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!
©2022 Thomson Reuters