Frequently Asked Questions
- PayCo Payroll Solutions
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- Frequently Asked Questions
State laws and collective bargaining agreements with unions may dictate how often a business must run payroll. If such requirements don’t apply to them, employers may choose a pay frequency that works best for them and their employees. The most common are weekly, bi-weekly and semi-monthly.
Payment options include paycheck, direct deposit and pay cards. However, some states have strict rules regarding electronic and alternative forms of payment, which must be followed.
Reporting requirements vary based on the size of the business and how it’s structured. Some examples include:
Pretax deductions are generally employee contributions to employer-sponsored benefits, such as group healthcare plan, group term life insurance, some types of retirement saving plans, etc. They are advantageous because they lower an employee’s taxable income.
Under federal law, employees who are non-exempt from the Fair Labor Standards Act (FLSA) are entitled to at least minimum wage and overtime pay at a rate of 1.5 times their regular rate of pay if they work more than 40 hours in a workweek. Exempt employees, on the other hand, are not protected by the FLSA. They typically earn a salary and work in administrative, executive or professional roles that pass the Department of Labor’s duties test. Note, however, that some states require overtime to be paid if a certain amount of hours are worked each day and at rates exceeding 1.5 times the employee’s regular rate of pay.
Employee tax withholdings vary based on state jurisdictions. Examples include, but are not limited to:
- Federal income tax
- Social Security and Medicare
- State and local income taxes (if applicable)
- State unemployment tax (some states)
The difference between regular, overtime and holiday pay is as follows:
- Regular pay – A non-exempt employee’s regular rate of pay must not be less than the highest federal minimum wage, state minimum wage or local minimum wage in effect when work is performed.
- Overtime pay – As defined by the FLSA, overtime pay is 1.5 times the employee’s regular rate of pay for each hour worked over 40 in a workweek. States may have their own overtime standards, which employers must follow.
- Holiday pay – Although not a federal requirement, some employers will offer their employees paid time off for holidays or pay them at higher rates for time worked on a holiday.
The FLSA requires employers to keep payroll records for at least three years and retain timesheets and other documents that show how wages were calculated for at least two years. What’s more, the IRS mandates that businesses keep payroll tax records for four years, and some states have payroll recordkeeping requirements with longer lengths of retention than the federal government.
Understanding the Fair Labor Standards Act’s (FLSA’s) laws on overtime is essential. Overtime is any time worked beyond 40 hours in a workweek. If an employee puts in overtime hours, you must pay overtime wages. Overtime wages are one and one-half times the employee’s hourly wages for hours worked over 40 each workweek. For example, if an employee earns $16 per hour and works three hours of overtime, they would earn a total of $72 in overtime wages ($16 X 1.5 X 3).
Benefits are an important part of an employee’s full compensation package. Fringe benefits include health insurance, educational assistance, and stock options. Fringe benefits can be taxable or nontaxable. Nontaxable fringe benefits are not subject to federal income tax withholding, FICA tax, or FUTA tax. The IRS determines the taxes that apply to different types of fringe benefits.
When bring on a new employee for payroll, employers need the individual’s Social Security Number, as well as completed and signed copies of Form I-9, Employment Eligibility Verification, Form W-4, Employee’s Withholding Certificate and State Withholding Certificate.