With every new year comes a new round of payroll and tax regulations. Adding these to the federal, state and local laws that are already in the books, can easily overwhelm business owners of all sizes. Those who run a small business, with limited human resources staff, may find the challenge of complying with ever-changing payroll and employment regulations even more daunting.
When it comes to running payroll, compliance is key. Whether employers or administrators use payroll software to process online payroll or outsource payroll services, here are three areas where changes may affect payroll in 2019.
1. Wage and Hour
Wage and hour mistakes are some of the most common and costly errors employers make. Common solutions for wage violations include:
- Payment of back wages
- Back pay plus an equal amount of liquidated damages
- Back pay plus an equal of amount of liquidated damages, plus attorney’s fees and court costs
A new year is a good time to check the minimum wage on the state, county and city levels to ensure compliance. The federal minimum wage rate is the same in 2019 as it was in 2018 ($7.25 per hour), however, about 20 states increased rates effective January 1, 2019. State and local minimum wage rates apply when they are higher than the federal rate.
Reminder: Employers are required to display posters reporting accurate minimum wage rates.
State Unemployment Tax
Laws implemented in 2019 made changes to some state unemployment tax rates, which could affect the way employers calculate deductions for employees. Oregon and Washington, for example, saw increased state unemployment tax base amounts. Click here to read more about the four payroll tax mistakes small business owners make.
Social Security Wage Base
FICA is a federal payroll tax that stands for the Federal Insurance Contributions Act and is deducted from each paycheck. Social Security tax, which is part of FICA, applies to taxable compensation up to a set limit. The employer and the employee pay 6.2 percent of Social Security tax up to the wage base limit (employees can see how much they pay by viewing their pay stubs). For 2019, this limit is $132,000; it was $128,400 in 2018.
2. Employment Laws
Many state employment laws voted on during the November elections are effective January 1 of the following year. It’s important for employers to review any employment law changes in the states where their employees work. Here are two examples of employment laws that went into effect on January 1, 2019.
- An Oregon Equal Pay law prohibits employers from paying employees different amounts for the same or comparable work unless the compensation is based on a bona fide factor related to the position.
- A California law requires employers with five or more employees to provide at least two hours of sexual harassment training to all supervisors (and one hour to non-supervisors) by the end of the 2019, and once every two years after that.
In many cases, employee benefits may already be in place for 2019, however, retirement savings plans and the Affordable Care Act (ACA) are just two examples of benefits that need to be monitored outside of open enrollment season.
Review Benefit Coverage Requirements
The fate of the Affordable Care Act remains to be seen, but for now, the employer mandate for companies with 50 or more full-time and full-time equivalent employees is still in place. Smaller employers can choose to provide coverage and should note that qualified small employer health reimbursement arrangements (QSEHRAs) have increased contribution amounts for 2019.
Review Elective deferrals for 401(k)
If companies offer a qualified retirement plan with salary reduction contributions (elective deferrals by employees), such as a 401(k), the limits for 2019 have increased over 2018 amounts.
Review FSA Limits
The amount of compensation that employees can commit to medical flexible spending accounts (FSAs) in 2019 increased to $2,700 (up from $2,650 in 2018). However, the limit for dependent care FSAs is $5,000, which is a fixed amount that’s not adjusted annually for inflation.
When you outsource payroll to a payroll company or Professional Employer Organization (PEO), your extended team takes care of paying employees accurately and on time, remitting payroll taxes and staying current with the full range of employment regulations. FrankCrum’s PEO services can be invaluable in the areas of timekeeping, payroll submission and compliance. Call 800-277-1620 today to learn more.