a vacation policy in effect, there are a few things that you may consider.  

Why Paid Vacation is Important

Most employers offer two weeks, or ten days paid vacation for employees.  Not only are vacations good for the employee’s physical and mental health, it is also a great morale booster and an effective recruiting tool.  Employees who enjoy more of a work/life balance, are more productive, motivated, and have fewer problems with attendance and other performance issues.  

Indiana Labor Laws and Vacation Pay

Also known as Paid Time Off (PTO), employers in Indiana are not required to offer vacation, sick, holiday, or personal days, but if any of this is offered, there needs to be a written policy or contract defining how vacation is accrued, paid, or not paid.  It is important that your policy be well-defined and clearly understood.

  • Separation From the Company 
    • If your vacation policy states that upon separation, accrued vacation is paid to the employee, by Indiana Labor Laws, it must be paid upon separation.  If your policy states that upon separation, accrued vacation is forfeited, the employee, by Indiana Labor Laws, will not be paid.  However, if there is no provision in the policy or contract, by law, the employee will be paid his accrued vacation upon separation.  
  • Vacation Accrual Cap
    • As an employer, you can lawfully cap the amount of paid vacation that your employees accrue.  However, this has to be stated within your company policy, handbook, or contract.  Failure to define the cap could result in uncapped payment.  
  • Use It or Lose It
    • Some companies have a policy on using or not using accrued vacation.  If the employee does not use the vacation time in a certain amount of time, he forfeits the paid leave.  By Indiana Labor Laws, the Use it or Lose it policy is legal, so long as it is written and well-defined in the company policies or employee contracts.  Provision must also be made for the employee to have the time available to him for this statute to apply.

Indiana Vacation Pay Compliance

Indiana Labor Laws leave plenty of room for employers to be flexible with their policy on vacation leave.  Employers can either offer paid or unpaid vacation time, or not offer any type of vacation time off.  They can choose the rate of accrual, such as accrual of one day per month, or ten days after one year of employment.  Employers can also choose to pay or withhold accrued vacation upon an employee’s separation.  Companies can set limits on accruals, or set policies for how not using your vacation time is handled. 

The primary takeaway is that policies or contracts need to be clearly defined so that the expectation of both the employer and employee are the same.   If you currently do not have a policy in place, be sure to consider how any changes would affect current employees. Also be sure that they are counseled on the policies before they go into effect.  

At ASAP Payroll, we offer full service payroll, human resources, and recruiting services, as well as many other additional functions that can help your business run smoothly.  Contact us today to see how we can help.

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.

How Important is Pay Frequency to Your Business/Employees?

Pay frequency means how often you, the employer, issue a “paycheck” to your employees. And, who doesn’t love payday? Whether you pay weekly, biweekly (every 2 weeks), bimonthly (twice a month), or monthly, “Christmas” comes with every payday. Generally, payday occurs on a Friday, 4-5 days after the period has been closed out. However, as a small business owner, you get to decide how to handle payroll at your business while being cognizant of the expenses involved in doing so. It’s a huge responsibility. You need to get it right, because payroll done wrong can cost you time, money, and employee morale.

Managing payroll can be very time-consuming and challenging. Based on how you pay your employees, certain payment methods are more of a hassle than others. Are you using outdated methods, like checks or cash, to pay your employees or are you increasing the frequency you pay your employees? This means that you’re spending money on printing supplies and investing unnecessary extra time on bookkeeping. Even direct deposit entails higher pay frequency, which can mean more transaction fees if you’re not utilizing online payroll software.

The best payroll schedule for your company will depend on how you answer the following questions:

  1. How much time and money can I afford to spend on payroll each month?
  2. How often would my employees appreciate being paid?
  3. How will I calculate overtime?
  4. What are my state’s requirements?

Consider Employee Benefits

When deciding how frequently to pay your employees, you’ll also want to factor in their benefits. You’ll typically run employee benefits, such as health insurance, on a monthly basis. As a result, paying your employees monthly or semimonthly is more convenient when calculating voluntary paycheck deductions versus paying your employees biweekly or weekly.

Yet, there are additional factors to consider when determining how often you pay your employees. Legal requirements, for example, must be met; then there’s your industry to consider; and finally, employee classification and payroll administration costs.

On the legal side, while the Fair Labor Standards Act doesn’t dictate how often employers must pay their employees, according to the U.S. Department of Labor, “Wages required by the FLSA are due by the regular payday for the pay period covered.”

Then, too, many states’ have minimum payday laws, so make sure the pay frequency you’re considering doesn’t conflict with your state’s requirements. Plus, some states have specific conditions for how often employees are paid, based on the type of work they perform. For example, some states have very complicated payday laws. In Arizona, paychecks must be issued no more than 16 days apart, and employees must receive a minimum of two paychecks per month, while Michigan’s payday laws are some of the least restrictive, because pay frequency is based on occupation. Then there are states with no payday requirements—Alabama, Florida, and South Carolina.

No two states mandate pay frequency the same way. You need to do your homework. Check out the findlaw.com website and go to the State Laws tab to determine the laws for your state or talk to a local employment lawyer to learn more about your state’s payday requirements, if you or someone you know has a question about employment laws in your state.

Of course, you can always pay your employees more frequently, but no less than what your state has mandated. You also need to pay your employees consistently. You can’t change how frequently you pay them for no reason. Courts will only permit changing pay frequency for legitimate business reasons. You can’t change pay frequency to escape paying wages. You also can’t cause any unreasonable delay in paying employees’ wages. In some states, employers must give advance written notice to employees who will be experiencing a change in their pay frequency. Even if your state doesn’t have this requirement, it’s in your best interest to provide adequate notice.

And, as the employer, making a change in your employees’ pay frequency is completely your call, because pay frequency can be easily handled through your payroll tool or by requesting it from your payroll service provider. However, again, it’s critical that you communicate the change clearly and give your employees plenty of advanced notice, so they can plan accordingly. It’s also a good idea to map out each payday for the remainder of the year after the change to make sure employees know they will be paid their full annual pay.

Depending on Your Industry…

From a competitive standpoint, it’s best to know how frequently other businesses in your industry pay their employees. For instance, if state law requires at least semimonthly payments, but most of your competitors pay their employees biweekly, it’s best to weigh the pros and cons of both pay frequencies before deciding.

You can base your decision on data from government sources, employer associations, or by surveying vendors. As an example, based on research provided by the Bureau of Labor Statistics, 70.6% of employees in the construction industry are paid weekly, 52.9% in education and health services are paid biweekly, 35.9% of those who work in the information sector are paid semimonthly, and 17.6% who work in the financial arena are compensated monthly.

Here’s a breakdown guide to help you determine how often to pay your employees.

Weekly

  • Weekly pay date.
  • 52 pay periods per year.
  • Employees prefer this, as weekly income makes budgeting and automatic payments easier.

Biweekly

  • Pay your employees every other week.
  • 26 pay periods per year (sometimes three per month).
  • Because paydays fall on different dates each month, cash flow is more difficult for employees to manage.
  • You, as the employer, save time and money, because you’re outputting half the cost of payroll processing compared to a weekly pay frequency.
  • It’s still easy to calculate overtime with an 80-hour pay period.

Semimonthly

  • Employees are paid on two pay dates per month, commonly on the 1st and 15th or the 15 th and the last day of the month.
  • Entails 24 pay periods per year.
  • Easier for employees to pay their bills, because they can plan/budget based on when they will be paid.
  • Employer incurs about half as much payroll processing costs as in a weekly pay frequency. This saves time and money.
  • Calculating overtime is challenging in an ~86 hour pay period due to the need to analyze each 40-hour work week separately.
  • This pay frequency is easiest when tracking accounting, since reports are often done at the end of the month.

Monthly

  • One pay date per month.
  • 12 pay periods per year.
  • Long stretches between paydays can be difficult for employees to budget financially. Can also put a strain on the employer’s cash flow management.
  • Employer saves the most time and money on payroll processing, because they only have to do it once each month.
  • Calculating overtime is even more difficult in an ~173 hour pay period, because each 40-hour work week needs to be analyzed separately.
  • This pay frequency is also easy for accounting to track, since reports are often done at the end of the month.

After reviewing these pay frequency options, you as the employer need to determine which frequency is best for your business.

How Are Your Employees Classified?

Employee classification can also have an impact on how employees are paid. Employees classified as exempt or nonexempt can be impacted differently in terms of how frequently they’re paid. As an example, to keep payroll calculations simple, some employers pay nonexempt hourly (overtime-eligible) employees weekly or biweekly. Exempt salaried (not eligible for overtime) employees are paid semimonthly. If your employees don’t work overtime, it’s more practical to have a single pay-frequency system in place for everyone.

The Cost of Administering Payroll

As mentioned earlier, the more often you run payroll, the higher your administrative costs. Some payroll providers may charge you each time you run payroll. If you pay your team weekly, those costs could add up quickly. If your provider offers unlimited payroll runs, you will still need to consider your cash flow to ensure that you have enough money on hand to run a weekly payroll.

Running a weekly payroll requires 52 payrolls per year. Operating a biweekly payroll typically entails 26 payroll runs, while a semimonthly payroll has 24 annual payrolls, and monthly necessitates 12 annual payrolls. Obviously, you need to weigh the complete picture when considering your costs, meaning, while it’s cheaper to process your payroll monthly, it may not be a desirable option for many of your workers. Doing this could result in challenges with attracting and keeping competent talent. However, if you process payroll weekly, this could “tax” your budget or lead to financial waste.

When it comes to managing employees, nothing is more important than making sure their paychecks are accurate and delivered on time. With ASAP Payroll Service, as a business owner, you can be confident in knowing your employees’ paychecks are handled on the industry’s leading payroll and tax software, Evolution.

Evolution is a SaaS-based payroll and tax management system that provides features, flexibility, and best practices to handle nearly every type of payroll, regardless of complexity or uniqueness.

Whether it’s a simple payroll for a small company or a complex payroll for a large business with multiple locations, Evolution can handle nearly every type of payroll. In addition, Evolution can support payroll entries from employers located anywhere in the world, provided they have internet access via Evolution’s proprietary SaaS-based system.

Contact ASAP Payroll Service today for help determining the best payroll frequency for your business. They can be reached at 317 887-2727 or by fax at 317 887-2741.