Payroll is crucial to your business. Pay for your employees must be on time and precise, and you must ensure that each individual paycheck has had the appropriate deductions and withholdings accounted for each employee. Making sure that you are following the current laws and regulations–including federal, state, and local–is imperative to running your business successfully.
Global payroll regulations are difficult to integrate, with a multitude of languages, countries and territories, and currencies. While there are many individual rules and regulations specific to each place, there are a surprising amount of similarities. After all, commonalities such as submissions, payments, and reporting are standard when it comes to calculating payroll anywhere in the world.
Even with so many parallel payroll regulations happening globally, there are many factors that account for the differences in countries’ payroll practices and management. Variances in culture, national and local regulations, and collective bargaining agreements mean that there still remains enough difference between nations to focus on the regulations where your own business is located. That doesn’t even account for the constantly changing laws around payroll that are put into place every year.
This article will explore payroll regulations specific to the United States. US Employers are required by law to adhere to government regulated payroll laws, set by the US Department of Labor (DOL). The Internal Revenue Service works with the DOL to enforce the federal payroll laws. It can be confusing and difficult to understand these regulations. They are varied, complex, and changeable. If you do not comply properly with your local and federal legislation, your business can risk hefty fines.
Don’t risk any mistakes: read on for US payroll regulations you should know about. The Fair Labor Standards Act (FLSA). The Fair Labor Standards Act is a federal law. It institutes standards for both full-time and part-time employees in the private sector as well as in federal, state, and local governments. The standards under this act include factors such as minimum wage, child labor, overtime pay, and record-keeping. Every employee who is in a position that is covered by the mandatory overtime provisions of the FLSA is covered by this act. If an employee has worked overtime hours, they are legally entitled to be compensated at overtime pay rates for each hour worked above 40 in a single work week. In order to comply with these standards, an employee who has worked overtime must fill out a Time and Attendance Record.
Federal Insurance Contributions Act (FICA). The Federal Insurance Contributions Act deems it mandatory for US-based employers to withhold Medicare and Social Security contributions from their employees. These rates may be changed annually, as well as wage limits, which is why it is crucial to stay up-to-date with these acts. In 2018, businesses are to withhold 1.45% of each employee’s wage for Medicare, and 7.65%-6.2% for Social Security. FICA taxes are of the utmost importance in your employees’ payment obligations, and comprise the Social Security tax, Medicare tax, and a 2.35% Medicare tax, which comprises 1.45% Medicare tax added to an additional 0.9% surtax, if your employee earns more than $200,000 annually.
Federal Unemployment Tax Act (FUTA). The Federal Unemployment Tax Act provides payments for unemployment compensation for workers who have lost their jobs. This act works with state unemployment systems, and the employer alone pays the FUTA tax, whereas the employee does not have this deduction from their wages. FUTA pays for half the cost of extended unemployment benefits. It also keeps a fund intact from which states can borrow to pay out benefits if needed. You may be required to pay FUTA taxes if you are a private, for-profit employer.
The importance of timekeeping
Staying abreast of all of these payroll regulations is crucial to your company and your valued employees. Another vital factor to consider is timekeeping; your payroll processing must include data for your workers and the hours they have worked. As you have read, these statistics are essential in complying with regulation laws. The Department of Labor requires you to keep accurate records, including information about your employees’ hours.