Payroll Law Basics

September 14, 2017

Salaries, bonuses and deductions (such as transit or health insurance) are the financial obligations paid by an employer to their workers, and these are covered by payroll.

All businesses should have a fully functioning payroll system, whether this is managed in house, or by an outside provider, and to avoid costly penaltiess and disgruntled employees, it must be managed effectively and professionally. As an employer, you are required to keep accurate records of employee payroll and make timely and appropriate tax contributions.

What are payroll taxes?

Payroll taxes are deductions made by employers on behalf of the government to fund entitlement programs and income tax, and complying with them can be complicated.

There are often many deductions such as for state disability, unemployment insurance and school and other programs that are held in trust, and ensuring that your business is compliant with both state and federal tax laws, may be best achieved by employing the services of a payroll professional.

What payroll taxes are employers responsible for paying?

  • Social security
  • Medicare
  • Federal unemployment taxes
  • State unemployment taxes

What are payroll laws?

  • Minimum wage - laws vary state to state, and in some cases, state minimum wage is higher than the federal minimum
  • Overtime - laws are mandated by the Fair Labor Standards Act and state that overtime must be paid when an employee works more than 40 hours a week. Any extra hours after that, must be paid ‘time and a half’. There are some exceptions to this law, such as salespersons and administrative workers for example.
  • Payroll tax – payroll taxes must be paid as per federal law
  • Frequency of pay – payroll taxes are scaled according to how often employees are paid. Many are paid biweekly, while others will be paid seasonally, daily or monthly.

Who can provide you with up to date payroll law information?

There are many specialized payroll services that exist today, to give you all the help and guidance with payroll and any associate laws, that you might need. They can offer software solutions and trained professionals who keep up to date with payroll and tax laws, to ensure that you are always compliant and your employees are being paid correctly. Some payroll service providers will also take care of some things normally undertaken by human resources personnel, such as tracking benefit plans.

What is payroll software?

Payroll software is available for small businesses, that can help them to keep on top of payroll by automating it. Most software nowadays can calculate deductions and create pay checks, along with managing benefit plans.

If you’re in any doubt about whether as an employer, you’re complying with payroll laws, it would be sensible to seek advice from a payroll professional. They could save you a lot of time and effort in the long run, and could even save you from the potential cost of penalties and lawsuits, should you happen not to be payroll law compliant.

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