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  • overtime-laws-salaried-employees-nonexempt

    Will Impending Overtime Laws Raise Your Payroll Costs?

    posted by Mike Kappel
    Newest Article
  • Some localities use local income tax to fund schools.

    What Is Local Income Tax?

    posted by Mike Kappel
    Recent Article
  • Will Impending Overtime Laws Raise Your Payroll Costs?

    Overtime laws might change soon.

    What does this mean for small business owners? In short, your salaried workers who are exempt from overtime pay now might soon become eligible for overtime.

    Let’s say you own a frame shop. Business is good, and you can afford to promote a worker to a supervisor position. However, that supervisor might cost you more than you thought.

    Overtime laws: Payroll changes are coming

    The Fair Labor Standards Act (FLSA) covers the complex laws for overtime hours. In March 2014, President Obama signed a memorandum to revise the outdated overtime laws. He stated, “If you have to work more, you should get paid more.”

    Overtime laws include a minimum salary threshold. Employees who earn more than the threshold might be exempt from overtime earnings if they also have qualifying job duties. Employees who earn less than the threshold are non-exempt from overtime earnings.

    Also known as a “white-collar” exemption, the intention of the FLSA overtime rules were to limit the amount of overtime pay that highly paid workers could receive. The limits include a salary threshold as well as confusing rules. When the threshold was set in 1975, 65% of salaried workers were eligible for overtime compensation. The other 35% potentially made too much money to earn overtime wages.

    Since 1975, there has been only one increase in the salary threshold. The increase does not allow for the impact of inflation. So, we have gone from 65% of salaried workers eligible for overtime pay in 1975 to just 12% of salaried workers eligible in 2014.

    overtime laws

    Doing the math

    Current overtime laws leave about 88% of salaried employees as ineligible for overtime. Are they all highly compensated workers? Nope.

    Some of those workers earn as little as $23,660 per year. If you do the math, a salaried employee who works a 60-hour week with an annual salary of $23,660 (without any overtime compensation) earns only $7.58 per hour. That is only $0.33 more than the national minimum wage ($7.25 per hour).

    The minimum salary level for employees exempt from overtime is currently $455 per week ($23,660 per year). If the proposed overtime laws go into effect in July 2016, the salary level will jump to $970 per week ($50,440 per year).

    There are additional stipulations about an employee’s duties when determining the exempt vs. non-exempt status (e.g., the employee must work a minimum of 40 hours per week). The DOL estimates 4.6 million workers would no longer be exempt from overtime pay!

    What this means for your exempt employee

    Let’s look at the frame shop example again…

    Suppose that your frame shop supervisor earns a salary of $455 per week. That would be $11.38 per hour for a 40-hour workweek. The new supervisor makes staff schedules and covers shifts if an employee doesn’t show up. For a large order, the new supervisor sometimes works late to get the work caught up.

    With the existing salary threshold, the employee is exempt from overtime. Your supervisor could easily end up earning only $7.58/hour on a busy 60-hour workweek. This means your supervisor could end up earning less per hour than coworkers under his or her supervision.

    What this means for you

    When the salary threshold for overtime pay is increased, your supervisor may no longer be exempt. What will that do to your payroll costs? Here are example calculations for a salaried employee earning overtime.

    Non-Exempt: 40 hours/week
    (no overtime hours)
    Non-Exempt: 50 hours/week
    (10 overtime hours)
    Non-Exempt: 60 hours/week
    (20 overtime hours)
    $455.00/week $625.70/week $796.40/week
    $23,660.00/year $32,536.40/year $41,412.80/year

    How can you prepare for the probable changes?

    When you do the math according to the proposed overtime laws, do you end up with an impossible monthly payroll? Does your employee end up with a fair hourly wage?

    First, you need a plan. Look at what you currently pay your employees and start crunching some numbers.

    • You might need to lower employee salaries in order to cover the cost of overtime when they are no longer exempt.
    • You might increase employee salaries to the new minimum threshold to maintain their exempt statuses.
    • You can shift duties from one employee to another so the employee no longer works overtime hours. Perhaps you will need to hire additional workers.
    • If you don’t have a good timekeeping system, you should consider getting one now. This will make the transition easier if you need to start paying employees overtime in the near future.

    With the time and attendance software add-on to our online payroll software, you can easily track hours employees worked. Get a free trial today!

    This article was originally published on 06/30/2014.

    What Is Local Income Tax?

    Cities, counties, local governments, and school districts in 12 U.S. states impose a local income tax. This is in addition to state tax. You are required to withhold local income tax from employee wages as part of your tax withholding obligations. While most states impose a local income tax as a tax on wages, some levy it as a percentage of the state income tax.

    The 12 states that charge local income tax are:

    How Much Does an Employee Cost? Find Out on This Infographic.

    The greatest expense for small business owners is often payroll. Did you know that when you hire employees, you have to pay more than just their wages?

    Before you add to your staff, it is important for you to understand the true cost of hiring a new employee. An employee costs more than their salary or hourly wage. You also have to pay employer payroll taxes. You might have to pay portions of fringe benefits. And you might provide small extras for your employees, such as free coffee or snacks.

    So, can you accurately answer the question, “How much does an employee cost?”

    What does this infographic include?

    What to Do If an Employee’s Form W-2 Comes Back “Undeliverable”

    You are required to send a W-2 form to employees by January 31 for wages they earned the previous year. But, what happens when you find a W-2 returned undeliverable?

    Below are the steps you can take.

    Simple Guide to Payroll Tax Contribution

    It is already difficult enough to run your payroll program. On top of that, you have to figure out all the payroll tax liabilities.

    At Patriot, we want you to succeed. That’s why we created a free whitepaper that explains payroll taxes.

    What you will find in our free payroll tax whitepaper

    How the New York Women’s Equality Act Affects Your Small Business

    On Jan. 19, 2016, the New York Women’s Equality Act went into effect. The Act, which protects women’s equality, addresses some employment issues. If you are an employer located in New York state, you should examine the law. You might need to revisit your business’s employment policies.

    Below are the parts of the Act that might affect your small business.

    What Is Schedule A (Form 940)?

    States must always have significant funds on hand for the unemployment insurance benefits that they may need to pay out during the course of the year.  If a state does not have the funds, they must take out a loan from the federal government to meet its unemployment obligations.

    If a state has not repaid its loan after two years, then the employers in that state face a higher FUTA (Federal Unemployment Tax Act) rate when they complete Schedule A (Form 940).  The higher FUTA rate is due to the fact that the state is now considered a credit reduction state. The higher rate helps the state reduce its line of credit.

    To calculate your FUTA tax, employers must complete Schedule A (Form 940), Multi-state Employer and Credit Reduction Information, a worksheet listing the applicable tax rates in each state.

    What Are FUTA Credit Reduction States?

    In order to pay unemployment benefits, states require that employers pay a state unemployment tax or insurance. If a state cannot afford to pay unemployment benefits with the money generated from the tax, the state has to take out a federal loan.

    FUTA taxes

    The Federal Unemployment Tax Act (FUTA) is a payroll tax that helps fund the federal unemployment loans. Most employers have to pay FUTA tax based on their employees’ wages.

    The W-2 Form: What You Need to Know

    You are familiar with the Wage and Tax Statement (W-2 form) as the form you send to the IRS when you file your personal income taxes. As an employer, the W-2 form (accompanied by Form W-3) is your report to the government about the taxes you’ve withheld for each individual employee.

    The federal government relies on W-2 forms for an accurate record of each taxpayer’s wages/salary. The W-2 includes not only wages earned, but also tips received and other forms of compensation. Equally important, the W-2

    Which States Require an EITC Notice or IRS Notice 797 for Employees?

    Several states require that employers give tax notices to employees regarding their possible eligibility for the Earned Income Tax Credit (EITC, or EIC).

    EITC is a benefit for working people who make low to moderate income. The credit reduces these individuals’ tax liabilities. EITC is available as a lump sum when employees file their income tax return each year.

    Will Impending Overtime Laws Raise Your Payroll Costs?

    Overtime laws might change soon.

    What does this mean for small business owners? In short, your salaried workers who are exempt from overtime pay now might soon become eligible for overtime.

    Let’s say you own a frame shop. Business is good, and you can afford to promote a worker to a supervisor position. However, that supervisor might cost you more than you thought.

    Overtime laws: Payroll changes are coming

    The Fair Labor Standards Act (FLSA) covers the complex laws for overtime hours. In March 2014, President Obama signed a memorandum to revise the outdated overtime laws. He stated, “If you have to work more, you should get paid more.”

    Overtime laws include a minimum salary threshold. Employees who earn more than the threshold might be exempt from overtime earnings if they also have qualifying job duties. Employees who earn less than the threshold are non-exempt from overtime earnings.

    Also known as a “white-collar” exemption, the intention of the FLSA overtime rules were to limit the amount of overtime pay that highly paid workers could receive. The limits include a salary threshold as well as confusing rules. When the threshold was set in 1975, 65% of salaried workers were eligible for overtime compensation. The other 35% potentially made too much money to earn overtime wages.

    Since 1975, there has been only one increase in the salary threshold. The increase does not allow for the impact of inflation. So, we have gone from 65% of salaried workers eligible for overtime pay in 1975 to just 12% of salaried workers eligible in 2014.

    overtime laws

    Doing the math

    Current overtime laws leave about 88% of salaried employees as ineligible for overtime. Are they all highly compensated workers? Nope.

    Some of those workers earn as little as $23,660 per year. If you do the math, a salaried employee who works a 60-hour week with an annual salary of $23,660 (without any overtime compensation) earns only $7.58 per hour. That is only $0.33 more than the national minimum wage ($7.25 per hour).

    The minimum salary level for employees exempt from overtime is currently $455 per week ($23,660 per year). If the proposed overtime laws go into effect in July 2016, the salary level will jump to $970 per week ($50,440 per year).

    There are additional stipulations about an employee’s duties when determining the exempt vs. non-exempt status (e.g., the employee must work a minimum of 40 hours per week). The DOL estimates 4.6 million workers would no longer be exempt from overtime pay!

    What this means for your exempt employee

    Let’s look at the frame shop example again…

    Suppose that your frame shop supervisor earns a salary of $455 per week. That would be $11.38 per hour for a 40-hour workweek. The new supervisor makes staff schedules and covers shifts if an employee doesn’t show up. For a large order, the new supervisor sometimes works late to get the work caught up.

    With the existing salary threshold, the employee is exempt from overtime. Your supervisor could easily end up earning only $7.58/hour on a busy 60-hour workweek. This means your supervisor could end up earning less per hour than coworkers under his or her supervision.

    What this means for you

    When the salary threshold for overtime pay is increased, your supervisor may no longer be exempt. What will that do to your payroll costs? Here are example calculations for a salaried employee earning overtime.

    Non-Exempt: 40 hours/week
    (no overtime hours)
    Non-Exempt: 50 hours/week
    (10 overtime hours)
    Non-Exempt: 60 hours/week
    (20 overtime hours)
    $455.00/week $625.70/week $796.40/week
    $23,660.00/year $32,536.40/year $41,412.80/year

    How can you prepare for the probable changes?

    When you do the math according to the proposed overtime laws, do you end up with an impossible monthly payroll? Does your employee end up with a fair hourly wage?

    First, you need a plan. Look at what you currently pay your employees and start crunching some numbers.

    • You might need to lower employee salaries in order to cover the cost of overtime when they are no longer exempt.
    • You might increase employee salaries to the new minimum threshold to maintain their exempt statuses.
    • You can shift duties from one employee to another so the employee no longer works overtime hours. Perhaps you will need to hire additional workers.
    • If you don’t have a good timekeeping system, you should consider getting one now. This will make the transition easier if you need to start paying employees overtime in the near future.

    With the time and attendance software add-on to our online payroll software, you can easily track hours employees worked. Get a free trial today!

    This article was originally published on 06/30/2014.

    What Is Local Income Tax?

    Cities, counties, local governments, and school districts in 12 U.S. states impose a local income tax. This is in addition to state tax. You are required to withhold local income tax from employee wages as part of your tax withholding obligations. While most states impose a local income tax as a tax on wages, some levy it as a percentage of the state income tax.

    The 12 states that charge local income tax are:

    How Much Does an Employee Cost? Find Out on This Infographic.

    The greatest expense for small business owners is often payroll. Did you know that when you hire employees, you have to pay more than just their wages?

    Before you add to your staff, it is important for you to understand the true cost of hiring a new employee. An employee costs more than their salary or hourly wage. You also have to pay employer payroll taxes. You might have to pay portions of fringe benefits. And you might provide small extras for your employees, such as free coffee or snacks.

    So, can you accurately answer the question, “How much does an employee cost?”

    What does this infographic include?

    What to Do If an Employee’s Form W-2 Comes Back “Undeliverable”

    You are required to send a W-2 form to employees by January 31 for wages they earned the previous year. But, what happens when you find a W-2 returned undeliverable?

    Below are the steps you can take.

    Simple Guide to Payroll Tax Contribution

    It is already difficult enough to run your payroll program. On top of that, you have to figure out all the payroll tax liabilities.

    At Patriot, we want you to succeed. That’s why we created a free whitepaper that explains payroll taxes.

    What you will find in our free payroll tax whitepaper

    How the New York Women’s Equality Act Affects Your Small Business

    On Jan. 19, 2016, the New York Women’s Equality Act went into effect. The Act, which protects women’s equality, addresses some employment issues. If you are an employer located in New York state, you should examine the law. You might need to revisit your business’s employment policies.

    Below are the parts of the Act that might affect your small business.

    What Is Schedule A (Form 940)?

    States must always have significant funds on hand for the unemployment insurance benefits that they may need to pay out during the course of the year.  If a state does not have the funds, they must take out a loan from the federal government to meet its unemployment obligations.

    If a state has not repaid its loan after two years, then the employers in that state face a higher FUTA (Federal Unemployment Tax Act) rate when they complete Schedule A (Form 940).  The higher FUTA rate is due to the fact that the state is now considered a credit reduction state. The higher rate helps the state reduce its line of credit.

    To calculate your FUTA tax, employers must complete Schedule A (Form 940), Multi-state Employer and Credit Reduction Information, a worksheet listing the applicable tax rates in each state.

    What Are FUTA Credit Reduction States?

    In order to pay unemployment benefits, states require that employers pay a state unemployment tax or insurance. If a state cannot afford to pay unemployment benefits with the money generated from the tax, the state has to take out a federal loan.

    FUTA taxes

    The Federal Unemployment Tax Act (FUTA) is a payroll tax that helps fund the federal unemployment loans. Most employers have to pay FUTA tax based on their employees’ wages.

    The W-2 Form: What You Need to Know

    You are familiar with the Wage and Tax Statement (W-2 form) as the form you send to the IRS when you file your personal income taxes. As an employer, the W-2 form (accompanied by Form W-3) is your report to the government about the taxes you’ve withheld for each individual employee.

    The federal government relies on W-2 forms for an accurate record of each taxpayer’s wages/salary. The W-2 includes not only wages earned, but also tips received and other forms of compensation. Equally important, the W-2

    Which States Require an EITC Notice or IRS Notice 797 for Employees?

    Several states require that employers give tax notices to employees regarding their possible eligibility for the Earned Income Tax Credit (EITC, or EIC).

    EITC is a benefit for working people who make low to moderate income. The credit reduces these individuals’ tax liabilities. EITC is available as a lump sum when employees file their income tax return each year.