HR Tip of the Month – Primary Beneficiary Test

Employers should use a test — called the primary beneficiary test — when determining if a worker can be properly classified as an unpaid intern or if they need to be classified as an employee and paid at least minimum wage and overtime. Before hiring an unpaid intern, employers should consider the following:

  • The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee.
  • The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  • The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  • The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  • The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

No single question will disqualify the worker from being classified as an unpaid intern. Instead, the employer should look at the answers as a whole. If in doubt, do not classify the employee as an unpaid intern.

Article content provided by My HR Support Center

Harassment Prevention Considerations with a Remote Workforce

Using video conferencing apps for meetings can make for a more productive and engaging time than group discussions over the phone, but there are also some risks to consider in regard to harassment prevention:

Attire

When working from home, the desire to work in comfortable clothes could tip from casual to inappropriate. You may have seen memes and stories about employees wearing professional tops without appropriate bottoms or family members dashing by too much in the buff. Fortunately, these wardrobe malfunctions are easily preventable with a little planning on the employee’s part. Remind them to plan ahead.

Backdrop

Ask that employees also take stock of what’s in their background before turning video on. Could there be inappropriate personal items or art that some might consider offensive? A number of video conferencing apps have virtual backgrounds that can eliminate both the threat of harassment as well as general distractions.

Video vs. Phone Call

Ensure that virtual meetings are scheduled equitably. For example, if a manager checks in with men on the team over the phone, but uses video for one-on-one meetings with the women, that would be a cause for concern.

Virtual Happy Hours

Both the use of alcohol and the act of communicating over a screen can decrease formality. Set expectations around respectful behavior and encourage employees to drink responsibly, if allowed, during happy hours. Remind employees that harassment and other conduct policies apply, just as they would at any other company-sponsored function.

Further Considerations Around Virtual Harassment

  • Handbook Policies: Review your company harassment and discrimination handbook policies and ensure they’re inclusive of, and applicable to, remote work and interactions.
  • National Origin and Race: An April 2020 Ipsos survey found that more than 30 percent of Americans have witnessed someone blaming Asian people for the coronavirus pandemic. The EEOC recently suggested that employers reduce harassment risk by clearly informing employees that fear of COVID-19 cannot be “misdirected against individuals” based on any protected characteristic, including national origin or race. Be alert for any discriminatory comments and be ready to act.
  • Age: Keep an ear out for jokes about employees’ age. A seemingly harmless barb about an older employee’s unfamiliarity with technology could result in a discrimination claim.

Article content provided by My HR Support Center

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Don’t Forget to Document, Document, Document

With all of the changes everyone has had to make over the past few months, not to mention the heightened stress we’re all feeling, it may be tempting to let certain practices slide or be less strict about following particular workplace policies. Flexibility during crisis situations may make sense in certain situations, but there are some areas where you don’t want to fall short of your usual standards. Documentation is certainly one of those.

Documenting decisions you make as an employer can feel like an extra, unnecessary step. It is additional work, after all, and that work adds up. Nevertheless, documentation is an important part of risk management, and the price of not documenting your actions can far outweigh the costs of doing so, especially if an employee were to ever allege discrimination.

When we talk about discrimination in the workplace, we’re not referring simply to the act of treating people differently or giving someone preferential treatment. Employers rightly treat individuals differently all the time. People are placed in different jobs, receive different pay, and work different hours. Some have better parking spots than others, vegetarians may get a special meal when lunch is ordered for the office, and the big boss may get away with a gruff personality while others are expected to be more cordial. 

Rather, when we talk about the discrimination that employers need to avoid and prevent, it’s discrimination that’s based on an employee’s inclusion in a protected class. A number of laws at both the federal and state levels make workplace discrimination unlawful if it is based on race, color, age (over 40), sex, pregnancy, religion, disability, national origin, ethnic background, genetic information (including that of family members), military service, and citizenship or immigration status, among other classes.

The best way to avoid discrimination is to base employment decisions only on factors that are job-related, and this is where documentation comes in. Documenting the job-related reasons for your business decisions helps show that your decisions were not done for discriminatory and illegal reasons. Absent that documentation, you have nothing to show the legitimate basis of your decisions if any of your employment decisions are challenged. That makes it harder to prove that you weren’t discriminating unlawfully. Below are a few areas where documentation is especially important.

Discipline and Termination

Documenting all the actions you take to warn an employee about poor performance or unacceptable behavior before terminating their employment demonstrates that you made a good faith effort to help the employee meet expectations and avoid termination. You’re on safest ground terminating employment if you can show that the employee understood what was expected of them and what would happen if they failed to improve.

Investigations

Make sure that you document every step of an investigation as well as the resulting actions taken so you can show that you fulfilled your legal obligations. Having a clear record will also help you ensure that similar situations are handled consistently in the future.

Hiring

Employers sometimes get into trouble with the law by asking questions of job candidates that reveal their membership in a protected class. Asking about church attendance, for example, may be intended to ascertain weekend availability, but it gives the applicant an opportunity to claim they were discriminated against. Hiring decisions should be based on job-related factors. Proper documentation shows that they were. 

Promotions and Pay

Documentation here should show that pay and promotion practices are systemized and based only on bona fide job-related reasons. The federal Equal Pay Act requires men and women in the same workplace be given equal pay for equal work while Title VII of the Civil Rights Act requires that employers not discriminate based on someone’s inclusion in a protected class. If you lack documentation explaining why one employee is paid more than another in the same position, your risk of being sued (and losing) goes up substantially. 

Article content provided by My HR Support Center

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Contempo COVID-19 Employer Update

The IRS and U.S. Department of Labor announced their plans for new Federally mandated paid sick leave with Families First Coronavirus Response Act (FFCRA).
Employer items to note include:

  • Employees directly affected by COVID-19 illness are entitled to up to 2 weeks of fully paid Emergency Paid Sick Leave.
  • Employees can also receive benefits under the Emergency Family Medical Leave Expansion Act. This will provide both job-protected leave and 2/3 replacement pay during a period of absence from 3 to 12 weeks for absences related to the care of a child during school shut-downs.
  • Both of these new leaves will be paid by employers and funded by the US government via the retention and use of payroll tax funds employers would otherwise pay to the IRS in the form of 941 payroll tax deposits. If those amounts are insufficient to cover the cost of the new paid leave, employers can seek an “expedited advance” from the IRS by submitting a “streamlined claim form” that will be released shortly.
  • The Department of Labor and the IRS will be providing additional details and guidance on the specifics and the implementation of the FFCRA on March 25th.
  • The Department of Labor will also release a new required workplace poster outlining these new employee rights under the FFCRA.

It may be hard for business owners affected by COVID-19 business slowdowns to imagine how they can bear additional effort and expense. We encourage anyone with these concerns to read the information in the web links below carefully:

We encourage all Contempo HCM clients to visit our online HR Support Center for additional tools and resources related to COVID-19. We are continually updating our HR Support Center as new information and guidance becomes available. You can learn more about the details of these leaves (who is covered, what it’s for, duration, etc.) on the HR Support Center by searching for “FFCRA.”

Big Payroll News!

More exciting than the updated Volkswagen Beetle…Bigger than New Coke!

The IRS has unveiled the NEW Form W-4 and it can be found right here:

This new withholding form is the culmination of extensive IRS work over the past year. This work included the solicitation of feedback from the payroll tax community to create greater withholding symmetry with the Tax Cuts and Jobs Act, which took effect in 2018.

According to the IRS, important changes to the W-4 form include:

  • The elimination of the outdated “withholding allowances” concept
  • Greater “simplicity”
  • Greater “accuracy”
  • Greater “privacy for employees”

Employers should note:

  • All new employees hired as of Jan. 1, 2020, must complete the new W-4 form.
  • Much like New Coke, employees can use their old W-4 elections or choose to adjust their withholdings going forward based on the New Formula!
  • Any adjustments made after Jan. 1, 2020, must be made using the new W-4 form.
  • New hired employees after Jan. 1, 2020 must use the new W-4 form.

Employees will find the 2020 Form W-4 contains a single full page followed by instructions, worksheets and tables. Employees may also choose to use the new form to determine the impact of income from other jobs.

Could this new form be the panacea that decreases the number of taxpayers who either write a big check or await a large refund each April?

Does anyone miss Herbie? 

Keep an Eye on these Important Employee Issues!

The US economy continues to surge forward. Many companies are expanding and hiring new employees. This is generally great news. However, hiring new staff can make payroll management (already a challenge for many firms) far more difficult. If your firm is in the hiring cycle keep an eye on the following three critical employer issues:

1. Increased Employer Costs

Most employers understand they must withhold taxes from employee checks. However, employer taxes such as Social Security, Medicare and unemployment tax are your firm’s financial obligation. These employer tax burdens increase with each new hire. Additionally, firms should consider their increased worker’s comp and benefit costs when hiring new employees.

2. Proper Employee classification

Employee misclassification is always a hot IRS topic. However, in recent years the DOL has also entered agreements with many state agencies to cooperate in pursuing enforcement against employers for misclassification of employees as independent contractors.

Independent contractor misclassification isn’t the only type of misclassification on the government’s enforcement radar. Special attention must also be paid to regulations regarding the determination of whether employees qualify for the “white-collar” exemptions from the FLSA’s minimum wage and overtime requirements. Employers must ensure compliance with minimum salary requirements and worker “duties” tests.

3. Recordkeeping

The DOL requires every employer covered by the FLSA to keep time clock records for each nonexempt worker. The law doesn’t specify the form of records, but they must include certain identifying information including the employee, the hours worked and the wages earned. Payroll records should be retained for at least 4 years including records for wage computation. These records include time cards, wage rates and records of additions or deductions from wages.

Ongoing challenges

Employers must remain vigilant regarding changes to federal and state laws/regulations that affect payroll taxes and other employee compensation issues. Do NOT assume you can put payroll management on autopilot!

©2019 Thomson Reuters

Why Outsourcing Makes Good Business Sense

One of the biggest challenges facing business owners is the continued performance of necessary but non-strategic critical functions such as payroll, human resources and information technology.

Business owners know that running a successful business requires much more than expertise in their trade. Often the most difficult challenge in business is keeping the firm’s critical functions running smoothly, including:

  • Payroll,
  • Accounting,
  • Human resources,
  • Collections, and
  • IT.

Many of these functions come with numerous subfunctions. Human resources, for example, includes recruiting and retention, training, leave management, benefits planning and administration — not to mention an array of compliance responsibilities. All of these are labor-intensive activities where expertise matters. And that expertise frequently can be obtained in a more cost-effective manner by turning to external service providers.

The potential benefits of outsourcing go far beyond expertise, though. The primary draw for most firms is reduced costs, which come from a variety of sources. Vendors can pass on the benefits of economies of scale and high-capacity utilization. They may also wield superior negotiating leverage when it comes to dealing with third parties. They also provide access to best practices and the latest technology without incurring the normal capital costs.

If you outsource functions, your firm may see reduced overhead and staff costs, including employment taxes, paid time off, benefits, salary and wages. Moreover, unlike internal staff, outsourcing partners are paid only for work performed — you won’t have to compensate them for being on vacation or idle time sitting at their desks!

Selecting vendors for outsourced services requires careful consideration. Not every vendor will be able to provide the functions and level of service you require. Begin by soliciting referrals from other business owners. Pay special attention to the experience of firms that are comparable to yours in terms of size and geographic area. Ask about vendor customer service. How do they react when problems arise? Do they resolve issues satisfactorily?

Also, analyze vendor fees and cost structures. Do they have a complex fee structure? Do they have hidden fees? Can the vendor adapt in case you expand or downsize in the future?

Once you’ve selected a vendor, it’s important to maintain frequent communication with the vendor through implementation and then regularly throughout the course of your relationship.

As businesses continue searching for greater efficiency and lower costs, outsourcing arrangements not only promote savings but can also provide your firm with a competitive advantage. Regardless of size, your firm might find that outsourcing makes good business sense!

©2019 Thomson Reuters

The New DOL Proposed Overtime Rule

The U.S. Department of Labor has released a Notice of Proposed Rulemaking. This new rule would revise current federal overtime regulations. This notice initiates a 60 day public comment period which allows members of the business community to provide feedback regarding the proposed regulations.

Background

As many business owners may recall, a similar overtime regulation update was initiated by the Obama Administration in 2016. However, a federal judge in Texas struck down the proposed Obama-era federal overtime rule, which would have made more than 4 million exempt employees eligible for overtime pay. As a result, the business community has cautiously anticipated the unveiling of this new 2019 overtime update.

Under this new 2019 DOL proposal, the new salary threshold for exempt-level workers would increase to $35,308 per year or $679 per week. This marks a 49% increase over the current level of $23,660 per year or $455 per week, which was established in 2004. Any employees with salaried amounts less than this threshold will be required to be paid overtime for any hours worked exceeding 40 in a work week.

The proposed 49% salary level increase may seem large to certain business owners. However, this proposed change is far less extreme than the Obama-era proposed previously blocked by the federal court in Texas. By comparison, the Obama-era change, slated to go into effect in 2016 would have doubled the minimum salary amount $47,476 annually or $913 per week.

The Trump administration and the Department of Labor (DOL) have worked to revise regulations concerning overtime in this new proposal. Their work focused on several key topics:

  • Whether to vary the salary threshold on a regional basis?
  • Where the salary threshold should be?
  • Whether the salary threshold should be updated automatically on an annual or multi-year basis?

The resulting 2019 DOL proposal does not vary on a regional basis. It also does not include a plan to automatically update the salary threshold and it does not alter the existing “duties test” regarding exempt level workers. However, the new proposal does allow employers to include commissions and bonuses to make up 10% or less of an employee’s total salary.

Lastly, the DOL would be committed to reviewing this topic every four years. However, any future modifications to the new salary threshold amount would be required to go through the same existing update process.

How does the new DOL proposed overtime rule affect you?

If this update is finalized, employers will be required to:

  • Review the salary levels of all exempt level employees
  • Calculate the cost of increasing the salary to the new threshold amount
  • Compare these new thresholds to the commensurate overtime expenses for hours worked in excess of 40 per week

You can review the Notice of Proposed Rulemaking and access additional resources on the Department of Labor’s website here.

Contempo HCM launches to provide Arizona business owners with payroll and human capital management technology

Payroll executive and entrepreneur, Lawrence Bailliere, BeachFleischman PC, one of Arizona’s largest locally-owned CPA firms, and Pinnacle Plan Design, LLC, a third-party administrator (TPA) for employer-sponsored qualified retirement plans, announce the formation of a joint venture to launch Contempo HCM, LLC, an Arizona-based payroll and human capital management company. Bailliere has been named CEO and will lead the company’s growth and strategic vision. BeachFleischman and Pinnacle Plan Design will offer Contempo’s services to its clients. Additionally, BeachFleischman will provide the company with operational support. Contempo HCM was launched to meet the workforce management needs of Arizona business owners operating in the small business and middle-market sectors.

Contempo HCM operates as an iSolved Certified Network Partner. The iSolved Network is an ecosystem for elite, high-growth payroll service providers utilizing the iSolved platform to deliver a complete set of workforce solutions to their clients. Contempo HCM’s cloud-based workforce management solutions include payroll, time & attendance, HR administration, and electronic benefit administration.

According to Lawrence Bailliere, “We shared the same vision with BeachFleischman and Pinnacle Plan Design, and that made this new venture possible. We are excited about the opportunity to help business owners drive down the cost and complexity of managing a workforce. Our system provides real-time data and immediate access to information for better decision-making. We want our clients to focus on their core objectives while outsourcing the risks and burdens associated with the changing employer and workforce management environment. We mitigate the need for separate workforce management solutions by delivering a customized, configurable, end-to-end experience using one technology solution.”

Marc Fleischman, BeachFleischman’s CEO said, “We are thrilled about the incredible opportunities that Contempo brings to the marketplace. It’s locally-owned, and Larry is a proven industry thought leader and entrepreneur who will leverage the talents of his team to help our current and future clients accomplish their goals.”

Kevin Donovan, Managing Partner of Pinnacle Plan Design, LLC said, “We’re really excited about the opportunity to deliver a more seamless administrative process to our 401(k) clients, and removing their burden to provide complete and accurate indicative employee data which can now be accessed by us directly, 24/7.”

Contempo HCM is headquartered at 5872 E. Pima Street in Tucson, AZ and has an office at 2201 E. Camelback Road in Phoenix, AZ.