Let’s be honest, managing payroll can be a complex process. One of the factors contributing greatly to that complexity is compliance with the various federal, state and local legislation. As an employer there are all kinds of obligations on you – all with the intent of ensuring fairness, of course – and what follows here is a quick checklist of the key federal requirements.
The FLSA establishes the federal minimum wage that you must pay (though state laws may set a different figure, in which case the higher of the two is payable). The legislation also mandates overtime be paid when an employee works more than 40 hours per week. A poster stating FLSA requirements must be displayed in the workplace.
Again, the key measure here is about rates of pay. Men and women performing substantially similar jobs in the same establishment must be paid the same.
Employers must pay male and female employees the same wage for the same job. One key amendment is the Lilly Ledbetter Fair Pay Act, 2009 which states that the 180-day statute of limitations for filing an equal pay suit runs from the date of the most recent paycheck (effectively increasing the possibility of a claim).
Employers must withhold a mandated percentage of employee wages and pay it to the federal government. Form W-2 must be filed for each employee.
In addition to income tax withholding, employers must make similar deductions from employee wages to cover Social Security and Medicare tax. The latest rates can always be found on the IRS website.
Unemployment tax is a payment by employers (not a deduction from employee wages) to fund federal unemployment programs. The likelihood is that you will have a state unemployment tax as well.
When an employee owes a debt following a court order or other legal procedure (such as state tax collection, or an order from the IRS), the employer is required to garnish (i.e. withhold a portion) of their wages.
Employers with more than 50 employees must offer a ‘minimum essential coverage’ health insurance option to their workforce or make a shared responsibility payment to the IRS. The employer also has reporting responsibilities, both to the IRS and to employees.