THE NEED FOR PAYROLL & PERSONNEL RECORDS CHAPTER 1 THE NEED FOR PAYROLL & PERSONNEL RECORDS

Payroll Profession Positions within payroll profession Range from payroll clerk to senior payroll manager Professional membership – American Payroll Association (APA) Certified Payroll Professional exam

Many Laws Affect Payroll 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

Fair Labor Standards Act Federal Wage & Hour Law of 1938 Minimum wage ($6.55/hour) plus overtime Fair Minimum Wage Act of 2007 raises to $7.25 by July 24, 2009 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

State Minimum Wage & Maximum Hours Laws State Minimum Wage & Maximum Hours Laws 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 (www.dol.gov/esa/minwage/america.htm) to see minimum wage by state

Federal Insurance Contribution Act (FICA) Federal Insurance Contribution Act (FICA) 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 SECA (Self Employment Contributions Act) applies to self employed people

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

Unemployment Tax Acts FUTA (Federal Unemployment Tax Act) 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

See http://www.eeoc.gov/ for more information Fair Employment Laws Title VII of the Civil Rights Act of 1964 EEO (Equal Employment Opportunity) Can’t discriminate in hiring, firing, promotion or compensating based on color race religion national origin gender Gender orientation added in certain states See http://www.eeoc.gov/ for more information

The Age Discrimination in Employment Act (ADEA) The Age Discrimination in Employment Act (ADEA) ADEA states employers cannot use age to discriminate against hiring/firing/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

Americans with Disabilities Act (ADA) 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

Personal Responsibility & Work Opportunity Reconciliation Act Requires employers to report all new hires within 20 days to state agency Records coordinated through Office of Child Support Enforcement (OCSE) Fines levied for failure to report A few states now require same from independent contractors

Immigration Reform and Control Act (IRCA) Immigration Reform and Control Act (IRCA) 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 where discriminatory practices are found

Family Medical Leave Act (FMLA) Family Medical Leave Act (FMLA) 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

Uniformed Services Employment & Reemployment Rights Act 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

Employee Retirement Income Security Act (ERISA) Employee Retirement Income Security Act (ERISA) Trustees must monitor pension plans Vested 100% in 3-6 years Example of a vesting plan Years of % Vested in Service Pension Plan 2 50% 4 75% 5 100% Provides for PBGC Pension Benefit Guaranty Corporation - a federal agency which guarantees benefits to employees Stringent recordkeeping requirements

State Laws Workers’ Compensation State Disability Benefit Laws 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 A few states have established laws requiring employers to provide disability benefits to employees that become disabled This applies even if the disability did not arise due to employment!

Human Resource System 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 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

Human Resource System (continued) 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 Accounting System 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