Categories
Payroll Tools

A Roadmap to Payroll Certifications (CPP and FPC)

  • The American Payroll Association (APA) has two general payroll certification programs
  • A Certified Payroll Professional (CPP) designation can be earned by those working in payroll for several years
  • The Fundamental Payroll Certification (FCP) generally is available for those who are new to payroll
  • To retain certified status, both designations require approved continuing education

Shortly after the American Payroll Association was formed In the early 1980s, an effort began to educate and elevate those working in payroll through a certification program. The purpose behind this push was to lend some legitimacy to payroll becoming a professional career track with specialized knowledge needed to understand the key functions and master the operations.

Two certification programs for payroll professionals

Nearly 40 years later, the APA oversees two types of certification programs and tests: the Certified Payroll Professional, or CPP, and the Fundamental Payroll Certification, or FPC. 

The APA has developed other certificate programs geared toward specific aspects of the payroll function, and there are certificate programs, including payroll, in several colleges and universities, but there are no other widely available general payroll certifications in the United States. One cannot yet get a four-year college degree in payroll.

Canadians have their own certification exam process through the Canadian Payroll Association, and there are similar designations and degrees that payroll professionals can achieve in the U.K. and in other countries.

To become a Certified Payroll Professional

To earn the CPP designation, individuals are required to meet two experience criteria and pass a four-hour exam. The first criteria allows those to take the exam if they have worked in payroll for three of the past five years, and there are definitions for qualified payroll work. 

The second criteria requires at least 24 consecutive months of work in payroll and the completion of a set of courses before taking the exam.

Then the 190-question exam can be scheduled and taken. It is recommended that those desiring the CPP designation do some preparatory training. The exam covers seven key areas of payroll, including core payroll concepts, compliance, calculation of pay, payroll systems, payroll management and administration, audits and accounting. 

While the APA provides extensive study material, local APA chapters throughout the country also conduct CPP-related training classes. 

Recent APA statistics show that approximately 50% of those taking the CPP exam pass and become CPPs. 

The designation is effective in five-year increments, and it can be renewed by participating in continuing education through programs that offer Recertification Credit Hours (RCHs), the APA’s version of CLEs for legal continuing education, or CPEs for certified public accountants. The APA allows some payroll-related curriculum with CLE and CPE designations to be converted to RCH equivalents.

Should an individual fail to show an accumulation of 120 RCHs after five years, they can lose their CPP designation and, to get it back, they may need to take the CPP exam again. 

Since the first CPP test was developed in 1985, there are now more than 11,000 active certified payroll professionals, according to the APA. 

More information on CPP eligibility and the exam is available on the APA website.

The Fundamental Payroll Certification program

The first FPC designation was developed in 2000 as a way for the APA to recognize those who may be new to the payroll field or who are working in some areas of payroll but are not working directly as payroll professionals. This includes sales professionals/consultants serving the payroll industry, systems analysts/engineers supporting payroll systems, and payroll service provider client representatives.

Candidates are allotted three hours to complete the 150-question exam that covers the same seven key areas of payroll that are included in the CPP exam. 

Approximately 75% of those taking the FPC exam pass, according to recent APA statistics. There are now more than 7,000 FPC’s.

More information on FPC eligibility and the exam is available on the APA website.

Both exams are available over a four-week period in the fall and spring and, starting in 2020,  exams have been proctored remotely.

Categories
Payroll Trends

Payroll 2021: Out and In

The forces of change continue to dominate payroll, and 2021 will see even more changes for employers in how they handle worker pay. PayrollTimes.com’s exclusive “out and in” for 2021 gives practitioners a glimpse at what is going away as the new year starts, and what will come into play as 2021 progresses.

However, many key payroll-related numbers for 2021 will remain the same as 2020 (although there always is the possibility that legislative changes could impact these as well in 2021). The elective tax-free deferral limit for 401(k)-type programs ($19,500), for example, remains the same as in 2020, as is the over-50 additional catch-up amount ($6,000). 

Other figures that remain the same are: flat tax rate on supplemental wage payments (22%; 37% once $1 million in supplemental wage payments is reached); the general tax rates for individuals remain the same in 2021 as 2020 (10%, 12%, 22%, 24%, 32%, 35%, 37%); the Social Security payroll tax rate stays at 6.2% up to the new wage base (see below); Medicare/Hospital Insurance tax rates remain the same as well at 1.45% for most and 2.35% for individuals with incomes generally higher than $200,000, once that amount has been reached for the year.

But, beyond that, here are the major things in payroll that are going “out” and coming “in” in 2021!

OUTIN
Working at Home Office/Home work blend
New Form W-4New Form 941X
State/Local Withholding Based on Company Sites Where Employees Worked State/Local Withholding Taxes Based on Where Employee Works Remotely
COVID-Related Employment Tax Credits Under March 2020 CARES ActClaiming Past Credits
Social Security Tax Deferrals Under CARES Act and President’s OrderAdditional Social Security Tax Payments
COVID-Related Mandated Paid Time Off Under March 2020 FFCRA LawGenerally Mandated Paid Time Off
Paycheck Protection Program Under March 2020 CARES ActPaycheck Protection Program Audits
Suspended Withholding on Student LoansNew Student Loan Withholding Orders
COVID-Related Emergency Unemployment Higher Unemployment Tax Contributions
Social Security Wage Base = $137,700 Social Security Wage Base = $142,800
Standard Business Mileage Rate = 57.5 cents-per-mile Standard Business Mileage Rate = 56 cents-per-mile
Employees Accessing Pay on PaydayEarned Wage Access/On-Demand Pay
Manual ReconciliationsAutomated Reconciliations

Total Defined Contribution Tax-Free Limit = $57,000

Total Defined Contribution Tax-Free Limit = $58,000

Form 1099-MISCForm 1099-NEC

Where to go from here

As in 2020, the payroll professionals who kept a good deal of the economy going despite illnesses, lockdowns, and social and political upheaval can expect more of the same for much of 2021. 

Although most see a light at the end of the tunnel for 2021, those in payroll will need to stay focused on their commitment to process accurate and timely pay under continued trying circumstances, just like the general public is being urged to stick with personal protection protocols until the infection curve declines.

Categories
Payroll Tools

Time Saving Tips for Your Payroll Team

A career working in payroll is challenging and sure keeps you busy. We know!  So here are some tips to help keep you on track and save time!

Make sure all your employees’ information is accurate

There is nothing more frustrating than going to process payroll and having the wrong information for an employee. Confirm every new employee’s information before you process their payroll so that you don’t have to go back to them on payday for the correct information. Here is what you will need:

To begin, you will need the following items:

  1. Your company legal name, DBA (if applicable), and company address
  2. All of your tax ID numbers, including:
    • Your federal employer identification number (EIN)
    • Your state tax withholding ID number
    • Your local tax ID numbers (if applicable)
  3. Your state unemployment (SUTA) account number and SUTA rate for your company. Note: Your state unemployment agency may send your SUTA rate determination in a separate letter. This rate is based on your industry and your company’s individual claim history for unemployment.
  4. All employee information*, including :
    • names
    • addresses
    • Social Security numbers
    • tax filing status
    • details on current deductions & contributions
    • (*This can be found on the W-4 form filled out by your employees.)
  5. The pay rate and pay frequency (weekly, biweekly, etc.) for all employees.
  6. All payroll registers for the current year, by pay date.
  7. All employer taxes for the current year, by pay date.
  8. Copies of all tax filings for current year (i.e. 941, state & local tax returns, SUTA).

Have a checklist

Make a list of the things you need to do to process payroll accurately and on time. This will save you time and streamline the process. 

Here are some items you might want to include on your list:

  • Collect time and attendance efficiently
  • Enter payroll information in your system
  • Process the payroll
  • Provide pay stubs, whether you pay employees in person, through the mail or with direct deposit
  • Tabulate taxes if your system doesn’t do this for you
  • Double check your information to ensure accuracy 

Keep your records organized

While this is typically a job for HR employees, there are files you may need to access as a payroll professional. This will allow for efficiency if changes need to be made in your system. Each employee should have a file that contains all of their payroll information. 

The following information about your employees is what you, as a payroll professional, should be able to access quickly. 

  • Employee identification number
  • State and local tax ID numbers
  • State unemployment ID number (most states require this)
  • Employee addresses, phone numbers and email addresses
  • Social security numbers
  • I-9 forms
  • W-4 forms

You should also carefully organize and be able to easily access:

If you are looking for more information about what these files should look like and include, take a look at this article by ADP.

Find a payroll software provider that works best for you

There are so many different payroll processing platforms out there. Some of these platforms, like Gusto, QuickBooks or Patriot are better for small businesses. Some payroll platforms are effective for all business sizes. 

Automate Payroll 

When processing payroll, try to automate as many processes as possible, using one of the payroll platforms mentioned above. Manual work creates a greater margin for human error. Not only does this cause mistakes that could create issues for the company, manual work is a waste of time for you! Automating as many aspects of payroll as possible will save time and money for you and your employer. For more information about how to avoid payroll errors, take a look at this column from the Journal of Accountancy.

Use direct deposit

Using direct deposit can save you tons of time and money. There are great benefits of direct deposit. Here are just a few of them:

  • Reduces worry about losing paper checks
  • Allows employees to access funds right away
  • Better for the environment
  • Increased security because no paper checks are changing hands

Some savings that you will realize from using direct deposit for payroll are:

  • Reduced payroll-processing time 
  • Decreased check fraud
  • Less time away from work for employees (they do not need to leave work to deposit checks)

If you are interested in learning more about the benefits of direct deposit, the NFIB has a detailed article about this.

Double check your work

For aspects of your payroll system that are manual, make sure to double-check your work. You can’t entirely avoid human error, but you can try! Just as a copywriter proofreads what they write, proofread your input into the payroll system to avoid errors.

Hopefully, some of these tips will help free up some time in your busy schedule as well as help you to work more efficiently in the long run.

Categories
Payroll Service

Choose the right payroll service provider with this basic framework

When it comes to running payroll, timeliness and accuracy are of the utmost importance. If you have an employee who receives her pay late or finds mistakes in her paystub, you can bet your bottom dollar that you’ll hear about it and have to work quickly to resolve the issue. Late or incorrect tax forms aren’t much fun to deal with either.

According to Business News Daily, one way to minimize risk and error is by using software to help you process payroll, calculate and file payroll taxes, generate payroll tax statements, and more. But with so many players in the space, choosing the right payroll service provider can be overwhelming. It can be made simpler with some basic considerations, including:

  • Price: For most companies, price is an important consideration when choosing any sort of outside vendor or software. Payroll systems can be very complicated, and pricing often depends on how many features or add-ons your team will use. Researching payroll service provider websites is a great place to start, but some large providers may require a sales call in order to better understand your needs and provide a quote.
  • Support: According to the U.S. Chamber of Commerce, customer support for a payroll service can be even more important than for software! Choosing a vendor with positive customer support reviews can help to save you and your IT team future hassles.
  • Security: Your payroll service provider will have access to your employees’ most sensitive personal information, including their bank account details and other personally identifiable information. It pays in the long run to pick a provider that encrypts information and safeguards it against bad actors. Carlos Rodriguez, president and chief executive officer of ADP, has said that ADP has a focus on “delivering market-leading, cyber resilient HCM solutions to clients who view [ADP] as a partner they can trust (source).”
  • Compliance: When it comes to running payroll, compliance is a top priority. In fact, the IRS recently reminded businesses to carefully choose their payroll service providers following continuing concerns that some disreputable organizations fail to deposit employment taxes, leaving businesses vulnerable to unpaid bills.
  • Experience: While every company is unique, choosing a vendor that has worked with similar companies to yours can help to ensure that they’re equipped to meet your business needs. Ask your potential payroll provider if the company serves similar clients to your business and check out reviews online to see how well they’ve serviced comparable organizations, or ask to speak with a reference!
  • Fit-Gap Analysis: Does the application have the right attributes to fit with what your organization needs done in payroll? Identify necessary tasks within your organization and ensure that the provider can fit the bill.

Add-ons, integrations and partnerships (oh my!)

While the considerations above provide a basic framework for evaluating payroll software companies, there are other features you should keep in mind if you want to ensure you’re getting the most innovation from your payroll provider:

  • Integrations and add-ons: Some companies will see real benefits from using specific payroll features or add-ons. The U.S. Chamber of Commerce suggests asking yourself: Do you have an existing suite of programs that demands careful integration? Does your company work in a heavily regulated vertical that might require sophisticated software? Selecting a payroll provider that can seamlessly integrate can save you time and money if this is the case.
  • Partnerships: Another way service providers scale out to include more services in their offerings is by partnering with other outside vendors who have been vetted as best-in-breed for particular applications, such as on-demand pay. These partners generally are included because they have a higher level of expertise and application experience in that particular service than the main payroll service provider can offer itself. Ensure these partner tools are compatible with any service provider software, allowing the additional application to be portable in the event a client chooses to make a change in their HCM or payroll processing vendor .

The bottom line

At the end of the day, every company is unique. The “right” payroll vendor for one company might not make any sense for another. Choosing a provider that has experience working with companies like yours, at a reasonable price point and with a commitment to compliance will help to ensure that you have a positive experience with your vendor.

Categories
On Demand Payroll

Top 3 Challenges of Off-Cycle Payments and How to Fix Them

Off-cycle payments are a bit of a necessary evil for payroll professionals. Whether you have to issue a bonus, provide termination pay or correct a payroll error, off-cycle payments are stressful, time-consuming and an all-around pain to deal with. Let’s explore the top three challenges that come along with these annoying little outliers and how best to handle them:

1) Off-cycle payments can create a lot of administrative burden.

You have your routines and processes in place. You live and breathe by deadlines, schedules and tight organization. And then off-cycle payments pop up along the way, totally disrupting your flow. It’s the worst! Sure, you want to make sure bonuses get into the hands of deserving employees and that you correct any errors you or your team may have made when processing payroll, but doing so off-cycle can grind your workflows to a screeching halt and add many tiny tasks to your to-do list.

 

So how can you ensure that employees get the money that’s owed to them in the most efficient way possible? Many companies have implemented policies to reduce the administrative burden of off-cycle payments. For example, a company policy might be that if a payroll error was only a certain small percentage of an employee’s paycheck, the remainder will simply be included in the next paycheck. Bonus checks may also be included within regular paychecks, as long as they are taxed carefully and correctly. See what works best for your team and your employees so you can create policies to make these processes as efficient as possible.

 

2) The costs of paper and overnight postage can really add up.

 

Since 93% of U.S. workers now receive their pay through direct deposit, so many of us forget how much paper and postage can cost, especially when you’re dealing with a large number of employees. One advantage of life in the digital age is that we are greatly reducing the amount of paper we consume as a culture. However, some off-cycle payments require you and your team to overnight checks via mail to employees or ex-employees.

 

Many states require termination pay to be submitted to the employee within 24 hours. Not only does that create a fire for you to put out, it also can be very expensive to mail, costing an average of $12-50 dollars per check. To cut down on these costs, which can easily be upwards of $50,000 annually, many companies are adopting digital payment solutions that have off-cycle payment technology built in. Not only do these new systems make it possible to send payments at the push of a button, they also eliminate the need for your employees to have to cash a paper check at their bank or check-cashing establishment, saving them time and money as well. You’ll also be saving a few trees in the process! These digital solutions are a win-win for you, your employees and the environment.

 

3) “Snail mail” leaves room for human error and other disasters.

Let’s face it. No matter how much we love and appreciate our mail carriers, there are still a lot of risks associated with sending off-cycle payments the old-fashioned way. We’ve all had those instances where we’ve mailed something and it was never received, or it came back to us with one of those frustrating “Return to Sender” stamps. Not only can things get lost in the mail, but the possibility of them being sent to the wrong address can cause even more issues. The last thing you want to worry about is re-issuing a payment that you’ve already sent out and having to pay for postage all over again!

 

A great solution to avoid this problem as much as possible is to send out periodic contact information requests to all employees. Having the most up-to-date information for their phone numbers, addresses and even emergency contacts can truly save the day in more ways than one. Keeping those records as meticulous as the hand-written address book your mom or grandma used can help you save time, issue off-cycle payments quickly and efficiently, and keep your processes as compliant as possible.

 

This year, the pandemic added another layer of worry, as paper mail is another thing that can potentially carry the COVID-19 virus. To avoid any potential risk associated with paper mail, discourage employees from interacting with their mail carriers up close, and encourage them to disinfect paper mail before opening it and to wash their hands afterwards. That way, you know you are helping them be as safe and germ-free as possible.

 

Do you have more “pro tips” on how to reduce the headaches associated with off-cycle payments? Please feel free to share your ideas below!

Categories
Payroll Trends

Payroll Trend for 2021: Remote Workers

Taxing remote work in 2021

  • Employers forced to address multistate tax-withholding issues
  • Taxing states have patchwork of requirements
  • Some employers may need to register in new states
  • Country-wide solutions proposed, but resisted

How states with income tax requirements are addressing the confluence of workers who are working remotely in other states, maybe their state of residence, or maybe not, will continue to be an uncertainty into 2021. Many employers have been forced to reckon with the potential that they are liable for tax payments for employees outside of their assigned business location. 

Some states have issued temporary reprieves on requiring employers to set up tax withholding in a new jurisdiction (which will expire), others are holding down their existing requirements for taxing nonresidents and residents that had been working in other states, but are telecommuting in their state. These requirements vary from state-to-state and are extremely difficult to apply, especially when employees may not be informing their employer where they are working from. 

An additional corporate tax issue can arise when a single worker teleworking in one state can trigger a status of business-related nexus in that state for the company, subjecting it to corporate filing and tax requirements as a business entity in that state. 

There have been efforts in Congress to set standards for state approaches to taxing teleworkers and employees who cross state lines to work. These have met with much resistance from states that fear they will lose revenue if their policies are forced to change. Look for more impetus to address this issue in 2021.

Business expense considerations in 2021

  • Can reimbursed business-related costs incurred by teleworkers be taxable?
  • Employers need to apply necessary accounting processes for these expenses
  • Guidance prohibits salary replacement, details how exclusions from income work
  • Some states require employers to reimburse costs of doing business remotely 

Along the lines of telework issues that payroll will need to be aware of, there’s the issue of whether certain reimbursed expenses from employers to workers in their homes are taxable. Accounting for legitimate business expenses, so they can be excluded from tax as additional wages for workers, can be tricky. Generally, flat cash reimbursements and stipends need to be included as wages, while more deliberate payments that can be verified (through bills, for example) and are specific to an expense have a better chance of being excluded. The IRS has an extensive program that explains how some procedures to pay expenses qualify for favorable tax treatment, and some don’t. 

Further, in some of that IRS guidance, there are prohibitions on employers seeking to use some of these expenses to offset full salaries, or characterize the reimbursement payments as part of employee wages, discounting the amounts paid for those purposes from someone’s agreed-upon salary or even hourly wage. In an environment when many who remain employed are experiencing salary cuts, some may find it attractive to use business expense reimbursements to artificially fill some of the gap.

Finally, don’t forget that state laws may have a play here as well with business expense plans. California, for example, requires employers to reimburse employees for costs of their mobile phone plan if the employee is using the phone for business purposes. There may be more states passing such requirements in 2021.

Categories
Small Business

Top 6 Payroll Concerns for Small Businesses

There is plenty to worry about in a small business, but let’s not let payroll be your biggest concern! The following are six payroll concerns that you may have and what to consider when addressing them. 

Outsourcing Payroll

Outsourcing payroll has its pros and cons, but many small businesses do it because it’s easier than hiring a full-time person to manage paying employees correctly. Here is a great website that talks about outsourcing payroll.

Pros:

Experience and knowledge

Payroll professionals have vast knowledge of what payroll for a small business needs to include and how to be compliant with payroll laws and regulations.

Simple systems

Outsourcing payroll may reduce the need for internal payroll employees. Payroll vendors generally use systems that are easy to learn and process payroll quickly and accurately. You don’t want to mess around when it comes to paying employees. While you have to pay to outsource payroll, it’s probably a lot less than hiring an in-house person who only works on payroll. 

Cons:

Package Deals

Some payroll companies only offer package deals that small businesses may not need. This increases the cost of outsourcing payroll and includes services that aren’t often needed.

Liability

Sometimes payroll companies fail to pay taxes on time or correctly, and this usually ends up being a liability for the business owner instead of the payroll provider. 

Employee vs. Contractor

You or your business may be a contractor to another company, organization or even to an individual — that’s how a lot of small businesses operate. But what about your workers? 

A lot of small businesses bring workers on and decide they are contractors when they really are employees. 

On the surface, this saves the small employer from having to pay their share of Social Security and Medicare taxes (also known as FICA), unemployment taxes, and likely, workers’ compensation, to name just a few obligations employers have to their employees. Also, contractors generally are not covered by labor requirements. 

But, because these really are employees, subject to the control and direction of the small business, there can be exposure to devastating back taxes, severe penalties and lawsuits. 

Small business owners should rely on general tests to determine whether a particular worker is an employee or an independent contractor. For taxes, check out the guidance in IRS’s Publication 15-A on figuring out if your worker is an employee subject to federal income tax withholding, federal unemployment and FICA taxes. 

To help decide if your worker is subject to federal labor law, such as the Fair Labor Standards Act, see the Labor Department guidance on this matter.

Finally, states have their own criteria for determining if a worker is an employee for unemployment insurance and workers’ compensation purposes. Due diligence in clarifying  worker status can save a lot of headaches later on for small businesses.

Direct Deposit

Using direct deposit has become increasingly popular, with 93% of Americans using direct deposit in both small businesses and large businesses. Direct deposit typically does cost an extra fee, however, it’s a lot less costly than disbursing a paper check.There are many pros and cons to using direct deposit, and here is a website that goes into detail about it. 

Pros:

Saving time and money

With direct deposit, there is no longer a need to print and mail checks. Your employees will get their money much faster and you won’t be spending money on paper checks, envelopes or postage. Direct deposit can also help your employees save money. They can easily split part of their check and automatically send it to a savings account. 

Security

According to a Nacha survey, 83% of employees see direct deposit as more secure than paper checks. They don’t have to worry about their check getting lost in the mail or losing it themselves. Direct deposit checks are much less vulnerable to fraud. 

Environmental sustainability

Direct deposit is better for the environment! According to Wagepoint, a small business with 10 people that doesn’t use direct deposit and pays employees twice a month would use 10.7 pounds of greenhouse gases each year. That is the same as driving almost 40 miles in a car. Switching to direct deposit would reduce this number as well as the amount of solid waste and wastewater used.

Cons:

Security risks

While seen as much more secure than processing and delivering paper checks, using direct deposit comes with having to provide sensitive information. If your small business doesn’t have proper online security measures in place, there is the risk that this sensitive information can be hacked. 

Risk of overdraft fees

Since direct deposit sends money to your employees automatically, you risk overdraft fees if the account is not properly funded. If there is an insufficient amount in the account that direct deposit payroll comes out of, this will cost you extra money. Paper checks allow for more control over this. 

Paid Time Off

Giving employees paid time off can be stressful for small businesses that have limited time and resources. Many small businesses are already stretched thin, making it difficult for employers to give paid time off. However, this is something that employees look for. There are federal and state laws that require employers to give a certain amount of paid time off. Workful.com is a great resource for those looking to see what they need to give their employees in terms of paid time off. 

Pay Satisfaction

With resources stretched thin for many small business owners, it can be difficult to keep employees satisfied with their pay. Unfortunately, about 43% of small business employees are dissatisfied with their compensation. This website talks about many ways to keep your employees happy without having to give them raises. Some of these ways include:

  • Celebrating special occasions and accomplishments
  • Allowing for flexible schedules
  • Giving performance-based annual bonuses

Exempt vs. Nonexempt Employees

Deciding how to classify your employees can be tricky. The main difference between exempt employees and nonexempt employees is that nonexempt employees are eligible for overtime pay. 

Nonexempt Employees

Nonexempt employees are covered by the Fair Labor Standards Act. They must be paid time and a half for any time worked over 40 hours in a week. Nonexempt employees are typically paid hourly.

Exempt employees

Exempt employees are not covered by the Fair Labor Standards Act and are not eligible for overtime pay. Typically, these employees are salaried. They are not limited to 40 hours a week, something that many small business employers find advantageous. They need to make at least $684 a week to be considered exempt. 

This is a great website that can give you more information on this topic. 

You have a lot to think about when managing a small business. Hopefully this helps make payroll one less thing you have to worry about!

Categories
Payroll Service

4 Compliance Concerns That Keep Payroll Professionals Up at Night

Let’s face it: as a payroll professional, you have a lot of worries associated with your job. The payroll department is the backbone of every company. It’s highly unlikely that there’d be any employees in the building if your team wasn’t there doing its job every day!

Let’s look closer at four compliance nightmares that may be keeping you up at night and help you get back to counting sheep and drifting off to dreamland:

Nightmare #1: Inaccurate payroll record-keeping.

While every department has its version of a clerical error, those involving payroll can easily snowball into much larger problems for the company. Depending on your state, you may be required to maintain employee payroll records for four to seven years, creating an even larger window of error for inaccuracy, lost files and other disasters. Having 100% accuracy as a goal is a lot of pressure on a team, especially if you are working with a manual system.

Electronic record-keeping can help streamline this process as well as give employees access to their own records and paperwork. Not only will this help you be more accurate and make it easier to keep things neatly filed, it will also reduce the frequency of times employees come to you to request old records. Having a timeclock system that automatically creates payroll records can also help eliminate extra steps and reduce the margin of error in your records.

Nightmare #2: Ever-changing legislature around payroll rules and regulations.

This is probably the most frustrating issue on the list and, unfortunately, the most constant. Across the country and from state-to-state, legislators are regularly re-writing the rules you need to follow. Non-compliance can be extremely costly and involve lawsuits, employee settlements and a myriad of issues that could have been avoided. The last thing anyone in your C-Suite wants to hear is the word “lawsuit.” However, there are some simple steps you can take to protect yourself and your company.

Using HR and payroll software that is automatically updated with these new policies and information can help reduce the risk of accidental and unintentional errors. Not only does that help you avoid missing new updates to payroll procedures or legislation, it also reduces the work of having to dig for this information yourself. For an added layer of protection, we also suggest checking reputable news sources for updates to legislation and policies.

Nightmare #3: Privacy breaches on your sensitive data.

While most people fear their personal information being stolen by hackers and other cybercriminals, you’ve got a whole team’s worth of information to worry about protecting. Not only are 52% of security breaches are caused by human error, but identity theft and money rerouting through a payroll system hack can be an especially egregious crime to clean up after.

So what can you do to prevent this? Well, one of your first lines of defense should be educating your employees to help reduce the risk of phishing scams, account hacking and various other forms of cyberattacks. Encourage them to protect sensitive passwords and other personal information. You should also limit who has access to these sensitive records as much as possible to further manage the risk of a data breach or identity theft. Lastly, using the most up-to-date payroll systems will help ensure that your software can protect your company from ever-evolving forms of security breaches.

Nightmare #4: Making an error when filing taxes.

Whether it’s a late payment or an error in worker classification or withholding, taxation mistakes can be a doozy to clean up and can even lead to audits and fines. In fact, mistakes in employer payroll tax cost small businesses a collective $6 billion in civil penalties in 2015. Not only that, but discovering these errors can mean hours of extra labor for your team members, who will then have to scramble and work backwards to correct them.

However, there are steps you can take to avoid civil penalties and all the associated headaches. This is another instance where automating your processes with tax software can really serve you. Since the software will include up-to-date regulatory and tax functions, you will greatly reduce the margin of error for yourself and your team. Regularly checking the IRS website for new, state-specific tax information can also help you and your team stay compliant and avoid the snowball effect of problems that a taxation error can cause.

Do you have other payroll headaches that keep you up at night?? Let us know in the comments down below or fill out the form and we will include your suggestion into our next article.

Categories
On Demand Payroll

How Full-Service On-Demand Pay Works for Our Payroll Team

By April Smith
Director of Payroll and Benefits, Senior Lifestyle

As a payroll professional considering an on-demand pay solution for the first time, my mind swam with thoughts of special deduction files, massive payroll system changes, funding issues, more pay reconciliations, and a lot more employee questions coming into our department. I was thinking ‘I don’t have the bandwidth to absorb this, and neither does my team.’ It was like a nightmare to me. But it was a critical need for our employees, so I took a deep breath and trudged on.

As we began the journey of vetting providers, we determined that the growing number of on-demand pay offerings can be grouped into two general categories: those who offer a comprehensive full-service approach and those who offer the technology and make you put resources toward it to make it run. 

Most of the vendors offering on-demand pay are self-service and require extra work from payroll and the employer for each transaction, validating those nightmarish thoughts I had initially, such as more pay reconciliations and the need to develop deduction files for employees using on-demand pay. In looking at those ‘solutions,’ I thought to myself: ‘I’m not going to turn into a bill collector’ and deal with collections and having to reconcile each transaction every pay period.

 

We opted for the fine-dining version, the full-service option. I consider us (the employer) to be the silent partner. It’s an employee benefit I don’t have to monitor. The most time I spend on the daily pay solution, which our employees are embracing by the thousands, is to verify employee accounts and follow up when the on-demand pay provider team sends me information. In the past six weeks, I’ve literally spent less than one hour thinking about our on-demand pay benefit. 

The provider’s call center, not my team, handles all employee inquiries, and they are very careful to continuously and accurately track earnings, making them accessible to employees and seamlessly accounting for the amounts, so my payroll team doesn’t have to take any action. That’s full-service.

  

But there was another issue we needed to consider. I also am concerned for our employees. Most self-serve vendors place arbitrary limits on amounts employees can access, when they can request on-demand payments and the payment methods they can use. While I understand the surface reasoning for doing this, I am troubled by it. 

We determined that any program we were going to choose needed to come with the maximum benefit to employees, meaning no arbitrary limits on amounts earned that employees can transfer or limits on their ability to draw whenever they choose. 

I also oversee benefits for my employer and we know that some workers take advantage of each benefit offered and some don’t take advantage of any of these benefits. This all is because each employee’s particular life circumstances are different. So when it comes to on-demand pay, who can dictate to these employees how much and when they can use their own earnings? 

We couldn’t accept a one-size-fits-all approach here because each employee has different circumstances. People’s work hours can vary, their home situations may have two incomes (or not), their stages in life and career are all at different points.

  

Early in my career, my focus was on our growing family, and a lot of my unexpected spending came from diapers, medical care and prescriptions for my children. I would have used an on-demand pay benefit to stay on top of these had it been offered. Now that my children have grown, my financial needs have changed, but the bills and unexpected expenses still come at times that don’t necessarily sync with payday. 

It’s not an employee’s fault that our society has adopted the practice of paying employees at set intervals, such as bi-weekly, or that bill due dates don’t always sync with the employee paydays.

 

We wanted the employees to have a customized solution for them, and the one-size-fits-all approach that most on-demand pay providers apply to available amounts and frequency of use was not going to do that. Our full-service daily pay provider offers up to 100% of anticipated net pay and does not limit the frequency of use.

As more payroll professionals, like me, are put in a position of considering an on-demand pay solution, know first that this is because of the clear upside to employers and HR this benefit brings:  a reduction in employee turnover, better employee engagement and easier recruitment, to name a few. But the impact each offering has on the payroll operation can vary widely. So be deliberate in your analysis and know the consequences of going with a provider that does not offer the full-service on-demand pay we have adopted.