Paying The Employee CPP Review Course February 21, 2015 Presented by: Heather Williams FPC, CPP

Chapter 5-- Objectives Pay Frequency Payment on Termination Payment Methods Cash or Check Direct Deposit (EFT) Electronic Paycards –Branded vs. Non-branded Pay Statements for Employees Unclaimed Paychecks (Escheatment) Wages owed to Deceased Employees Extra Paydays (53 rd pay period)

KEY NOTE: CPP Certification Test is based on Federal Laws ONLY Chapter Five is a great resource for State Requirements and Rules regarding Employee Payment. State Pay Frequency Requirements State Payment Requirements upon Termination State Rules on Direct Deposit State Paycard Compliance Issues State Pay Stub Information State Rules on Unclaimed Wages (Escheatment) State Requirements governing wages to deceased employees 5.31 – 5.34

Payroll Frequency & Payment on Termination Chapter 5- Paying the Employee

Testing Your Knowledge What law governs how often and how soon employers must pay their employees after service is performed ? What does the FLSA regulate?

Payment Methods Chapter 5- Paying the Employee

Payment Methods Cash Check Direct Deposit ( Electronic Funds Transfer) PayCards

My Money! Cash or Check All 50 states and the District of Columbia allow payment by cash or check and don’t have laws that regulate either payment option Although states differ in regulation, they require that employees are able to cash their pay check or negotiable instrument: 1.For face value 2.Without additional fees enforced for cashing 3.Most states require that financial institution be in the state where employees work or conveniently located for employees

Direct Deposit (EFT) Chapter 5 – Paying the Employee

Direct Deposit (EFT) Most popular way of paying employees – 74% Safe and Secure First on the scene – distribution of Social Security Benefits Eliminates many problems concerning: Lost or stolen checks Unclaimed or uncashed checks (Escheatment) Storage of documents(cashed checks, etc.) Check Cashing Procedures

Direct Deposit (EFT) Federal and state governments share regulatory responsibility NACHA– National Automated Clearing House Association ACH– Automated Clearing House State Law Regulations The Electronic Payments Association (NACHA) issued International ACH Transaction (IAT) operating rules and formats that became effective on September 18, They comply with the Office of Foreign Assets Control (OFAC)

Direct Deposit Process Direct Deposit: automatic deposit of an employees pay into his/her desired checking and/or savings account  Employer prepares file and send to Originating Depository Financial Institution - (ODFI)  The ODFI verifies the file and processes it through the Automated Clearing House - (ACH)  ACH Operators delivers files to the Receiving Depository Financial Institution - (RDFI)

The Direct Deposit Process Employer ODFI ACH RDFI Special Note: Under ACH Operating Rules, employee authorization for Direct Deposit does not have to be in writing. However, many states require written authorization. Information needed for Direct Deposit Authorization 1.Name and Routing Number of EE’s desired financial institution 2.Type of account (checking and/or savings) 3.Account Number

Direct Deposit Reversal/Pre-notification Single Entry Reversal Amount of reversal must match the exact amount of credit Must be reversed within 5 days of the original entry Employee authorization not necessary Pre-notification Optional, but is used must be sent atleast 6 days before the actual direct deposit is sent.

Direct Deposit FYI There’s no specific time stated in the 2014 Payroll Source. Banks make funds available at various times. Funds usually posted by 9:00 am on pay date. If not posted by 12 Noon; Verify both routing and account numbers Check RDFI posting schedule Regardless of reason for delay – employer must make sure employee is compensated at employer’s expense …sooner rather than later via voucher verification.

Direct Deposit Employee Advantages / Disadvantages Advantages Immediate availability of funds on payday No bank interaction No delay in constructive receipt of pay Disadvantages No Bank account establishment Comfort level in payment

Direct Deposit Employer Advantages / Disadvantages Advantages No lost or stolen checks Reduction in paper flow Cost effective Ease for reconciliation Reduction in escheatment Disadvantages Not truly “Green” Loss of float Additional processing fees Challenges for stopping and reversals

Pay Cards Chapter 5- Paying the Employee

Paycards Paycards are similar to debit cards Prefunded, host based cards providing employees access to their net pay via a bank, ATM (Automatic Teller Machine) or POS (Point of Sale) purchase. Employer funds the same way as direct deposit Process subject to the same NACHA rules

Paycard Program Program offered by many different vendors. Variables to be aware of: 1. Features 2. Benefits 3. Costs Understand the difference between branded vs. non- branded

Branded vs. Non-Branded Branded VISA/ MC/ Discover Logo Employee signature only ATM – 4 digit PIN required Personalized Parental approval for employees under age 18 Non-Branded More secure to use than Branded ATM or POS Logo (Star, Pulse, NYCE) PIN required for ALL transactions Host computer authorizes funds transactions. Prevents negative authorizations.

Employee & Employer Benefits Employee Reduced costs – no check cashing fees Increased independence Improved credit status Financial safety Ease of use Protected from loss ATM access always –no limitations(time or place) Employer Reduced costs Enhanced efficiency All employees eligible Increases employee productivity time Escheatment reduction

Pay Stub/Pay Statement Determined by State Must include, but not limited to: 1.Earnings Information 2.Hours Worked Information 3.Tax Withholding Information 4.Other Deductions Information

Escheatment Escheatment – State Law governing unclaimed, abandoned wages (property) State Regulated Unclaimed wages usually become abandoned after one year Employer does its best to contact ex-employee to avoid abandonment Non-successful contact = abandoned to the state Better Business Practice - suggest direct deposit and/or paycards as options

Wages Owed To Deceased Employees State Law regulates wages - Who, How, What Who – Who the wages may be paid to How – How much may be paid before it’s paid What – What conditions must be met before payment is made Federal Law regulates wages taxes Year of death = W2 and perhaps 1099M Year after death = 1099M AP Check Payment = Gross minus FICA

The 53 rd Pay Period One day of the week will occur 53 times in a year 2014 = Wednesday Pay Reductions may cause problems Hourly employees must be paid all wages Salaried employees can be adjusted Verify contracts if need be Planning is Key

Heather Williams FPC, CPP Thank You!