What Changing Already?

When you start a blog like this one its always difficult to know how to organize it and what to write about. So you start out organizing it one way but soon discover it doesn't quite work for you, so you make some changes.  And that, ladies and gentlemen, is what has happened to me.

When I first started I thought it would be best to have a specific topic on payroll for each day of the week.  This way all topics are covered and I would always know what to write about on that day instead of sitting around going what should I write about today? But now that I have a few months under my belt I find this method doesn't work very well for me.  I feel like I am missing out on pressing or current topics. For example, Monday is wage and hour law.  But the DOL  or a state announces a change on Tuesday.  To keep to the topic schedule I wait until the following Monday to write on the news.  And that I just don't like.  I want this blog to be current, in real time so to speak.  If the DOL announces it today, I want to write on it either today or tomorrow, not a week from now.

So as of today I will be making some changes.  I will use the news of the day for my topic first instead of the daily subject.  And if there is no relevant news of the day, then I will use the topic when needed.  And you can rest assured that anytime I feel the need to blog on the payroll profession I will do so regardless of which day of the week it is.

In addition, this will be my last Friday blog.  I will only be blogging Monday through Thursday.  Now before you start accusing me of taking time off and what kind of payroll professional can I be if I can take time off, I actually need to use Fridays for my business.  You see every other Friday I use as my catch up day.  I update my school websites and manuals, write newsletters, answer questions from seminar attendees, do phone conferences with clients etc.  Trying to blog on that day is really tough.  And on the opposite Fridays I handled all of my business out of the office such as appointments with clients etc.  So that means this is my last one for Fridays.

But maybe it won't be the last blog we post on Fridays.  What I hope will happen is all the payroll professionals out there who want to do a blog one time or every once in a while, might submit their blog to me and I can use Fridays for posting their blogs.  So Friday is guest blog day.  If you want to get something off your chest and it is payroll related send it to me at payrolladvisor@cox.net.  I will be posting your blogs on Friday.

I hope you like the changes.  Please let me know what you think.

The Answer We Waited a Week For

Last Thursday I blogged about using the Employer Social Security Credit under the Hire Act. You can re-read the blog for the full scope of the discussion.  But one point that I made was that while researching questions on using the credit I wondered how the IRS would answer if the question of whether or not an employer can use the credit at the end of the quarter or do they have to do deposit by depost was put to them.

So as I said in the blog I e-mailed the IRS and asked the following question:

I have a webinar atendee who is using the Employer Social Security Tax Credit under the Hire Act for the first time in the second quarter.  The question is can an employer take the credit on the Form 941 only and forgo using the credit for each deposit made or must the credit be used as each tax deposit is made for the appropriate payrolls? 

I got the answer back on the following Tuesday so as promised here is the IRS's response to the question:

Since the credit allowed under the HIRE act reduces the total tax liability on the Form 941, the deposits may be reduced accordingly but it is not a requirements that those deposits be adjusted.  If the tax deposits are not reduced, the result will be an overpayment of the tax and a refund may be claimed when the Form 941 is filed.

Well I feel really great about this.  My answer to my seminar attendee was spot on! But it never hurts to confirm it with the IRS.

How are you using the credit?  Let us know

Electronic Signals or Piles of Paper--You Decide

At this year's APA  Congress a panel was held on Electronic Income Withholding Orders for Child Support (e-IWO).  According to Bill Stuart, a software developer who works with the federal Office of Child Support Enforcement, the Electronic Income Withholding Order, designed for large employers, has become so prevalent that some states are considering the mandatory use of the program.

The e-IWO portal, which facilitates the transmission of the withholding orders to employers, is used in 22 states.  New Jersey began using the portal on May 26th.  The e-IWO program allows employers to make entries on a spreadsheet or PDF.  The program is user-friendly, accurate and provides secure delivery to employers.  The portal is a central location for child support orders and is helpful for employers dealing with multiple employment sites.  The portal also quickly gets payments to state disbursement units (SDU) and recipients.  The panel also discussed converting to not just receiving support orders electronically, but also sending payments to the SDUs using electronic funds transfers.  With the exception of South Carolina, SDUs receive and send payments electronically, said Nancy Benner, employer services specialist for the Office of Child Support Enforcement.

Boy, have things changed since I began my payroll career back in the mid-70's. Back then and through the decades since we basically had paper everywhere when it came to child support.  As laws were passed that increased our responsibility in collecting child support, the paper piles increased as well.

So our best practice suggestion for today is to take advantage of modern technology when you can and sign up for electronic Income Withholding Orders.  In addition, set up a program to submit your child support payments via EFT through the SDUs.

Let us know what you are doing in your payroll department.  Are you signed up for the e-IWO?  What has been your experience using the system--good or bad?  Do you have questions about using SDUs?  Post them here and we will get the answer for you. 

HHS Wants Us Fit—IRS Wants the Tax

It’s been in the news a lot lately—how unfit Americans have become. The First Lady is advocating programs to fight childhood obesity while AARP is starting an online movement to get fit over the summer. Everyone is being asked to join in and help. But for employers helping fight obesity is a two-edged sword.


If the employer takes office space and puts in a gym on site for employees to use, it is tax free and employee good will is created in addition to the benefit of giving employees a chance to work out. But for the employer to use valuable and sometimes nonexistent “extra” office space to put in a gym can cause a lot of “bad will” among workers who are crammed into cubicles. And let’s face it not too many companies have an extra 500 square feet just laying empty. Plus I really have to ask how many of us overweight and out of shape payroll professionals want to huff, puff, and sweat in front of our staff and fellow co-workers. I know I never did. Plus with no shower that’s not too pleasant back in the small and cramped payroll office. And if the employer does put in a shower, I really don’t want to strip and shower in front of my staff!

But the employer really wants to offer a healthier lifestyle to its employees. And many local businesses want to help other local businesses by buying services. So they buy a gym membership for all their employees. It might be a one-off benefit or even part of a larger and more complex wellness program that includes quitting smoking and diet tips. Either way it doesn’t matter. If the employer buys the gym membership everyone is paying taxes on it. FIT, FICA, FUTA, SIT, SDI (where required), SUI, Local Taxes. All of them. In essence the employer is made to pay more simply because they don’t want a gym next to their conference room.

My point is if the government wants Americans to get fit why make it harder and more expensive to buy a gym membership rather than gym equipment. Why should employers have to pay more for offering basically the same thing.

That’s my thought, what do you think?

Does your company have a gym? Do they buy memberships? Let us know what you do and how you handle it.

Multiple Rates of Pay—Finally a Use for High School Math

Under the FLSA it is required that employers pay employees overtime based upon the regular rate of pay. Over the course of the next few months we will often discuss this topic. But today I want to look at one facet of calculating overtime and the regular rate of pay. What to do when an employee works at two or more different rates within the same workweek. In this type of situation, the regular rate of pay for the week is the weighted average of all the rates. Remember weighted average is not the same as average.

Let’s do an example: At Secrest Corp this week Paul worked to cover for other employees on vacation. His time card reads as follows:

Day                     Per Hour Rate               Number of Hours Worked
Monday                    $8.00                                 8
Tuesday                    $8.00                                 8
Wednesday               $9.00                                 8
Thursday                   $8.75                                 9
Friday                       $7.50                                10
Total Hours                                                        43

Paul does not work in a state which requires daily overtime. So under the FLSA we would calculate his gross pay as follows:

Step 1… Calculate the Earnings for Each Day
Monday                            8 x $8.00 = $64.00
Tuesday                            8 x $8.00 = $64.00
Wednesday                       8 x $9.00 = $72.00
Thursday                           9 x $8.75 = $78.75
Friday                             10 x $7.50 = $75.00
Total                                                    $353.75

Many times I have seen payroll professionals confuse weighted average with average. They add up the rates then divide by the number of rates. For example $41.25 (total of all the rates) divided by 5 (number of rates) = $8.25 and try to use that as the regular rate of pay. In this case it would be close enough. But unfortunately it doesn’t always work out so close and can end up underpaying the employee.

Step 2: Divide the total earnings by the total hours worked to determine the regular rate of pay
$353.75 divided by 43 = $8.23 (regular rate of pay)

Step 3: Determine the premium pay for overtime by multiplying the regular rate of pay by .5 (or divide by 2) then multiplying that amount by the number of overtime hours
$8.23 x .5 x 3 = $12.35

Step 4: Determine the total weekly compensation by adding the total earnings (step 1) and the premium pay (step 3)
$353.75 + $12.35 = $366.10 (total weekly compensation)

These 1938 rules under the FLSA require this method to properly pay employees working at more than one rate in a workweek. So you see, you should have paid closer attention to your teacher in high school math class.

Do you have to do weighted averages where you work? How do you handle it?

Let us know. Join in the discuss.