Review pay practices to avoid missteps and be compliant

Although the final federal overtime rule was halted from taking effect on Dec. 1, 2016 this might still be a good time for employers to take action.  The Fair Labor Standards Act (FLSA) changes were designed to address salaried employees’ pay threshold and overtime.  Although the future of the overtime rule is uncertain, employers may still want to review their pay practices, particularly in the areas listed below.

Hourly employees

Travel time – Hourly employees that spend time traveling for work (other than normal home-to-work travel) must be compensated for these hours as regular hours worked and should be counted as such when determining overtime.  Travel to a distant location and/or overnight travel becomes more complicated and a policy should be in place to address this.

Breaks – Company provided breaks for employees are not required by law (there are exceptions in some states for minor employees).  If provided, breaks of 5 to 20 minutes are considered compensable, and an employee’s pay should not be reduced.  Bona fide meal periods (typically lasting at least 30 minutes), serve a different purpose than coffee or snack breaks and, thus, are not work time and are not compensable.

Salaried employees

Misclassification –  To qualify for overtime exemption, employees must meet certain tests regarding their job duties and be paid a salary basis of not less than $455 per week (at the current time.)  Job titles do not determine exempt status.  For an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s regulations.  Many employers run into trouble when the job duties test is applied.  Details of these exemption tests can be found here: http://www.flsa.com/coverage.html.

Docking – There are very limited situations in which a salaried employee’s pay may be docked or reduced.  Pay may not be docked or reduced for a partial-day absence.  Additionally, full-day absences of one or more days must be paid unless the absence is for personal reasons other than illness or disability.

Neither an hourly or salaried employee’s pay can be reduced for company property damage or loss unless the employee has authorized such a deduction in writing.

 

Common pay practice missteps are often made in these areas.  There are many non-compliant practices that are widely followed, particularly some that appear to be industry specific.  However, this rationale will not protect an employer from being responsible for back pay and penalties when a wage-and-hour claim is filed or a Department of Labor investigator shows up at the door.

Concerns?  The professional staff at BCN can review your current practices, make recommendations, and help you to plan and communicate any changes in pay practices to employees.

 

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Sue Kester, HR Manager

 

State tax reciprocity: What it is and how it can affect your employees

If you have hired, or are thinking of hiring, employees who live in a state different than your worksite,you should be aware of the tax implications.

Many states have entered into tax reciprocity agreements with surrounding states, allowing employees to pay state tax for only the state that they live and not for the state in which they work.  For example, Michigan and Indiana have a reciprocal agreement so if your worksite is in Michigan and you hire an employee living in  Indiana, the new employee would pay only Indiana income tax.

If there is no reciprocal agreement between states, an employee would pay taxes for both the state they live and the one they work in.  For example, the state of New York has no state tax reciprocity, so an employee working in New York state and living in nearby New Jersey is responsible for paying taxes in both states.  We always encourage employees in this situation to consult a tax professional, as there are still many states without tax reciprocity agreements that offer tax credits with the employee’s year-end tax filing.

Employees responsible for incorrect tax deductions

Being aware of current reciprocity agreements as well as future changes is incredibly important as an employer.  Employees with taxes incorrectly deducted can be charged not only the taxes owed, but for fees and penalties as well.  This can lead an employee to have a negative experience within your company.  Conversely, having the knowledge base of state tax reciprocity can not only help in producing an accurate payroll, but also helps you to answer employee questions confidently and hire new employees with ease.

For easy reference, here is a chart with information sourced from the American Payroll Association detailing current state reciprocity agreements. If you would like more information or have any questions, give BCN Services a call at 1-800-891-9911.

 

State Reciprocity Grid (Updated November 16, 2016)
Worked-In State Reciprocal Lived in States
District of Columbia Any Other US state
Illinois Iowa, Kentucky, Michigan, Wisconsin
Indiana Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin
Iowa Illinois
Kentucky Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, Wisconsin
Maryland District of Columbia, Pennsylvania, Virginia, West Virginia
Michigan Illinois, Indiana, Kentucky, Minnesota, Ohio, Wisconsin
Minnesota Michigan, North Dakota
Montana North Dakota
New Jersey Pennsylvania
North Dakota Minnesota, Montana
Ohio Indiana, Kentucky, Michigan, Pennsylvania, West Virginia
Pennsylvania Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia
Virginia District of Columbia, Kentucky, Maryland, Pennsylvania, West Virginia
West Virginia Kentucky, Maryland, Ohio, Pennsylvania, Virginia
Wisconsin Illinois, Kentucky, Michigan

 

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Dani Austin, Payroll Supervisor

Taxable wage base for Social Security to increase in 2017

Each year, the Internal Revenue Service determines whether or not the limit on Social Security taxable wages will increase.

The Social Security Administration determines this annually by calculating the national average wage index.  In 2017, SSA will increase the taxable wage base from $118,500 to $127,200 for both employee and employer.

What does this mean to employers?  In 2016, an employer paid $7,347.00 for each employee that reached the wage cap and 2017, employers will pay $7,886.40, an increase of $539.40 per employee.

Employees at the wage cap will also see an additional $539.40 deducted from their checks.  It is important to note that employees potentially affected by this change should be notified in advance of the effective date of Jan. 1, 2017.

More information online:

  • For a look back at the increases over the years and for more about the contribution and benefit base visit the Social Security website at ssa.gov/OACT/COLA/cbb.html .
  • For a history of the taxable maximum, the rationale for the changes and how the SSA arrived at today’s process, visit www.ssa.gov/policy/docs/policybriefs/pb2011-02.html

If you have questions about how your employees are impacted by Social Security deductions, contact the experts at BCN Services for assistance.

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Amber Heckaman, Senior Staff Accountant

How to address concerns when moving an employee from salaried to hourly

With upcoming changes increasing the federal annual wage minimum taking effect December 1, 2016 there may be some anxiety or discontent with some of your employees who will be moved from exempt (salaried) status to non-exempt (hourly).

The annual wage minimum requirement for salaried/exempt status will change from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) under this legislation.

When moving employees to an hourly classification under the new regulations, it’s helpful to understand the employee’s perspective.  Although the intent of the Fair Labor Standards Act is to protect employees from being overworked and underpaid, many employees perceive an hourly classification as having a lower status compared with those classified as salaried.

In delivering this message, here are a few tips that may ease their concerns:

  • When explaining the reclassification, explain that this change is based solely on legislation enacted by the U.S. Congress and has nothing to do with their job performance. Assure them that this is not a demotion, but a pay reclassification.  Explain to them that the change to hourly status is intended to assure that they are paid for overtime hours they work.
  • There also will be an adjustment phase. Employees that are now salaried may not be used to tracking their work hours or using a time-keeping system.  It is important to stress that this will be the new norm and that they must report all hours worked, including work from home whether via remote web or phone calls.
  • Each company will have different interpretations of flexibility in the workplace, but if your employees are used to a certain level of flexibility when with their schedules, you may want to continue that practice. Explain to them that they will have the same flexibility for doctor’s appointments, long lunches with an old friend, or leaving early on a Friday during the summer.  Make it clear that when they work 40 hours for the week, their weekly pay will remain the same.  But be sure they understand that if they do not make up this flexible time, their check will be less.
  • Keep an open door policy with your employees to address their concerns. It’s a good idea to map out potential paths for them to move into positions that remain salaried positions.  Help them understand what those positions are and direct them towards achieving their goals so they are able to move into those jobs.  While doing so, however, be sure to stress that their value and responsibilities within the company in their current position has not changed.  Only their pay structure has.

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Frank Lewandowski, PHR, SHRM-CP

I-9 Compliance: How much is it costing you?

The federal Form I-9 is deceptively simple, yet crucial in every new hire process. The form is designed to help employers verify the identity and certify that each employee can legally work in the United States. Can you imagine being fined hundreds of dollars because an employee forgot to sign or date it? Multiply one mistake by hundreds or thousands of employees and the result is a huge burden for business owners who fail to realize the importance of properly completing the I-9.

The U.S Immigration and Customs Enforcement, referred to commonly as ICE has been hitting companies hard with I-9 audits recently, and there is no sign of them slowing down. According to a recent Associated Press article, audits of employer I-9 forms increased from 250 in 2007 to more than 3,000 in 2012, and this number will likely continue to grow. ICE handed out more than $13 million in fines in 2012 based on violations discovered during these audits.

The USCIS states that fines for improper completion and retention and not making I-9 documents available for inspection range from $100 to $1,100 for each I-9. Fines for purposely hiring or continuing to employ unauthorized employees range from $250 up to $11,000 per offense. Employers who show a continued pattern of hiring unauthorized workers are liable for criminal penalties of as much as $3,000 per employee and may be subject to a minimum prison penalty of 6 months.

All companies, regardless of size, state, or industry, are subject to an ICE I-9 audit. A large clothing retailer reached a settlement with ICE of more than $1 million dollars in fines regarding I-9 documentation violations discovered during a 2008 audit. A drywall company was fined $173,250 for 225 separate I-9 paperwork violations. Additionally, a worldwide staffing company has been fined $227,000 in civil fines for improperly completing the Form I-9.
As you can imagine, these fines have greatly impacted companies worldwide, and could have been prevented with proper training and knowledge.  So what can a business do to properly protect itself?

The rules around I-9 forms can be very specific and sometimes confusing. As your trusted HR partner, BCN takes pride in ensuring our clients are in compliance, and trained properly in the I-9 paperwork procedures, avoiding the headache and stress of massive fees and penalties. If you have any questions or would like more information about  Form I-9, contact your HR specialists at BCN Services.

 

 

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Taylre Reed, Partnership Manager

New overtime exemption rules enter final review stage

After months of speculation, the U.S. Department of Labor (DOL) advanced its final draft of new requirements for overtime pay exemption rules to the Office of Management and Budget (OMB) on March 14, 2016.

This step marks the final stage before implementation as OMB completes its review and releases the new regulations. The OMB’s review phase may take up to 90 days, but approval may occur sooner. While it is difficult to pinpoint a timetable, experts are forecasting the release for June or July 2016 and implementation on or about September 2016.

So what should employers do now? First and foremost, begin planning. Taking a wait-and-see approach may be appealing, but there are strategic planning steps which should be taken now:

Understand the proposed new rules

  • The standard salary test amount changes. Qualifying employees must be paid at least $970 per week ($50,440 annually) under the new rules to be exempt from overtime pay. The current minimum is $455/week ($23,600 annually)
  • A provision would increase the salary test level on an annual basis. This adds to to current regulations and adds a formula by which the salary test will be increased each year, indexed to inflation
  • For highly paid employees, the total compensation threshold will increase from $100,000 to $122,128,and these levels would also be increased each year
  • Another change under consideration is the duties test, establishing a minimum amount of time an employee may perform exempt vs. non-exempt tasks and identifying a minimum amount of time for a duty to be considered a primary duty. Although the proposed rule does not offer specific changes, there has been discussion about making this change in the new rules.

Analyze your current positions and exempt classifications

  • Identify positions and employees who may be reclassified from exempt to non-exempt
  • Evaluate the need and frequency of each position to work more than 40 hours per week
  • Redesign pay structures and determine new pay rates.
  • Review other policies (including benefits, bonuses, schedules, overtime approval) and how they will apply to those who will be newly classified as non-exempt.

Build a communication and training plan

Focus on:

  • Newly classified non-exempt staff
  • Supervisors and Managers
  • Others within the organization

Evaluate non-exempt status changes on an ongoing basis

Look at potential impact on:

  • budgets in current and future year
  • schedules and workload
  • HR policies and practices

Also, consider additional training that might be required.

For more, see the U.S. Department of Labor website.

 

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Susan Price, Strategic Account Manager

Consider impact of daylight-saving time for hourly worker

Many people are familiar with the axiom “spring forward and fall back” to help them remember in which direction to change the clock during daylight-saving time transitions.

However, questions may linger for employers about pay practices for those employees that are “on the clock” during the time change.

Non-exempt employees, who are generally paid on an hourly basis, are entitled to be paid for the hours they actually work. For example, in the fall when employees may only be scheduled for an eight hour shift but end up working nine hours due to the time change, they must be paid for nine hours. In the spring, if a normal work schedule constitutes eight hours, but the employee works only seven hours due to the time change, the employer need only pay seven hours of time worked.

Some companies may decide to pay a full eight hours so that their employees don’t lose regularly expected compensation, but there is no obligation for them to do so.

Employers and scheduling supervisors should not “balance out” time over the year in which an employee works during the time change in the spring and in the fall. Hours should be paid within the time period in which they are worked.

Other questions about compensation or pay practices? Our professional staff at BCN can help. Call us at 800-891-9911 if we can assist you and your business.

 

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Sue Kester, HR Manager

Federal government decreases Standard Mileage Rate for 2016

The federal government has decreased the allowable per-mile reimbursement for employees who drive their vehicles for business and using their vehicles for medical care and moving expenses.

Employers may reimburse their employees for operating an automobile for business, charitable, medical, or moving expense purposes. They can calculate those reimbursements using a variety of methods including: travel days, miles, or the fixed-rate allowance.

Each year the Internal Revenue Service evaluates the Standard Mileage Rate to determine whether the rate is reasonable based on driving costs and whether the rate should be increased, decreased or remain the same. The IRS takes into account costs such as the price of gasoline and oil and other expenses including insurance and repairs.

New published rates include:

  • The standard business mileage rate for auto expenses has decreased to 54 cents per mile for 2016 (from 57.5 cents per mile in 2015).
  • The rate for charitable uses remains the same at 14 cents per mile.
  • The rate for driving for medical care has decreased to 19 cents per mile for 2016 (from 23 cents per mile for 2015).
  • The rate for deductible moving expenses using an automobile has decreased to 19 cents per mile for 2016 (from 23 cents per mile for 2015).

The maximum standard automobile cost under a fixed-and-variable-rate (FAVR) allowance method has decreased from $28,200 for 2015 to $28,000 for 2016 (excluding trucks and vans). The standard cost under a FAVR allowance for trucks or vans has increased from $30,800 for 2015 to $31,000 for 2016.

If the allowance paid to an employee exceeds the amount allowed by the federal government, the excess amount must be reported as wages and is subject to income tax withholding and payment of Social Security, Medicare and federal unemployment taxes.
For more about “Business Use of Car,” visit the IRS website at: https://www.irs.gov/taxtopics/tc510.html or contact the experts at BCN if we can answer your employment questions, including those about employee reimbursement policies and current guidance and legislation.

 

 

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Susanna Achatz, Payroll Manager

Minimum wage laws continue to be a hot employment topic

BCN Services is a full service Human Resources partner, and one of the ways we help keep our clients compliant is to ensure they are updated regarding changes in the minimum wage laws in their state and or localities. The minimum wage and tipped wage requirements are among the main topics of discussion amid the current political and economic news cycle.

BCN has updated all our clients affected by the recent changes in Minimum and Tipped wages throughout the country. We are also supplying updated compliance posters to all our customers affected by the changes.

Inform yourself about minimum wage levels

How much do you know about the minimum wage and tipped wage levels in the U.S.?

The federal minimum wage has not increased since 2009, although many states have adopted new, higher minimum wage standards. The current federal minimum wage is $7.25 per hour and $2.13 per hour for tipped workers.

There are 7 states currently with either no minimum wage or a minimum wage rate listed below the federal rate. In these states, states the federal minimum wage applies. They include:
Alabama, Georgia, Louisiana, Mississippi, South Carolina, Tennessee, and Wyoming.

Twenty three local municipalities have adopted minimum wages above their state minimum wage. They are: Albuquerque, New Mexico; Berkeley, California; Bernalillo County, New Mexico; Birmingham, Alabama; Chicago, Illinois; Emeryville, California; Las Cruces, New Mexico; Louisville, Kentucky; Montgomery County, Maryland; Mountain View, California; Oakland, California; Palo Alto, California; Portland, Maine; Prince George’s County, Maryland; Richmond, California; San Francisco, California; San Jose, California; Santa Clara, California; Santa Fe City, New Mexico; Santa Fe County, New Mexico; SeaTac, Washington; Seattle, Washington; and Sunnyvale, California.

The following states have increased their minimum wage in the past 6 months. The old minimum wage is in parentheses. All wage rates noted are per hour.

Michigan – effective January 1, 2016:

Minimum Wage: $8.50 ($8.15)
Tipped Wage: $3.23

Note: Michigan also has scheduled increases with annual indexing beginning April 1, 2019:
January 1, 2017 – $8.90
January 1, 2018 – $9.25

Other states include:

Alaska – effective Jan., 1 2016
Minimum Wage: $9.75 ($8.75)
Tipped Wage: $9.75

Arkansas – effective Jan. 1, 2016
Minimum Wage: $8 ($7.50)
Tipped Wage: $2.63

California – effective Jan., 1, 2016
Minimum Wage: $10 ($9)
Tipped Wage: $10

Colorado – effective Jan. 1, 2016
Minimum Wage: $8.31 ($8.23)
Tipped Wage: $5.29

Connecticut – effective Jan. 1, 2016
Minimum Wage: $9.60 ($9.15)
Tipped Wage: $6.07

Hawaii – effective Jan. 1, 2016
Minimum Wage: $8.50 ($7.75)
Tipped Wage: $8.50

Massachusetts – effective Jan. 1, 2016
Minimum Wage: $10 ($9)
Tipped Wage: $3.35

Minnesota – effective Aug. 1, 2015
Minimum Wage: $9 ($8)
Tipped Wage: $8

Nebraska – effective Jan. 1, 2016
Minimum Wage: $9 (8)
Tipped Wage: $2.13

New York – effective Dec. 31, 2015
Minimum Wage: $9 ($8.75)
Tipped Wage: $7.50

Rhode Island – effective Jan. 1, 2016
Minimum Wage: $9.60 (9)
Tipped Wage: $3.39

South Dakota – effective Jan. 1, 2016
Minimum Wage: $8.55 ($8.50)
Tipped Wage: $4.28

Vermont – effective Jan. 1, 2016
Minimum Wage: $9.60 ($9.15)
Tipped Wage: $4.80

West Virginia – effective Jan. 1, 2016
Minimum Wage: $8.75 ($8)
Tipped Wage: $2.63

BCN will continue to keep you up to date and in compliance with all federal, state and local laws. By allowing BCN to handle your administrative functions, as well as your Human Resources needs, you can continue to focus on your business’s bottom-line results.

Contact BCN Services today to learn more about our programs.

Direct deposit has many benefits over a traditional, paper paycheck

Employees come to work every day for many reasons, but the one day that all employees look forward to is payday. How employees receive their wages on payday can impact both the employer and the employee.

Although there are other options, the most common methods of payment are either by check or direct deposit.

By encouraging employees to sign up for direct deposit, employers eliminate the risk of lost/stolen checks, altered checks, and checks that are never cashed. Employers that have 100 percent of their employees signed up for direct deposit will increase efficiency throughout the workplace.

Employees that choose to receive a live check are at a disadvantage. Although they may receive their check on payday, they must take time out of their day to obtain their check, take it to the bank and cash or deposit it. Depending upon where the employee banks, there may be a waiting period before the funds are available for use.

On the other hand, direct deposit for employees:

• Allows them to receive their pay sooner. It automatically goes into an employee’s bank account, even if they are on vacation or away from the office
• It saves them from making a trip to the bank and allows easy, faster access through electronic transfer, making things like online banking easier
• Safeguards against forgery and theft which are possible with paper checks
• Allows employees to select more than one account in which to distribute their pay. An employee can put some money into savings and some into a checking account, for example.

If you have questions about direct deposit or other payroll matters, please call BCN Services at 734-994-4100 or toll free at 800-891-9911.

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Susanna Achatz, Payroll Manager