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IRS Announces 2012 Limits for Retirement Plans

The IRS has announced a 2012 Cost of Living Adjustment (COLA) for retirement plans. Check the chart below for the most commonly used limits, as many have changed for the coming year.

Employee Deferral Limit for 401k/403b Plans $17,000
Defined Contribution Limit (Total for employee plus employer contributions) $50,000
Age 50+ Catch-up Contribution Limit for 401k/403b Plans $5,500 (same as 2011)
Annual Compensation Limit (for benefit calculations) $250,000
Employee Deferral Limit for SIMPLE Plans $11,500 (same as 2011)
Age 50+ Catch-up Contribution Limit for SIMPLE plans $2,500 (same as 2011)
Highly Compensated Employee (HCE) Definition $115,000
Social Security Taxable Wage Base $110,100

How Do I Conduct Drug Tests for Job Candidates?

Workplace drug use costs employers anywhere from $75 to 100 billion dollars a year in lost time, accidents, health care, and workers’ compensation costs, according to the U.S. Dept. of Labor. By drug testing job candidates, you can help decrease the chance of hiring a drug user. Here are some common questions you may have about pre-employment drug testing.

How do I start the pre-employment drug tests for job candidates?

If you are a private employer, develop your company policy for pre-employment drug screening. Then, contact your state for their guidelines. Many states recommend following federal guidelines for drug testing: the Drug-Free Workplace Act of 1988 and the Omnibus Transportation Employee Act of 1991.

How much does a drug screen cost?

Standard urine tests typically cost between $25-75. The costs of pre-employment drug screens can vary depending on what substances are being screened.

Who pays for the drug screen?

The employer generally pays for the test. In some cases, employers may ask job candidates to foot the bill, and then reimburse the employee in their first paycheck.

How do I choose the type of drug test?

Most employers who perform pre-employment drug screening choose a five-panel test of street drugs, including marijuana, cocaine, PCP, opiates, and amphetamines. These categories are known as the SAMSHA 5, required by the Substance Abuse and Mental Health Services Administration for federal employees and contractors.

Some employers opt for a more extensive nine or 10-panel test for substances such as alcohol, MDMA (ecstasy), hydrocodone (Vicodin, etc.), benzodiazepines (valium or rohypnol, for example). Employers can also select a hair or saliva test.

Are drug tests accurate?

It’s getting more difficult for people to cheat at a drug test. Laboratories take a sophisticated approach to analyzing specimens and are constantly on the lookout for attempts to substitute or alter specimens.

How do I choose a drug testing company?

Federally certified labs are considered the “gold standard” for drug testing. While not required for private employers, you can choose from a list of federally certified labs on the Substance Abuse and Mental Health Services Administration website.

At what stage of hiring should I order a pre-employment drug test?

An employer generally sends a candidate for drug testing after they extend a job offer; the job offer is contingent upon the results of the pre-employment drug test and a background check. Most employers insist that pre-employment drug screens be conducted within a short time frame to ensure accuracy.

What is the usual procedure of pre-employment drug testing?

  • The employer orders the drug screen to occur, and gives the candidate a Chain of Custody form, which will accompany the specimen from the collection site to the lab.
  • The candidate will visit the collection site, show a photo identification, and sign the Chain of Custody form authorizing the drug screen.
  • The candidate will follow strict rules for leaving a specimen, which is sent to the lab for analysis.
  • The lab or third-party testing company will contact the employer with a negative or positive result.

How long does it take to get results from a drug screen?

It can take anywhere from a few days to a few weeks to get the results of a drug screen.

What if the candidate tests positive?

If an initial drug screen is positive, the lab will most likely perform further tests to rule out a false-positive result. A medical review officer (MRO) may contact the candidate for a valid reason for the positive result, such as a medically necessary prescription, and may ask for proof. If the candidate proves their case, the MRO can negate the test and present a negative result to the employer.

If the candidate fails the test completely, the drug screening company or lab will inform the employer. The employer should contact the job candidate following the steps in the Fair Credit Reporting Act. (For more information, read the article Following the Fair Credit Reporting Act.)

Where can I find more information on drug testing job candidates?

To find out more about establishing pre-employment drug screening, visit the SAMHSA Dept. of Workplace Programs, or call 1-800-WORKPLACE.

How Do I Make a Job Offer?

making_a_job_offerUpdated on June 24, 2013
Finally! You’ve found the right person for the right job. You’ve checked the candidate’s references, and everything looks good. Now, what’s the best way to extend the job offer to the candidate?

1. As part of your compensation strategy, research comparable salaries ahead of time, and design an offer that is as attractive and competitive as possible. There are many sites that can give you guidance.

2. Move quickly with your job offer. Remember, other companies may be courting your candidate as well, and you don’t want to lose out. As soon as you check the candidate’s references, it’s time to act.

3. Make your verbal offer by phone (contingent upon the passing of a background check and drug screen). Sell the job opportunity to the candidate, mentioning the starting salary any perks such as flex-time, benefits, or travel that the candidate might find attractive. If you haven’t already discussed the benefits package, be prepared to answer any questions the candidate may have about what is included, the waiting periods, etc.

4. Your next steps depend, of course, on the outcome of your offer.

If their answer is no…If the candidate declines your offer on the basis of salary or another factor that’s negotiable, negotiate if possible.

If maybe…If the candidate hesitates or needs more time, give them a day or so to consider your offer. During this time, come up with a follow-up offer just in case.

If yes…If the candidate accepts your offer right away, find out how soon they can start.

5.  Have the candidate sign the authorization paperwork for you to conduct a background check and drug screen. For more information on background checks, read our article Hiring: The Rules of Conducting Background Checks.

6. While you’re waiting for the screening results (which could take take anywhere from a few days to a few weeks, depending on the type of checks), follow up with an offer letter (download our free sample letter below). The offer letter outlines the terms of employment, including the job title, the salary you agreed upon, whether the position is full- or part-time, estimated start date, etc. The offer letter also gives both parties important documentation in case there’s a dispute.

7. Receive results of the background check and drug screen. If there are adverse items in the background check, follow the steps outlined in the Fair Credit Reporting Act so that the candidate can address any problems. (For more information, read our article on Following the Fair Credit Reporting Act.)

8. If the background check results are clear, the candidate can start work. Reconfirm the start date, and provide the candidate with specific instructions, including parking information, reporting manager’s name, important phone numbers, etc., before the start date.

Why Should I Check References?

checking referencesDo you check references of prospective employees? You should. With up to one-third of all resumes containing a lie, you can bet that a few of your applicants may fabricate references to construct a better work history (on paper, anyways.)

You may not look forward to checking references. After all, it takes time to reach all the references a candidate has listed, which can delay your hiring decision. Employers you have to call may view giving references as an inconvenience or even a risk to them. The whole process may seem unnecessary, especially if you’ve found the perfect candidate. Or, you may be tired and just want to fill the position. Whatever your reasons: Do it anyway.

When you check references, you are protecting your investment in your business and guarding your employees from a potentially bad hire. Here are some good reasons to check references:

1. Verify information. Even if a former employer will only verify the person’s job title and the fact that they did indeed work there for three years, that’s good information to have. You’ve now confirmed the accuracy of the resume (or poked a hole in it.)

2. Paint a more accurate picture of the candidate. The candidate has shown you her best. Now, here’s a unique opportunity to get the rest of the story from the vantage point of others.

3. Make better hiring decisions. The more information you have about a candidate, the better. Because past performance is often a good indicator of future performance, checking references is a critical step in the hiring process.

What is the cost of a bad hire? Much higher than the cost of taking time to ensure the person you’re about to hire is honest, respected, and effective in their field. Think about the potential for lost revenue … time spent managing an ineffective employee … poor employee morale … possible legal issues. Checking those references will give you the valuable information you need to make a good hiring decision.

Coming up: Learn how to conduct a reference check.

Hiring Guide: Conducting an Interview

interview softwareConducting a job interview is one of the most important steps in the hiring process (especially if you’re attempting to hire your first employee). The success of the interview as a hiring tool partly depends on you, and how prepared you are. Here are some tips to help your interview run smoothly.

Before the Interview

  • Write down your questions in advance. (Hint: For best note-taking during the interview, type your questions on a worksheet, leaving plenty of space for your handwriting. You can save the worksheet and print it out to interview other candidates.)
  • Base your questions on the knowledge, skills, and abilities required for the job. Use the same interview questions for each candidate, which helps you compare answers and helps eliminate the possibility of bias.
  • Strive for open-ended questions to inspire the candidate to provide as much information as possible. Behavioral questions based on past experiences can help predict the candidate’s success in your company. For more information, read our article “Interview Questions: 25 Great Ideas.”
  • Determine how many questions a candidate can reasonably answer in a typical 30-60 minute interview. Start with areas that deserve the most attention, such as job history, education, etc., so that you don’t run out of time.
  • Plan the interview format. Will you be the only interviewer, or should others interview the candidate as well? If you decide to have multiple interviewers, split up the questions according to each person’s area of expertise to avoid redundancy (and a feeling of interrogation).
  • Choose a quiet, comfortable setting for the interview. Have coffee, tea, or water available, since the candidate will be (or should be) doing 80% of the talking.
  • Study the candidate’s resume in advance.
  • Establish rapport with the candidate for a few minutes. Ask casual questions to help the candidate relax and feel comfortable talking about themselves. You can also explain the format of the interview during this time.
  • Limit interruptions and distractions. Silence your cell phone and let your calls go to voicemail.
  • Keep a clock or a watch handy to keep track of the time.
  • Take notes to help you stay focused, record responses that you want to remember, and plan follow-up questions.
  • Don’t rush through the questions. Give a candidate 30 seconds or more to formulate a thoughtful answer. Allow for silences.
  • Listen carefully and completely to fully evaluate each response. Don’t think about the next question while the candidate is talking. Show you are listening by occasionally restating the candidate’s answer.
  • Be polite, smile, and use consistent eye contact, which demonstrates your interest in what they’re saying.
  • Invite the candidate to ask you questions about the company or the job. (But give succinct responses — remember, the candidate should be doing most of the talking.)
    • As a courtesy to the candidate, try to estimate how soon you expect to decide who will move on to the next step in the hiring process, such as testing. This will give the candidate an idea of when they will hear back from you.
  • Close the interview by thanking the candidate for their time.

After the Interview

  • When the candidate has left, review your notes. While the interview is still fresh in your mind, add observations about the candidate’s qualifications. Make note of positives and negatives relating to the requirements of the job, which will make it easier for you to compare candidates.

Hiring quality employees is important, but you may be distracted by other tedious administrative tasks like running payroll. Relieve yourself of stress, and end your search for the best payroll software for small business by trying Patriot for free today!

Updated on June 14, 2013

Hiring Guide: Interview Questions to Avoid

interview questions to avoid

Before you start interviewing job candidates, do you know which interview questions are risky or just wrong to ask?

Ask the wrong question in your interview process, and you can land in hot water. A seemingly harmless question such as “Where are you from?” can backfire if the applicant files a discrimination complaint because of her national origin.

[RELATED ARTICLE: Interview Questions: 25 Great Ideas]

As discussed in a previous article, “Preparing for a Candidate Interview,” interviewers need to be careful about the questions they choose to ask. Questions that seem benign may cause trouble if an applicant claims discrimination in the hiring process.

Interview Questions to Avoid

Play it safe, and stay away from questions about the following subjects:

National Origin: Don’t ask about a person’s ancestry or national origin, such as “Is that an Italian name?”
— You can ask: “Are you legally eligible for employment in the United States?”

Citizenship: Do not ask whether an applicant is a naturalized citizen or the date they became a citizen.

Race or Color: Do not ask about an applicant’s nationality or involvement in minority organizations.

Language: Do not ask about an applicant’s accent or their native language.
— You can inquire about languages that the applicant speaks and writes fluently if the question is job-related.

Marital Status: Don’t ask whether a person is married, single, divorced, or living alone.

Gender: Don’t ask about the applicant’s sex or gender identification, such as “Do you wish to be addressed as Miss/Mrs./Ms./Mr.?”

Sexual Orientation: Do not ask any questions in your interview process regarding an applicant’s sexual orientation or preference.

Family or Family Planning: Do not ask if the applicant has children, the ages of their children, whether they plan to have children, or if they’re currently pregnant. Do not inquire about child care arrangements.
— You can ask, “Do you have responsibilities other than work that will interfere with specific job requirements such as travel?”

Age: Don’t ask the person’s age or date of birth, or require them to show a birth certificate before you make a job offer. The Age Discrimination Act of 1967 bars discrimination against people 40 and over.

Religion: Don’t ask about a person’s religion, what church they attend, or whether their beliefs will affect their ability to work on Saturday or Sunday, for example.
— You can tell the candidate about the regular working hours and requirements for the position and ask, “Will you have any difficulty meeting these requirements?” 

Education: While your interview process can and should include relevant questions about education, don’t ask about the religious affiliation of a school or the graduation dates of the applicant, which could indicate possible religious or age discrimination.
— You can ask: “Do you have a high school diploma or equivalent?” or “Do you have a college degree?”

Arrest Record: Do not ask about an arrest record.
— You can ask if the candidate has ever been convicted of a felony or a misdemeanor, if the question is job-related. For more information on this subject, read our article “Are Background Checks Really Necessary?”

Travel: Be careful when phrasing questions about travel in your interview process. Don’t say: “How will the travel requirement affect your children?”
— You can say,” This job requires 50% travel. Will that cause any problems for you?”

Disability: Don’t ask questions about the existence, nature, or severity of a person’s disability. These questions are prohibited by the Americans with Disabilities Act.
— After describing the job duties, you <can ask: “Are you able to perform all of these duties?” or “Is there anything that would hamper your ability to perform these duties?”  For more information, read our article “Adding Disabled Employees to Your Payroll.”

Memberships: In your interview process, avoid questions about outside activities, clubs, and organizations unrelated to the job.

Military Discharge: Don’t ask about an applicant’s general military experience or discharge status, which may reveal information about a possible disability.
— You can ask, “What type of education, training, or work experience did you receive in the military?”

Economic Status: Don’t ask about the applicant’s credit history, car ownership, or past garnishments, which may be evidence of discrimination against women or minorities.
— You can ask whether the candidate has transportation required for the job. Note: In some instances, The Fair Credit Reporting Act allows employers to request a credit report when financial assets of the business could be at risk. For more information, read our article “Following the Fair Credit Reporting Act.”

Residence: Don’t ask where a person lives, or whether they own a home or rent.

If you are unsure whether an interview question is appropriate, a good rule of thumb is to ask yourself if the question pertains to a candidate’s knowledge, skills, or abilities needed to meet the requirements of the job.

Hiring Guide: Preparing For A Candidate Interview

RS209 iStock 000002285748XSmall
When preparing for an interview with a candidate, it’s a good idea to develop a list of standard interview questions that you will use for all candidates. You should be aware of what you should and should not ask, and consider the knowledge, skills, and abilities required for the job you are looking to fill.

In general, laws prohibit the use of pre-employment questions that cannot be shown to be job-related and justified by business necessity. Your focus must be: “What do I need to know to determine whether I should hire this person for this position?”
When thinking through possible interview questions, ask yourself, “Is this information necessary to judge the candidate’s competence and qualification, and is the question job-related?”

The U.S. Equal Opportunity Opportunity Commission enforces federal laws prohibiting employment discrimination. And while your business may be small enough to be considered exempt from federal law, you may be covered under the laws of your particular state. (For more information, visit the EEOC website.)
According to the courts, the burden of proof is on you, the interviewer, to show that the answers (verbal or written) are not used in a discriminatory manner.

As you think through the interview process, consider your questions carefully, and stick to your prepared notes. Here are some more tips:

  • Carefully study the job requirements of the position.
  • Ask only questions that relate directly to the job requirements.
  • Avoid receiving or volunteering information that could later be construed as discriminatory.
  • Make evaluation notes during and directly after the interview. Only take down notes that are related to the job. Do not describe the person’s physical characteristics in your notes.
  • Ask the same questions of all candidates.
  • Use only job-related information when making your hiring decisions.
  • Document well — it’s your best defense against false discrimination allegations.

For some general interview question ideas to get you started, see our article Interview Questions: 25 Great Ideas.

For what not to ask, read our blog post Hiring Guide: Interview Questions to Avoid.

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How to Write a Job Ad That Attracts — Not Repels!

hiring for payroll how to write a job ad picture of man holding pen


Warm body to fill empty space at struggling widget company at undisclosed location. Due to high turnover, working hours and salary non-negotiable. Opportunities for advancement: nil. Send resume and references to: We’ll get around to your resume eventually, SO DON’T CALL US.  

Obviously, your company has more to offer than the Boring Widget Company, and you can certainly compose a better job ad than that . . . right?

How to Write a Job Ad

Writing the perfect ad can be harder than it looks. What do you say? What don’t you say? Here are the basics to include:

  • Job title
  • Employer name
  • Location of job
  • Concise description of business
  • Description of role in company
  • Profile of desired candidate
  • Required qualifications and experience
  • Salary information
  • Instructions on how to apply
  • Contact information

Other considerations:
Is the position full- or part-time? Will you be adding the new employee to your payroll indefinitely, or is it a short-term, contract assignment? Consider mentioning other perks, including opportunities such as a pension, company car, etc. Include your website to encourage candidates to explore your company. Here are more do’s and don’ts for writing a job ad:



Include the top 4-5 skills most essential to the job. Request specific personality traits or characteristics that could be viewed as discriminatory against protected groups of people (age, gender, race, etc.)
Target the area or skill you have found most difficult to fill. Be boring.
Talk about what may be important to applicants. Do you offer a family-friendly environment? Flex-time? Health care? Give too much technical detail. Your job ad is not the place to discuss awards your company has won or the size of your facility.
List salary info or a salary range. Use too much jargon.
Specify how employees should contact you. Overdesign your ad; a clean design is best.
Make it easy to read and pleasing to the eye. Use all CAPS.
Keep it short, but not too short. Say what you need to say. Make it too long.

Source: “How to Write a Job Ad,” Entrepreneur.

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Cobra Subsidy for Laid Off Employees Expires This Month

COBRA subsidy expiresThe COBRA subsidy program to help laid-off workers shoulder the cost of continuing health insurance coverage will finally expire at the end of August.

For the last two years, the program has subsidized 65% of the cost of health insurance premiums for millions of laid-off American workers. Workers laid off in May 2010 were the last group to take advantage of the 15-month subsidy. Workers laid off after that date were no longer eligible.

The program began in February 2009 as part of the economic stimulus bill passed by Congress at the height of the recession. Congress has extended the subsidy several times since then, but allowed it to expire due to growing concern about the federal deficit.

Although exact numbers aren’t available on how many laid-off employees took advantage of the subsidy credit, congressional analysts estimated that the subsidy could help 7 million laid-off employees and their families at a cost of $25 billion. As a result of the subsidy, COBRA enrollment dramatically increased.

Hiring: The Rules of Conducting Background Checks

conducting background checksUpdated on June 24, 2013

More and more employers are finding that background checks are a necessary hiring tool. In fact, about 70 percent of organizations conduct background checks on job candidates, according to the Society for Human Resource Management (SHRM).

Employers often seek background information on potential hires through a variety of means, including court records, criminal records, driving records and motor vehicle registrations, sex offender lists, Social Security numbers, and fingerprinting. Through a background check, employers can search for information related to credentials, past employers, personal references, and state licensing.

[RELATED ARTICLE: How Do I Makes a Job Offer?]

However, as you might guess, employers must carefully follow rules governing these items. As I explained in my previous post, Are Background Checks Really Necessary? employers must follow state and federal laws. All criminal background checks must comply with the Fair Credit Reporting Act, and candidates must sign a release form before a background check can be conducted.

Here are some other rules employers must follow, according to the Small Business Administration:

Lie detector tests. The Employee Polygraph Protection Act prevents most private employers from using lie detectors in the course of employment or in the hiring process. However, there are a few exceptions, such as armored car services and pharmaceutical businesses.

School records. The Family Educational Rights and Privacy Act and other state laws protect the confidentiality of school records, such as transcripts, and won’t be released without consent.

Medical records. Employers cannot request a job applicant’s medical records, and some state laws protect the confidentiality of medical records. The Americans with Disabilities Act allows employers to only inquire about an applicant’s ability to perform the duties of the job. If the employee can perform the work (with or without reasonable accommodations) employers cannot make job decisions (hiring, promotions, etc.) based on the disability. For more information, read “Adding Disabled Employees to Your Payroll.”

Bankruptcies. While bankruptcies are part of public record and may show up on a candidate’s credit report, the Federal Bankruptcy Act prohibits employers from discriminating due to a bankruptcy filing.

Military records. The military may choose to disclose limited information without the candidate’s consent, including name, rank, salary, duty assignments or status, and awards. Consent is likely to be required for other types of information.

Worker’s Compensation records. Because worker’s compensation appeals are part of the public record, employers may use this information in hiring decisions if they can show the injury may interfere with the candidate’s ability to perform the duties of the job.

The takeaway: While background checks can be a useful hiring tool, it’s important to learn the applicable federal and state laws and make sure your methods are in compliance. If you use a third-party for your background screenings, they should be able to advise you on what’s allowed and what’s not.

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