January 15, 2024, by HR Search & Rescue It is estimated the average company makes 15 corrections to payroll during each pay period, according to an Ernst & Young survey. Payroll hours for corrections mean lost time and revenue and can have legal consequences for employers. PEO payroll services allow companies to avoid costly errors and maintain compliance. Navigate Complex Payroll Tax Regulations The Internal Revenue Service (IRS) assessed 4,378,150 civil penalties due to employment tax mistakes, errors, and fraud for fiscal year 2022. The following list contains the most common errors the IRS discovered: Failure to make federal tax deposits Lack of payment Delinquency Bad checks Underpayment of estimated taxes Since only 56 civil penalties were due to fraud, most business owners intend to meet their legal tax obligations. Payroll tax regulations are complex, though. Many employers need help complying with the Federal Insurance Contributions Act (FICA), Federal Unemployment Tax Act, and income tax regulations. These errors and omissions lead to expensive penalties, with the IRS assessing $13,609,790 in fines for fiscal year 2022. Business owners risk more than high fines when failing to comply with payroll tax regulations. Employers must contend with legal expenses and a tarnished reputation if they do not meet regulatory standards. Employers protect the company’s financial health and avoid reputational damage by using PEO payroll services. PEOs assume all payroll compliance obligations, allowing business owners to focus on day-to-day operations. They also ensure they fully understand what compliance entails via consultation. Adhere to Wage and Hour Laws and Regulations Employers must adhere to the Fair Labor Standards Act (FLSA) and all other local, state, and federal wage and hour legal requirements. These regulations govern minimum wage, overtime, hours worked, recordkeeping, and child labor. Legal Requirements for Minimum Wages The FLSA sets the minimum wage at $7.25 per hour, and states without minimum wage laws must meet the federal standard. Mississippi, for instance, does not have a state minimum wage law, meaning employers must pay employees at least $7.25 an hour based on federal guidelines. States with minimum wage laws require employers to pay more than the federal standard. California is a notable example, with a minimum wage of $16 per hour. California employers must meet the state’s standard to remain in compliance. If they use the federal guideline for minimum wage and pay less than $15.50, they will be penalized. Legal Requirements for Overtime Pay The FLSA states that employers must pay at least time and one-half regular pay when covered non-exempt employees work more than 40 hours in seven days. Most states defer to the FLSA regarding overtime, although there are exceptions. Some Kansas employers can follow the state’s overtime law, which calls for overtime to be paid after an employee works 46 hours a week. Kansas employers must examine state and federal overtime laws to determine which to follow. The decision is based on interstate commerce and the business’s annual revenue. Legal Requirements for Hours Worked Federal law also governs what constitutes hours worked. Employees accumulate hours worked when they have to or are permitted to work. This includes waiting for work at the employer’s behest and working on and off the premises. Employers must also count time spent correcting errors and mistakes as hours worked. Business owners in all states must adhere to the hours worked provision in the FLSA to maintain compliance. Legal Requirements for Recordkeeping Employers must also maintain proper records on all employees based on FLSA standards while keeping additional records on non-exempt employees. All payroll records must be preserved for at least three years and accessible if needed. Since the federal government does not provide forms or templates, it is up to each business to establish and maintain a recordkeeping protocol. Mistakes such as misclassifying employees or keeping incomplete records are common errors that lead to violations and potential fines and other penalties. Legal Requirements for Child Labor Child labor laws are also part of the FLSA and require children to be at least 14 to work in non-agricultural jobs. The child labor laws also set restrictions for the hours worked and the work conditions for children. The FLSA also allows employers to pay subminimum wages to employees under 20 who meet specific conditions. For instance, employers can pay full-time students 85% of the minimum wage when working at colleges and universities, in agriculture, or at retail establishments. Some states also have child labor laws that dictate the hours and how late children can work. Employers must comply with state and federal laws when employing minors or risk significant penalties and reputational damage. PEO payroll services include maintaining compliance with all wage and hour laws, including those at the local, state, and federal levels. PEOs determine if companies are currently complying with these laws. If not, PEOs provide guidance to assist the company in meeting legal standards. PEOs ensure maintained compliance to prevent the company from violating laws and regulations. Maintain Compliance With PEO Payroll Services Many small businesses use PEO payroll services to assist with meeting regulatory standards. The HR professionals at HR Search & Rescue provide expert guidance on all aspects of payroll processing, including taxes, laws, and regulations. Contact HR Search & Rescue today to schedule a consultation.
