Business News Quarterly 3rd Quarter 2019

Teamwork Strengthens Payroll and Other Departments

Teamwork is essential in virtually every business operation. But working as a team is critical when departments such as payroll, finance and human resources have overlapping functions. If your company expects to compete in a global economy, you must ensure that employees in these separate departments work together effectively. Here’s how.

Room for Improvement

According to the DATIS 2017 “State of Workforce Management” report, 65% of executives believe that their organizations’ separate “silos” hamper collaboration. Another study, the Wrike “Operational Excellence Report 2018,” reveals that only 32% of managers believe their company is running smoothly. Non-manager employees are even more pessimistic, with a 21% approval rate. Obviously, there’s room for operational improvement.

Without collaboration between the payroll, finance and HR departments, employee relations can be adversely affected. Employees want rewarding jobs that use their skills and talents. They also want to be paid, and paid on time. Any payroll hitches are likely to lead to an unhappy workforce. In a worst-case scenario, they may start looking for other jobs.

Accordingly, payroll checks must be issued or amounts direct-deposited as your company has promised. And salary increases and bonuses should be addressed promptly and accurately. For example, if an employee has been told he or she is receiving a raise or bonus, HR must communicate this information to payroll to have the amounts reflected in a timely fashion. As for the finance department, it should always be notified about changes affecting payroll to avoid any processing delays.

Four Areas of Focus

Here are four specific areas where teamwork between the three departments can make a difference in operational efficiency and employee morale:

1. Benefits. Departments must work together when choosing benefits programs, such as health care, disability and life insurance, and retirement savings plans. Although cost is important, it can’t be the only factor managers discuss. For example, employee retention efforts and processing challenges may also determine what benefits you offer.

2. Hiring. The hiring process, including recruiting, also calls for cooperation between departments. HR plays the biggest role in this process and must make sure that proper documentation for a new hire is filed. But the hiring process isn’t complete until finance and payroll process the information so that new employees will receive their first paycheck on time.

If your company gets a reputation for failing to process payroll on time, the talent pool likely will dry up — an alarming prospect in the current tight job market. If you don’t already use one, think about acquiring a digital system that integrates inter-departmental documents and provides the team with a single source of hiring-related materials.

3. Legal and tax compliance. Don’t overlook potential legal issues involving the three departments. All must comply with applicable tax law and ensure that federal, state and local tax forms are revised or replaced whenever the law changes. They should be on the lookout for common issues. For example, an employee moving from one state to another might notify HR but neglect to tell payroll. This can affect withholding amounts which are based on where employees reside.

4. Security issues. All three departments have access to sensitive data and, therefore, have a responsibility to protect it. A data breach could cost your employees their financial identities and your company in legal expenses. Then there’s the public relations cost.

Outsider hackers aren’t the only threats your company needs to worry about. Insiders, such as crooked current employees or disgruntled former employees, may also try to steal confidential data. Payroll, finance and HR should work closely with IT to build a secure network, as well as devise policies and procedures that keep both outsiders and non-authorized employees from gaining access to your systems.

Even Stronger

The fortunes of any company are inextricably linked to the performance of three key departments — HR, finance and payroll. Even if these departments seem to function well as individual silos, they almost certainly will be even stronger if they closely collaborate. Take steps now to encourage more teamwork and better communication within your company.

Employers: Take Note of New Penalties and Visa Requirements

The payroll obligations of employers are much more extensive than withholding taxes from paychecks. There are myriad complex rules to navigate — and failing to comply with requirements may result in significant penalties. Recent action in three areas highlights the range of employer responsibilities.

1. Alien Workers

Employing immigrant workers remains a hot-button issue in the United States. Recently, the Department of Homeland Security (DHS) increased the civil penalties imposed for employing aliens who aren’t authorized to work in this country.

The first is for hiring-related violations. If you knowingly hire, recruit or refer an authorized alien for a fee — or continue to employ an unauthorized worker — you may receive an order to cease and desist. Effective April 6, 2019, the civil fines are:

    • Between $573 and $4,586 (previously, $559 – $4,473) per unauthorized alien for the first offense,
    • Between $4,586 and $11,463 (previously, $4,473 – $11,181) per unauthorized alien for the second offense, and
    • Between $6,878 and $22,927 (previously, $6,709 – $22,363) per unauthorized alien for each subsequent offense

Penalties may also be levied for I-9 paperwork violations. The I-9 Form is used to verify the identity of individuals hired for employment in the United States. Employers are subject to civil, but not criminal violations. Penalty amounts have increased slightly to between $230 and $2,292 (previously $224 – $2,236).

Employers could further be fined for document fraud. They and referral agencies can incur civil penalties for knowingly forging, obtaining, using, accepting or preparing a fraudulent document to satisfy employment requirements. The fines are:

·        Between $473 and $3,788, (previously, $461 – $3,695) per document for the first offense, and

·        Between $3,788 and $9,472 (previously, $3,695 – $9,239) for each subsequent offense.

Similarly, the penalty for failing to cease and desist from activities related to document fraud are now:

·        Between $400 and $3,195 (previously, $390 – $3,116) per document for the first offense, and

·        Between $3,195 and $7,987 (previously, $3,116 – $7,791) per document for each subsequent offense.

2. H-2B Visas

The DHS and Department of Labor (DOL) have published a joint temporary final rule authorizing an additional 30,000 H-2B temporary nonagricultural worker visas for fiscal year 2019. The H-2B visa program allows U.S. employers to temporarily hire foreign workers if qualified U.S. workers aren’t available and the employment doesn’t adversely affect the wages and working conditions of U.S. workers.

Additional H-2B visas are only available to returning workers who received an H-2B visa — or were otherwise granted H-2B status — during one of the last three fiscal years. Businesses that would suffer irreparable harm without hiring additional workers are given priority.

Eligible employers should file Form I-129 (Petition for a Nonimmigrant Worker) to hire additional H-2B workers with employment start dates before October 1, 2019. You must submit a supplemental attestation on Form ETA 9142-B-CAA-3 with your petition. The U.S. Citizenship and Immigration Services has stated that it will stop accepting petitions under the increase on September 16, 2019 or when the cap is reached, whichever comes first.

Note that this joint temporary final rule doesn’t apply to petitions exempted from the H-2B cap (for example, certain cannery employers). Those petitions may still be filed under the normal rules.

3. Shared Responsibility Payments

The individual requirement for obtaining minimal health care insurance coverage under the Affordable Care Act (ACA) has been repealed, but “shared responsibility” for employers remains. The IRS has adjusted penalty amounts for 2020.

The ACA requires an employer with 50 or more full-time employees, including full-time equivalent (FTE) employees, in the previous year to offer affordable minimum essential coverage to employees and their dependents. An “applicable large employer” could be assessed a penalty for a calendar month in which it doesn’t satisfy two rules:

1.      The employer fails to offer at least 95% of its full-time employees the opportunity to enroll in minimum essential coverage (MEC) under an eligible employer-sponsored plan and one of its full-time employees receives a premium tax credit for coverage purchased through a government Health Insurance Marketplace.

2.      The employer does offer at least 95% of its full-time employees the opportunity to enroll in MEC that’s affordable and provides minimum value, but one or more of its full-time employees purchases Marketplace coverage and receives a premium tax credit.

Penalties for failing to satisfy the first rule will be $2,570 per full-time employee in 2020. Noncompliance with the second rule will result in a penalty of $3,860 per full-time employee.

Stay in Touch

Complying with these federal rules is essential if you want to avoid penalties. Stay in touch with your payroll advisors concerning new developments that may affect your organization.

Starting a New Business or Organization?

When starting a new venture, there are a variety of entity choices — although some will be easily ruled out based on your operation. Most entities are governed by state statutes, with federal income tax rules and regulations also coming into play. The six basic entities are:

1. A sole proprietorship is owned by one person, who may also be the only worker. Note that a sole proprietorship is not a separate legal entity. The owner receives all profits, bears all losses, and is personally liable for legal claims that arise from accidents, faulty merchandise, employees, unpaid bills and other business problems.

2. A limited liability company gives owners protection from the claims of business creditors and others. Individual LLC members’ liability for business debts is limited to the value of their interest in the business — hence the name “limited liability.”

3. A C corporation is a legal entity owned by its stockholders united under a common name. Corporations issue stock and elect a board of directors to manage the company. Shareholders have limited liability for the obligations of the business. Corporate income is taxed twice. The corporation distributes its earnings as dividends to stockholders, who must include the dividends as personal income on their tax returns.

4. An S corporation limits the number of stockholders to 100. Many small companies choose this option, because it’s a good way to avoid the double taxation of corporations and also provides limited personal liability for the owners. However, there are some restrictions placed on S corps. For example, there can be only one class of stock and the corporation must be domestic.

5. A not-for-profit organization is set up with a specific mission to improve society, such as a museum, charitable foundation, religious organization, research group or trade association. It is not an option for a regular for-profit business. Not-for-profit organizations generally do not pay taxes on their income, cannot sell stock or pay dividends, and have strict requirements imposed on their activities.

6. A general partnership involves two or more owners who make decisions for the business together. Partners share profits, losses, and liability. Although a partnership can be very informal, it is generally considered a legal entity under applicable state law.

In addition, there are sub-entities within some of the above six categories. Contact us to discuss the options. We can help decide which one is right for your operation.