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.

Payroll Tax Deferral

With COVID-19 continuing to wreak havoc on businesses of all sizes and individuals nationwide, the U.S. government is searching for ways to provide additional relief to employers. In an effort to help alleviate the negative effects of the coronavirus, President Trump issued multiple executive orders on August 8, 2020. One, in particular, relates to a payroll tax deferral that allegedly provides temporary relief to employees. As a result, on September 1, 2020, the IRS issued guidance (Notice 2020-65) on the payroll tax deferral for wages paid.

What This Currently Means

Only FICA taxes (the 6.2% portion of the federal payroll tax on employees and its Railroad Retirement equivalent) are deferred. Medicare taxes are not deferred.

Then, too, this deferral applies to taxes on employees who earn less than $4,000 bi-weekly. If the payroll period doesn’t occur bi-weekly, then the limits are adjusted accordingly. It’s important to note that if an employee earns $4,010 dollars in a bi-weekly period, none of the FICA taxes are deferred. However, if an employee earns $3,990, the FICA taxes will be deferred. This is what’s called a “cliff effect” rule. AND, this determination is independently repeated for each pay period.

Then, in January 2021, the employer will collect and remit the deferred taxes by increasing withholdings on employee earnings. To confuse things more, if the employer chooses to withhold the FICA taxes, irrespective of the deferral, then the employer needs to remit the taxes following the standard rules currently in place.

In total, President Trump issued four executive orders, the first being the payroll tax deferral. The remaining three executive orders cover unemployment aid expansion, student loan payment deferral, and protection from evictions.

Of Importance to Employers

  • Currently, it appears that participation in the withholding tax deferral is optional and only defers the employee portion of payroll taxes.
  • FICA tax consists of an employee’s portion of their Social Security tax and Medicare taxes, with matching funds provided by the employer. For clarity, the employee portion of Social Security is 6.2% until the employee reaches a designated wage base. The balance of their FICA taxes is the employee’s Medicare tax, which is 1.45%, with a matching amount paid by the employer. However, the withholding deferral only covers an employee’s Social Security portion of their FICA taxes. And, according to President Trump’s executive order for the payroll tax deferral, this will only be in effect between September 1 and December 31, 2020.
  • If you, as an employer, offer this option to your employees, then you are responsible for remitting these taxes to the IRS on behalf of your employees without any penalties or interest no later than April 30, 2021. This means you will collect and pay the Social Security tax for September 1 through December 31, 2020, in addition to the collected Social Security tax from January 1, 2021 through April 30, 2021.
  • Employers have the option of making “other arrangements” to collect the deferred FICA taxes from employees; however, details related to “making other arrangements” have not been clearly defined to date.
  • If an employee chooses to defer his FICA taxes and leaves the company before the deferred taxes are paid, the employer is still responsible for covering those taxes, irrespective of his ability to collect them from the employee.
  • Also, for employers with workers who receive tips, it is not clear how the obligation to collect and deposit the deferred taxes will coordinate with the rules governing the withholding of taxes on tips.
  • A self-employed taxpayer doesn’t have the option of taking advantage of this tax deferral break.

What Remains Ambiguous

This employee payroll tax deferral mimics a tax cut, because workers would be temporarily taking home larger paychecks during this timeframe. However, because this is a deferral and not an exemption, the payroll taxes would still need to be paid by April 30, 2021.

However, if reelected, President Trump promises that his administration will push Congress for forgiveness of the deferred taxes. However, because the presidential election is still pending, it remains unknown whether the new Congress will support a payroll tax forgiveness program.

It is also unknown whether employees will take advantage of this opportunity. Considering the potential employer liability for FICA taxes for employees who leave, and the awkwardness of increasing withholdings in 2021 to make up for 2020 deferrals, it’s uncertain how many employers will participate in the deferral program, in view of the major programming and logistical difficulties of implementing this change on very short notice. Forbes senior contributor Kelly Phillips Erb wasn’t optimistic when she wrote on August 28, 2020, “There are so many unanswered questions. With just days to go before the deferral period begins — that’s Tuesday — I don’t see how this will actually roll out on time. If employers were looking for clear direction from [the] Treasury and the IRS, this is not it.”

Again, employers have the option of deferring employees’ payroll taxes, according to Treasury Secretary Steve Mnuchin. Deferring the payroll taxes is not mandatory.

An example of how this deferred payroll tax would work is as follows: The employer runs payroll biweekly, with the first pay date after September 1 falling on September 7. That employer would defer the employee share of the Social Security taxes over 9 payroll periods in 2020 but would have to recoup those taxes over 8 payroll periods starting in January 2021. For an employee who earns $1,000 in wages each pay period from September 1 through December 31, 2020, the deferral would result in an increase of $62 per pay period in take-home pay through the end of 2020. Then, in 2021, the employee’s take-home pay would be reduced by $69.75 per period through April 30, 2021 to recoup the deferred taxes from September 1 through December 31, 2020.

An employee who earns $4,000 in wages per pay period between September 1 and December 31, 2020 would see a take-home pay increase by $248 per period in 2020, but his or her take-home pay starting in 2021 would be reduced by $279 per pay period through April 30, 2021.

As mentioned previously, if an employer elects to defer the employee Social Security tax withholdings and the employee leaves before the taxes are paid, that employer may be forced to pay those amounts and potentially gross-up the amount as additional wages to a former employee.

This executive order could provide some relief for those who are currently struggling due to COVID-19, but it could also create significant hardship for employees in 2021, because they could be saddled with twice as much tax being withheld from their paychecks through April 30, 2021. It should also be noted that this payroll tax deferral won’t do anything to help the approximately 28 million Americans who are currently unemployed and, therefore, not receiving salaries or having payroll taxes withheld (because unemployment benefits are not subject to payroll taxes).

Large companies, including Walmart, have been looking for guidance from the Treasury Department before proceeding with how to handle this with their employees. And, industry groups, including the U.S. Chamber of Commerce, have expressed concern regarding President Trump’s executive action and have opposed it, saying this executive order creates a substantial tax liability for employees at the end of the deferral period. In conjunction with this executive order, what’s needed is for Congress to forgive this liability, because it threatens to impose serious hardship on employees who will be facing an even larger tax bill in 2021 as a result of the deferral.

In contrast, the National Finance Center, a shared service provider for Financial Management Services and Human Resources Management Services under the United States Department of Agriculture, has already indicated that it will be implementing the payroll tax deferral per an August 21, 2020 memo. Social Security taxes are being deferred for all employees who are eligible for the initiative. The employees will have no say in this decision and will not be able to opt-in or opt-out. One can only hope that this is not going create some hardship for those employees down the line, if they don’t carefully budget now.

Potentially, a tax deferral could turn into a tax cut, but this would require an act of Congress. Given the fact that Congress can’t pass legislation with close to 30 million people unemployed and the country reeling from the economic effects of the coronavirus pandemic, it’s not highly likely that this will occur. And, if such legislation were to pass, there could be a threat to Social Security. The critical question is whether Congress will include language that reimburses the Social Security Trust fund from general government revenue. There has been limited information provided by President Trump or his advisors on whether such a reimbursement model would be used if a payroll tax cut is passed in the next coronavirus relief package. However, if a reimbursement clause is not included, then it could impair funding for Social Security and Medicare in the future.

While critics fear a payroll tax cut is an attempt to go after Social Security, there’s still too much uncertainty over President Trump’s payroll tax cut demand to validate the claim. The core issue will be whether the payroll tax holiday proposal simply cuts off revenue from the Social Security Trust Fund or whether it reimburses it from another source.

Why Should a Small Business Outsource Their Payroll?

You started your company and it’s now thriving. As it grows, will you be adding add human resources staff to manage your payroll and other HR responsibilities? How about hiring legal teams to withstand errors or stand up against litigation you might face? Or have you considering outsourcing your payroll needs to free-up your employees to handle new challenges and provide more value to your customers? If so, how you choose the right company to handle your payroll?

As a small business, while it’s a common myth that you’ll save money by handling your payroll inhouse, in actuality, a payroll company can have your back, while it partners with you. Payroll professionals are like realtors. They’re professionals in their field and that’s all they do. It’s imperative that they keep up-to-date on all changes, irrespective of when they’re issued. Too, think of them like your tax accountant. Everyone needs one and they have the resources to guide and direct you, as regulations change and your small business grows.

Do you have the time to read up on all changes that come about, let alone have the time to implement them? And, if you overlook a regulation, are you prepared to handle the penalties associated with it? Can you juggle a cadre of tools related to payroll, and keep up with the technology and equipment involved with operating it? Wouldn’t you rather focus on serving your customers and growing your business, considering that’s your expertise and the reason you started your small business?

Selecting the Right Payroll Service for Your Business

Irrespective of what kind of business you have, think long-term. Look for a payroll provider that understands your business and will be there to support your company as it stretches and grows. When it comes to payroll, consider your payroll service provider as a trusted advisor. And, of course, do your research. Look for a payroll service that has a solid reputation for quality and service.

Because the technology related to handling payroll gets more complicated each year, choose a payroll service that will advise you on how their technology can best meet your needs now and into the future. Is the payroll provider up on which states don’t have income taxes and which ones don’t tax wages? Will the company be able to step up its services and meet your needs as your small business grows? Does it handle critical details, such as keeping up with tax tables? Ultimately, how simple or complicated is the software that you’ll be using at your end? And, be sure to ask for one or two software demonstrations during a sales presentation to make sure you’re comfortable with operating it. Is the software user-friendly; does it contain all the features that you need? Does the provider take the time to answer all of your questions thoughtfully?

One aspect of growing your business is the onboarding process. Complying with the Fair Labor Standards Act, which addresses minimum wage, child labor laws, and record-keeping requirements, is critical for the success of your business. When handled properly, it’s a win/win, because it sets your company and your new employees up to succeed. It helps to assure the new employees gets acclimated to your company quicker with minimal glitches. Plus, it’s critical that the new employee’s data be recorded accurately, such as completing their W-9s or I-9s and comparable state documents, SSN verification, and recording other necessary data so that they’re paid accurately without you incurring any penalties.

As your business evolves, is your payroll service prepared to assist you with handling human-resource responsibilities, such as:

  • Applicant tracking
  • Background screening
  • Employee onboarding
  • Electronic benefits enrollment
  • Time and attendance
  • Scheduling
  • HR Information Systems
  • Benefits tracking, accrual and leave tracking
  • Document management

To make it easier at your end, can the technology related to these services be handled from a single portal?

Features Unique to Your Industry

Does your industry require special considerations, such as job costing, paid time-off accrual tracking, multiple pay options, benefits administration, custom reports, mobile time punch tracking with GPS location verification? When your payroll service understands your industry, it can become a trusted advisor that understands the nuances of your business and offers solutions.

It’s no fun being dinged for non-compliance. Make sure the partner you select has your back when it comes to payroll and tax penalties, wage and hour, employee relations, ACA, and other evolving legislative changes. Your vendor should understand the ongoing complexity of compliance related to your small business/industry and accurately calculate payroll taxes across municipalities, keeping in mind local, state, and federal guidelines.

Then, there’s configuring all the different categories for your employees, such as: full-time, full-time exempt, full-time non-exempt, part-time, contract, contemporary, statutory, and non-statutory statuses. Each category has an impact on how your payroll is configured. Are you taxing these employees properly and delivering their benefits accurately? You can’t afford not to.

And, just as certain generations are phasing out of the work force, today’s younger generations are demanding simpler, faster ways to be paid. What would be the impact on employee morale if you missed paying your employees by one week? Falling behind on payroll tasks and delaying paying your employees can have cascading implications for your small business, as your employees are left to handle the fallout of delayed wages. Too, today’s employees expect to have their paychecks “direct deposited” into their accounts. More so, they expect employers to provide options in terms of how they’re paid. This can also mean using payroll debit cards. Therefore, it’s important to select a payroll service that provides options and is flexible when it comes to how your employees are paid.

Empower Your Employees

The bottom line is that your employees expect to be paid on time. They have no comprehension of all the behind-the-scenes data collection that’s is involved in making this happen, such as:

  • Collecting and verifying time-worked data
  • Handling new hires’ input data and paperwork
  • Entering detailed payroll data into the system
  • Conducting self-audits to ensure accuracy
  • Dealing with essential record-keeping tasks
  • All the different ways employees are paid
  • Managing tax deductions
  • Tracking employees’ insurance, garnishments, etc.

When selecting a payroll service, if you select a partner that offers Employee Self Service (ESS) functionality, you’re empowering your HR and payroll staff, because the ESS feature allows employees to view their pay stubs, timesheets, time off and accrual balances, withholdings, and more on an as-needed basis.

Then, too, it’s important to distinguish between gross and taxable wages. Some employees want to take more of their salary home each week, while others prefer a bigger tax refund at the end of the year. It’s critical to make sure these deductions are handled accurately with each pay period. Voluntary deductions can make your head spin. Are you prepared to handle:

  •  the 401k
  • health and dental insurance
  • group term life insurance
  • disability insurance
  • when appropriate, union dues
  • loans
  • uniforms
  • charitable contributions

These types of deductions can vary from paycheck to paycheck. Then, there’s Social Security and Medicare deductions. The calculations for these deductions differ for higher income earners. Plus, you could have employees who are exempt from federal and state income tax deductions. How about handling child support or garnishments. The calculations for all of these types of deductions must be handled accurately, with all factors being taken into account. Do you or your staff have the time to manually configure or create equations that will handle all of this?

Then, too, if you decide to outsource, it should be cost-effective. What does a payroll service cover when unexpected regulatory challenges arise? How quickly can they respond? Is it something your small business should handle? At what cost? Will you have to pay extra for a payroll service to cover these services, when needed? Make sure you’re absolutely clear about the lines of responsibility you and your payroll service provide. Never assume. And don’t wait for a crisis to occur to discuss these with them.

In addition, a payroll service may require you to sign on for services you’re currently not using, but as your business grows, you’ll be glad you had. Are you prepared to absorb these costs now? Or should you get a quote today for the services you’ll need later on, with the option of adding them as you need them?

Make Technology Work for You

As documented above, there’s a plethora of considerations that come into play related to payroll. It’s no longer tracking an employee’s time and writing a check weekly or bi-weekly. As a small business owner, you must carefully track large, complex data sets to ensure every paycheck your employees receive is accurate. Human capital management systems provide specific competencies and are implemented in three categories: workforce acquisition, workforce management and workforce optimization. They can track all of the fields specific to your employees’ payroll needs and automatically feed the correct data through the system, streamlining your pay processes and ensuring accuracy in paycheck configurations.

Now that you better understand the value of a payroll provider, do you choose a national or local company to partner with when it comes to your payroll needs? Of course, there are pros and cons to both. A national partner can offer more services and bells and whistles. Do you really need them? Are higher costs connected with using a national company?

Of course, we all know that a local company is often more accessible, and often provides more personalized service at an affordable price; however, can it keep up with the latest technology?

The bottom line is you know your small business best and only you can decide. If you choose an outsourced payroll provider, ASAP Payroll Service would be glad to help you think through the process to see if they’re a good fit. Just email them at: Kyle.masengale@asappayroll.com or call: 317-887-2727, or visit their website at: www.asappayroll.com.

Instituting Paperless Payroll

In today’s “fast-food” world, convenience is mandatory. It’s no different when it comes to paying your employees. As a result, payroll cards are a fast-growing option to more traditional forms of payroll payment, such as paper checks and bank direct deposit. Plus, failing to offer payroll alternatives can result in your company running the risk of missing out on talent and retaining experienced employees. With paycards, employees’ payments are directly deposited onto a debit card without the need for a bank or cash checking service as the middleman. Payroll debit cards are reloadable pre-paid cards that employers can use to deposit their employees’ net wages. In turn, workers can conveniently use them to make purchases, withdraw cash, and pay bills.

Payroll debit cards are a win/win for you, the employer, and your employees. A top reason to use them includes boosting employee satisfaction, because, in addition to helping to retain employees, they simplify your payroll process.

When using payroll debit cards, your employees:

  • Gain immediate access to funds, once they’re deposited. They no longer have to cash a check, take time during lunch to make a deposit, or incur check cashing fees.
  • If an employee doesn’t have a bank account, they can still access their money by using a paycard, provided paycards are permitted in your state and all rules and regulations are met.
  • With a paycard, there are no monthly fees, minimum balances, or bank charges incurred, and more often than not, only a small fee is charged for handling certain transactions.
  • Paycards are ideal for certain industries, including hospitality and food service. In some instances, paycards have programs that give employees the option to have their tips sent directly to their paycards, along with their wages.
  • Employees can access their money through ATMs; however, they should note that some financial institutions limit the number of monthly transactions or charge a fee for withdrawals.
  • Just like a debit card, merchants who accept them will also accept paycards when handling transactions.
  • With a paycard, there’s no concern over fraudulent or stolen checks.
  • Depending on the vendor, an employee can access financial information, such as viewing their transaction history, making transfers to other accounts, and sometimes accessing account information via a mobile app.
  • Most paycard programs are FDIC insured and/or include fraud protection in case the card is lost or stolen.
  • Similar to debit cards, employees can only spend what they have in their account. There’s no chance of running into debt. As a result, this can help employees enhance their credit rating.

On the employer’s side:

  • Paycards function similarly to direct deposit: you can run payroll remotely, after hours, or during an emergency. You can also make corrections to paychecks and issue employee reimbursements through a paycard, just like with any other form of traditional wage payment.
  • Paying employees via a paycard eliminates the need for paper checks—the labor costs and environmental waste associated with them and running the risk of lost or stolen checks.
  • Issuing paycards saves the time and cost of delivering checks to those employees who opt out of direct deposit. They can receive wages at institutions of their choice by electronic transfer to a payroll card account.
  • Paycards can also be insured by the Federal Deposit Insurance Corporation (FDIC). Many paycard programs include fraud protection, dispute resolution procedures, and purchase protection plans.
  • Paycards are flexible. If an employee has a bank account, an employer can allocate a portion into a paycard and the balance into a bank account.

As an employer, if you run your payroll 100% paperless, you need to establish a strategy. For example:

  • Determine whether your business will mandate paperless payroll enrollment or make it voluntary.
  • Use different communication tools to ensure that your employees are on board with paperless payroll.
  • Obtain input/feedback from your managers so they can reiterate the benefits of paperless payroll and answer employee questions.

If you successfully switch to paperless payroll, you’ll reduce payroll costs, eliminate check-cashing fees, and increase efficiency. Is paperless payroll right for you?

Move Into the 21st Century with Electronic Timekeeping

Today, paper timesheets or punch clocks are old school. Employees have discovered work arounds to punching in, such as using co-workers to clock in for them at specific times or providing employers with inaccurate work times that pay employees for overtime they never really worked.

Electronic timekeeping, also referred to as digital time and attendance or biometric systems, automates the time-tracking process and keeps detailed real-time data of when employees arrive and leave work. A digital system automates the entire time-tracking process, keeping detailed actual data of when employees come and go; it’s then automatically transferred into a payroll solution.

These systems offer increased security and accuracy, but they can be costly. Read on to determine if such an investment ideally meets your needs.

Biometric timekeeping systems
These systems use unique physical identifiers to ensure that the employee is the same as the name indicates. This technology tracks the time workers clock in and out with greater security and accuracy.

Different types of biometric scanning devices include:

  • Face recognition. May be less than 100% reliable. When introduced as a smartphone feature, it failed to be foolproof, as close relatives could be taken for the phone’s owner. Not ideal for an employer/employee situation.
  • Iris recognition. Identifies the user by taking a photo of the patterns in the colored ring on the front of the eye, known as the iris.
  • Retina recognition. Looks deep into the eye, closely scanning and noting vein patterns in the back of the eye.
  • Fingerprint recognition. Each individual’s fingerprints are unique and, although they can become more difficult to decipher over time, they’re still valid for biometric identification.
  • “Hand geometry” recognition. Looks to match structures, such as the width of one’s hands and the length of the fingers.

Is biometric timekeeping worth the investment?

Employers primarily invest in biometric timekeeping to lessen the chance of time theft and other types of payroll fraud. Businesses that have struggled with this issue may find the initial investment a way to reduce buddy punching—meaning a friend checking in in lieu of the actual employee.

To increase your overall security and consider biometric screenings for building or data access, you can add a timekeeping component. Biometric scans require no additional input besides the employees themselves. You’ll never hear the excuse that your employee forgot to bring their fingerprints to work or the dog ate them.

How the Fingerprint System Works

Fingerprint time clocks are referred to as thumbprint time clocks and use a fingerprint scanner to match an employee’s fingerprint to a stored image of that fingerprint, enabling the employee to securely clock in or out of a work shift.

Everyone’s fingerprints are unique. The fingerprint reader recognizes and associates a fingerprint with an employee. It stores a numerical series of key points taken from the employee’s finger, referred to as “minutiae.” These fingerprint minutiae serve as landmarks; they’re encoded as a series of numbers and can be used to verify whether the fingerprint is that of a particular employee. An original finger-print image can’t be recreated from the minutiae.

As a result, fingerprint time clocks help to ensure each employee is clocking in or out for themselves. The downside is they’re not legal in some states. The Society for Human Resource Management indicates that Illinois is a state that doesn’t allow employers to use biometric data, such as fingerprints for time clocks. Data stored by these systems is frequently viewed as intrusive and not compliant with privacy-minded data collection rules.

What’s legal nationwide is a time clock app. These apps prevent an employee from buddy punching for another.

Which kinds of companies use biometric clocks?

Theoretically, any company that can afford them can use biometric time clocks. They’re popular among industries, such as restaurants and hospitality.

While biometric timekeeping systems may seem ideal, they’re costly. Small businesses can expect to outlay $1,000-$1,500, while larger corporations may invest five or six figures. You get what you pay for. You can obtain a less secure system at significantly less cost; however, you need to consider whether time fraud is an issue, because you may not be able to quickly recoup the cost in payroll savings, if at all.

Can you assure the protection of your employees’ personal data? Biometric data can be used in identity theft, so it needs to be kept highly secure. There have been class action lawsuits instituted against employers who failed to properly protect this very confidential information.

Something else to consider is that, today, in many instances, your employees may not all be housed under one roof. If you have employees who work remotely or travel a great deal for their jobs, this can pose challenges to conducting consistent biometric timekeeping. Biometric systems are less efficient the more decentralized your employees are.

What are the advantages of using biometric time clocks?

If your business hires hourly employees, you need a time clock to stay compliant with federal and state labor laws. An employee time clock keeps track of every hour an employee works, right down to the minute. You also have the option of rounding up or down that employee’s time worked, pursuant to federal labor laws. Such time clocks also track employee attendance.

Time clocks also protect employees in the sense that they can be assured they’re accurately paid for every hour they work.

Biometric time and attendance tools also address the employer’s concerns regarding time theft, such as when employees clock in and out for one another. However, check your legal jurisdiction, as biometric time clocks may not be legal in your area. You can also consult with a local employment attorney.

If your business has off-site employees, they can clock in and out from their mobile phone. To verify it’s a particular employee, their mobile phone also provides a screenshot of their location on a map.

Which biometric time clock will best suit my business needs?

Before selecting a biometric time clock, consult with a local employment attorney to make sure they’re legal in your state. Ideally, it’s best to use a time clock app that includes integrated scheduling, easy payroll export, hiring tools, etc. Then make sure it integrates with your employee scheduling software, your payroll provider, and your other team management processes. In addition, it should include a mobile app feature that lets you track which employee has clocked in, who’s late, and who’s on break. And, it lets you access this information quickly, irrespective of your location.

ASAP Payroll Service makes hardware clocks, such as card readers, fingerprint readers, and face clocks available to its customers.

An alternative to biometric time clocks

Often, your employees will want to protect their biometric data and would prefer that you not use a biometric time clock, even if it’s legal in your state. As an alternative, you could use cloud-based software to meet your time and attendance needs. With this free mobile app, your employees can view their schedule and timecard data on a mobile device. It also helps them to better budget their finances, because they’ll be able to estimate their pay each week.
A free mobile app can also empower your employees, because it can help them trade shifts, update their work availability, and check-in with the rest of the team…in real time from their mobile device. In turn, these self-service tools will save your supervisors time and establish a paper trail that human resources can use.

ASAP Payroll Service uses TimeWorks Mobile. It allows employees to track their hours on-the-go, punch in and out, view available time-off hours, and more. It’s available on either the iTunes™ App Store (IOS devices) or at the GooglePlay™ App Store (Android devices) and can be downloaded for free.

Other options include using a physical timecard, punch cards, a proximity card, or swipe cards; however, each has its own downfall. Regardless of which you use, these kinds of cards don’t protect from time theft. And, they might not be able to export to your payroll software, in addition to giving you very limited access to data.

Another option is using your tablet’s built-in camera. You’ll get a photo of each clock-in and clock-out on the employee timecard, so you can be sure the right person is clocking in for their shifts. Paired with the included shift scheduling app, which you can access from any web browser, you’ll get a better handle on overtime hours, total payroll and labor costs, and robust attendance tracking data that includes a ranking of who on your workforce is most often on-time for their shifts. You’ll also get other reports that’ll help you and other business owners more efficiently manage your workforce, so you can focus on growing your business and empowering your employees.

In turn, your supervisors will be in charge of running payroll and better coordinate with human resources. The most time will be saved when your workforce management systems all integrate with one another.

What Is Pay-as-You-Go Workers’ Comp?

Workers’ compensation insurance basics

Irrespective of the type of business you run, there’s a chance that your employees could get injured or sick. They might slip on a wet floor, fall off a ladder, cut themselves with a sharp instrument, or get in a car accident while running a business errand. Because of the numerous ways your employees can get hurt or sick, your business must have workers’ compensation insurance to cover them.

It’s state-mandated insurance that protects your business. The sick or injured employee receives workers’ compensation benefits to cover expenses, such as medical bills, job retraining, and pay while off from work. While the majority of states require businesses have workers’ comp insurance, in some states, businesses with a certain number of employees may elect to opt out of coverage.

When an employee accepts workers’ comp benefits, they typically waive their right to sue for the injury or illness. Workers’ compensation insurance covers employees regardless of who is at fault. The illness or injury could be caused by you, the employee, a co-worker, a customer, or someone else.

However, there are some restrictions to receiving workers’ compensation insurance. An employee cannot receive benefits if the incident was purposefully self-inflicted, not job-related, or was incurred while committing a crime or violating a company policy. If you suspect workers’ compensation fraud, you’ll want to take the necessary steps to counter it. And, while many states offer workers’ compensation insurance through a state-operated fund, there are also many private providers who offer the coverage.

If your employee has incurred a job-related illness or injury, you should not retaliate or threaten that employee to prevent them from filing a claim. If you attempt to take recourse against the employee, they can report you to your state or insurance agency.

Did you know that an employee doesn’t have to incur an accident or injury at work to receive these benefits? The illness/injury just needs to be work-related. An employee can get hurt while running a business errand or traveling for business. Or it can happen over a long period of time, such as carpal tunnel syndrome, chronic back problems, lung disease, hearing loss, and/or stress-related injuries.

Generally, employers can purchase workers’ compensation insurance from any provider they want (state or private). However, employers in North Dakota, Ohio, Washington, and Wyoming are required to purchase their insurance directly from the state. These four states are referred to as monopolistic states.

What is pay-as-you-go workers’ comp?
The pay-as-you-go method allows you to pay your workers’ compensation premiums based on your actual payroll and exposure risk, instead of the budgeted payroll you believe will be accurate for the year. This helps eliminate surprises during your workers’ comp audit.

You’ve probably received a few emails, phone calls, or letters offering pay-as-you-go as an alternative to traditional workers’ comp insurance. It lets you pay your workers’ comp coverage by bundling or combining it with your regular payroll. If you work with a payroll or HR service, they’ll make sure your employees and your workers’ comp premiums are paid every pay period. You’re then presented with a single bill to cover all the costs for that time period.

Traditional workers’ comp plans, compared to pay-as-you-go, require large lump sum payments to cover the estimated cost of your liability. With pay-as-you-go plans, your workers’ comp insurance liability is based on each payroll run. If you add or lose employees, your premium liability adjusts accordingly. Pay-as-you-go provides all the coverage and compliance of workers’ comp with none of the stress.

Unless you live in a monopolistic state (mentioned above), you can take advantage of pay-as-you-go workers’ comp.

What Are the Benefits of Pay-As-You-Go Workers’ Compensation Insurance?

Deciding which type of workers’ compensation insurance to select comes down to what works best for your company. For many business owners, pay-as-you-go workers’ comp is a good alternative to traditional lump sum payments. Here’s why:

  • Making hefty annual payments can put a strain on your business budget and harm your business cash flow management. Depending on factors, such as where your business is located, the industry, and how many employees you have, workers’ compensation insurance can quickly add up.
  • Knowing exactly how much your workers’ comp should be is difficult to predict. Pay-as-you-go calculates up-to-date workers’ comp rates with each payroll cycle. Traditional workers’ compensation insurance premiums are based on estimates. You might decide to hire or let go of some employees, which can affect your rate. Traditional workers’ compensation insurance requires that you project what your payroll will be for the year and pay it upfront. Then, at the end of the year, your insurance provider either refunds the difference or requests further payment.
  • With pay-as-you-go workers’ comp insurance, the money you owe is based on your actual payroll. This lets you pay accurate premium amounts and avoid over- or under-estimating. And, as a result, you’ll incur a simplified audit process.
  • Paying your premium can slip your mind. But with pay-as-you-go workers’ compensation, your policy provider automatically collects your premiums with each payroll and debits your bank account.
  • Makes the auditing process is easier, which can save you time and money.
  • What you pay to a payroll service is only your premium payment. You still need to work with a state-approved insurance provider for your coverage.
  • Your premium is based on the payroll generated during a pay cycle and is based on a rate per 100 of payroll per job classification.
  • Pay-as-you-go coverage often requires a down payment, so that a notice of cancellation can be covered if your provider cancels your coverage.
  • This method is still auditable, because all workers’ comp insurance is auditable.

 

There’s also a down-side to consider

  • You can’t budget each pay cycle for workers comp.
  • You might not always see the true cost of your workers’ comp, as it is bundled with the rest of your payroll.
  • Not all insurance companies allow a pay-as-you-go method, so your options may be limited and you may not get the best rates.

Reporting actual payroll wages and only paying premiums based off those actual wages make pay-as-you-go a great alternative to the traditional estimated billing process. However, ultimately, the choice has to be what works for your business. Today, insurance providers offer a wide variety of solutions and flexibility for their programs, so you may simply need to contact your provider to find out what they offer.

If you’re not sure what to do about your workers’ comp coverage, contact us at ASAP Payroll Service. We’ll discuss your options with you to help you make the best decision for your business.

The Nuances of Restaurant Payroll

There’s more than meets the eye when it comes to managing restaurant payroll. It’s crucial that you pay your employees accurately. Plus, you need to track industry one-of-a-kind tax and wage/hourly laws.

Another challenge is high staff turnover. Prior to COVID-19, The National Restaurant Association estimated that the average restaurant lost $150,000 annually due to staff turnover. According to the Center for Hospitality Research at Cornell University, losing a front-line employee costs a restaurant employer an average $5,864. This kind of sky-high rate can take its toll on your payroll process.

Many restaurants conduct most of their new hire paperwork using pencil and paper—a time-consuming endeavor. Switching to a digital onboarding process, such as ASAP Payroll Service’s Evolution software, can save you significant time each year. When a new employee completes an electronic W-4 as part of the onboarding process, the information will automatically flow to the payroll system to establish the proper federal income tax withholding.

Offboarding employees who leave your business create extra work, too. This means understanding final paycheck laws and abiding by them. For example, in California, a terminated employee must be given their final paycheck on their last day. In this instance, ASAP Payroll Service’s clients can go into the system or call to figure out the exact amount. However, not every state has this level of final pay standards, but most have rules regarding when a terminated employee must receive their last paycheck. Check your state’s department of labor for regulations.

Besides servers, you need to track cooks, bartenders, and assistant managers, because each may have a different pay rate. While tracking different wages isn’t unique to businesses, the process is more complicated for restaurants.

There’s more to consider than accurately processing payroll and paying your employees on time.

  • Classifying your employees/tips—while most employees will be classified non-exempt, meaning they will be paid a minimum wage (federal minimum wage—$7.25 per hour) and any accrued overtime, their tips also need to be tracked. According to the U.S. Department of Labor, an employee who classifies as receiving tips engages in an occupation where he or she customarily and regularly receives more than $30 per month in tips. In this instance, the employer of a tipped employee is only required to pay $2.13 per hour in direct wages, if that amount, combined with the tips received, at the very least equal the federal minimum wage. If the employee’s tips and the employer’s direct wages of at least $2.13 per hour do not equal the federal minimum hourly wage, then the employer must make up the difference. Many states, however, require higher direct wages for tipped employees. Please note that certain states and cities have higher minimum wage rates than the federal minimum requirements. It’s important to keep up-to-date on these changes, which generally occur on January 1 or July 1. In addition, states may have different tip credits, so be sure to check your state’s department of labor. It’s important that employers and managers follow federal and state rules.
  • Exempt employees—there are strict rules regarding when to classify an employee as exempt. While most restaurant workers won’t meet the job duties or salary requirements that qualify them to be considered exempt from overtime, be sure to check the Department of Labor’s website for more details. However, when overtime is warranted, it must be paid at a rate of at least 1.5 times the nonexempt employee’s weekly regular rate for each hour worked over 40 hours. States like Alaska and Nevada calculate the time based on hours worked per day, not 40 hours per week. Again, check the Department of Labor’s guidelines (dol.gov).
  • Cash/check tips vs. credit card tips—when a diner leaves a cash or check tip, that money is 100% the property of the server. However, credit card tips are handled differently. Depending on the state you’re in, the employee either receives 100% of the tip or the credit card processing fee is deducted from that tip. Then, too, service charges that you add to a customer’s bill, then pay your service staff, are considered wages, not tips. But tips issued via tip-splitting or tip-pooling (see below) are considered tips, regardless of which employee actually received that tip.
  • Tip pooling— means that, instead of employees keeping all the tips they earn, the tips must to be put into a pool and divided equally among the waitstaff, bussers, bartenders, and possibly the back-of-house employees during a work shift. In this instance, the employer needs to communicate to tipped employees that they must participate in a tip pool, and, a tip credit can only be issued for the number of tips that employee ultimately receives. For further clarification refer to the U.S. Department of Labor’s website (dol.gov) and look for Tip Regulations Under the Fair Labor Standards Act.
  • To take advantage of this benefit, make sure your payroll tax calculations, filing, and payments are all accurate. This is a general business credit equal to the amount of employer Social Security and Medicare taxes that you paid on wages over and above the minimum wage for each employee (see IRS Form 8846).
  • Tip credit—make sure your employees report all tips, because, at the end of the year, if they were paid total wages that exceeded the applicable minimum wage for your business location, you can file for the Fair Labor Standards Act (FLSA) tip tax credit. Related to the restaurant industry, the FLSA allows a business owner to apply a credit up to $5.12 for the employee’s pay. The reasoning is that tips should make up this amount, which leaves the employer paying the difference in a wage, which is to be no less than $2.13. If the employee does not make up the difference in tips between the minimum wage and $2.13 an hour, the employer must meet the hourly minimum wage standard, which, in most cases, is the minimum wage of $7.25 an hour.
  • More than 10 employees— if more than 10 employees worked for you during the previous year, based on using the average number of employee hours worked on a typical business day, you need to complete IRS Form 8027, which tracks total tips, service charges, and gross receipts from food and beverages. If the total tips reported amount to less than 8% of your gross receipts, you must allocate the difference to your tipped employees. If you can prove that a lower rate should apply to your business, then you may request a rate lower than 8% from the IRS. And, if you are granted a lower rate, you should use it in the allocated tip calculation on IRS Form 8027.
  • Benefits and deductions—restaurants customarily provide a free or discounted meal during an employee’s shift. The IRS classifies this as a fringe benefit and it should be treated as taxable income. Because it’s considered a fringe benefit, it needs to be added to an employee’s pay when running payroll.
  • Within a single job, such as a cook, there can be different pay rates, depending on the shift worked, and employees may cover more than one shift during a pay period.
  • There may be employees who work more than one type of job within the same pay period. And, if you have multiple restaurant locations, it’s common for employees to work in more than one location. In this instance, labor expenses will need to be allocated based on the location.
  • As the restaurant owner—what deductions can you make from an employee’s paycheck? The FLSA allows employers to deduct certain costs of doing business from employees’ wages, only if the deductions do not result in the employee earning less than the minimum wage standards after the deduction. Such costs include uniforms, customers who fail to pay, or broken objects. Technically, deducting these costs is allowable, but restaurant owners need to make sure they’re not violating FLSA rules and regulations if this results in an employee’s wage falling below minimum wage.
  • Hiring restaurant employees can be a revolving door. Some may be receiving some form of government assistance, while others may have recently been released from the military, or perhaps jail. In these instances, if your restaurant hires such individuals, you can get up to $2,300 in tax credits after that employee has accrued 300 hours of work.

Managing the Details

If you’re new to the restaurant business, managing your staff can seem daunting. This is where a good online time and attendance system, such as ASAP Payroll Service, can help you track all your employees’ movement between shifts, job types, and locations. It will save you time and reduce payroll errors. We understand how the restaurant industry works and we can help you track:

  • Minimum Wage Alerts. We help keep you compliant with your state’s minimum wage laws and make sure your employees receive their accurate pay.
  • FICA Tip Credit Report. We run this report to help you configure and track what you can claim on your annual tax return.
  • Tip sign-off report. This report provides you with written proof of your employees’ tips received and declared. This helps to keep you compliant.

And, if the IRS or another agency contacts a restauranteur regarding filing their taxes, based on how ASAP Payroll Service filed the paperwork, we’ll work with that government agency, representing the restaurant owner to resolve the issue. If ASAP Payroll made an error, we’ll talk to the government agency on your behalf and pay any fines.