THE NEED FOR PAYROLL & PERSONNEL RECORDS Developed by Lisa Swallow, CPA CMA MS Payroll Accounting 2009 Bernard J. Bieg and Judith A. Toland

 Positions within payroll profession  Range from payroll clerk to senior payroll manager  Salaries range accordingly  Professional membership – American Payroll Association [APA]  Certified Payroll Professional exam  Code of Ethics sets direction for profession

 Fair Labor Standards Act of 1938  State minimum wage and maximum hour laws  Federal Insurance Contribution Act (FICA)  Income tax withholding laws  Federal, state and local  Unemployment tax acts  Fair employment laws  Other federal and state laws

 Federal Wage & Hour Law of 1938  Minimum wage until 7/24/09 = $6.55/hour  Then $7.25/hour by end of 2009  Always get overtime  Equal pay for equal work provisions  Sets law for companies involved  in interstate commerce or  in production of goods/services for interstate commerce  Requires payroll records be maintained

 Established minimum wage rates for specific industries  Employees covered by both federal and state laws receive the higher hourly rates  State minimum rates and regulations vary

 Comprised of two taxes paid by employers (ER) and employees (EE)  OASDI (Old Age, Survivors & Disability)  6.2% with a cap that changes each year  ER and EE pay  HI (Hospital Insurance, part of Medicare)  1.45% with no ceiling  ER and EE pay  SECA (Self Employment Contributions Act) applies to self employed people

 Federal income tax  Levied on earnings of employees  Income tax is withheld from paychecks  State and local income tax  Income tax is withheld from paychecks  Different in each state

 FUTA (Federal Unemployment Tax Act)  ER tax –paid on $7,000 per EE per year  Taxes used to pay state and federal administrative expenses, not used to pay unemployment benefits  SUTA (State Unemployment Tax Act)  Mandatory unemployment insurance –  each state has different laws  SSA outlines what kinds of standards each state’s unemployment compensation law must follow  Used to pay unemployment benefits

 Title VII of the Civil Rights Act of 1964  EEO (Equal Employment Opportunity)  Can’t discriminate in hiring, firing, promoting or compensating based on  color  race  religion  national origin  gender  Gender orientation added in certain states See for more information

 ADEA states employers cannot use age to discriminate in hiring firing or promoting  applies to employers with 20+ employees  Exception to rule is  Executives aged 65 or over and  Who hold key strategic decision-making positions for prior two-year period  Can face mandatory retirement if annual pension from ER will be at least $44,000

 Prevents employers with 15 or more employees from discriminating against disabled employees and job candidates based upon disability  ‘Reasonable accommodation’ must be provided  This is a very vague term and subject to court interpretation

 Requires employers to report all new hires within 20 days to state agency  Records coordinated through Office of Child Support Enforcement (OCSE)  Fines of $25/hire levied for failure to report  A few states now require same from independent contractors

 Bars hiring and retaining aliens unauthorized to work in U.S.  Accomplished by employee completing I-9 within 3 business days of employment  Or termination may result  U.S. Citizenship & Immigration Services may audit and levy penalties  Criminal penalties if discriminatory practices found

 Covers companies with 50+ employees within 75 mile radius  EE guaranteed 12 weeks unpaid leave for  Birth, adoption, critical care  Can use for child, spouse or parent  Leave may be used all at once or at separate times – but must be within 12 months of qualifying event  ER continues health care coverage  Right to return to same/comparable job and continue health coverage in absence

 Military personnel given right to take leaves of absences from civilian jobs  Right to return to prior jobs with seniority intact  Health benefits must be started without a waiting period  Doesn’t apply if dishonorably discharged

 Trustees must monitor pension plans  Vested 100% in 3-6 years  Example of a vesting plan Years of % Vested in ServicePension Plan 250% 475% 5100%  Provides for PBGC  PBGC ( Pension Benefit Guaranty Corporation) is a federal agency which guarantees benefits to employees  Stringent recordkeeping required including financial statements

 Workers’ Compensation  Most states require employers to pay workers compensation premiums  Can self insure if state approved  Different premiums based upon job class  State Disability Benefit Laws  Five states plus Puerto Rico have established laws requiring employers to provide disability benefits  This applies even if the disability did not arise due to employment!

 FLSA requires stringent personnel record- keeping  Pre-hire inquiries like application/screening document design and retention also critical  No questions alluding to religion, gender, race, age or national origin allowed  Unless implicates ability to perform job (for example, bilingual capabilities)  If application asks age/birth date, should contain ADEA language notifying candidate of anti- discriminatory provisions

 Reference Checks  Due to amount of litigation in this area, respondents should only verify facts  **not offer subjective information**  Really diminishes credibility of reference inquiries  Prospective ER may require applicant to sign “Employment Reference Release”  Interview records should be written/retained  Employee history record contains performance evaluations, compensation adjustments, disciplinary issues, etc. Critical area – employment related litigation is very expensive and often times avoidable

 Payroll Department documentation  Change in payroll rate form notifies proper departments of rate change  Payroll Register compiles data per paycheck  EE Earnings Record outlines earnings per period, quarter- to-date and year-to-date for each EE  Paycheck  Paycheck or direct deposit  Outsourcing Payroll  Many small- to mid-sized businesses hire a payroll company to do their processing  This independent company responsible for compliance and can quickly and efficiently process payroll