All posts by Jessica Pfenning

Pay Equity: Are You Within the Law?

Pay equity has received a lot of exposure recently. The salary gap between men and women, as well as minorities, is well documented. Consequently, laws are tightening to reduce this gap. As an employer, it’s important to understand the concept of pay equity and to stay within the law.


Relevant Laws

There are two specific laws that are designed to prevent wage discrimination. One is The Equal Pay Act of 1963, which was created to eliminate wage disparity between men and women. It was enacted during the Kennedy Administration when there was a massive discrepancy in salary between genders.

The other is Title VII of the Civil Rights Act of 1964. This took aim at preventing wage discrimination based on race, color, sex, religion or national origin.


Minimal Impact Thus Far

You could argue that these two laws regarding pay equity have fallen short of hitting their mark. This is primarily due to a lack of enforcement and the fact that pay equity-related lawsuits are difficult to win. Even though these laws have been in place for more than half a century, their impact has been fairly minimal.

Here is some data to put it in perspective. “In 2009, Evelyn Murphy, president of The WAGE Project, estimated the wage gap was 23 percent, meaning that the average American woman was paid 77 cents for every dollar made by a man. Over the course of a 47-year worklife, a woman will lose between $700,000 and $2 million to the wage gap.”


Pay Equity Getting More Attention

Wage equity has recently become a hotbed of conversation. In fact, the Equal Employment Opportunity Commission (EEOC) and Office of Federal Contract Compliance Programs have been working to increase regulations to reduce the wage gap.

For instance, there is a proposed requirement for the EEOC to require federal contractors to report W-2 earnings along with annual filings. According to the U.S. Department of Labor, the Pay Transparency Nondiscrimination Provision, “Provides applicants and employees notice that the employer will not discriminate against them for inquiring about, discussing or disclosing their pay or, in certain circumstances, the pay of their co-workers.”

It’s likely that regulations are going to tighten in upcoming years. As a result, pay equity is something to take seriously and address if you haven’t done so already. Your HR team should stay abreast of updates in this area and ensure that your company is doing everything possible to prevent wage gaps between your employees.


Pay Equity Self-Audit

One way to take immediate action is to perform a self-audit to assess how your company stacks up and determine if there are any areas that need your attention. Consult this resource from The National Committee on Pay Equity for a 10-step guide on how to go about the process.

Differences in pay between men and women and minorities has been an ongoing issue. However, it’s clear that measures are being taken to reduce this disparity and ensure pay equity among workers. This makes it something that should be on your radar and an area you should give plenty of attention to moving forward.

How to Prepare Your Small Business for Tax Season

The thought of tax season can elicit some unpleasant emotions for small business owners. Even if you’re highly organized and on top of your game, handling taxes can quickly become a source of stress. Following a few key tips should make the process relatively smooth and less time-consuming.


Keep Track as You Go

Scrambling to get all of your tax information together at the last minute is a recipe for disaster. Ideally, keep up with all pertinent documents throughout the course of each year. When you break it all down, your documents will fall into two main categories — income and expenses. Consult the small business tax prep checklist from H&R Block for more details.


Use Technology to Your Advantage

There are several types of software and apps that can make your life much easier as a business owner. For instance, automated inventory management software and time clock software will help you get organized and minimize your odds of making needless mistakes. Staying on top of payroll is especially important because it’s one of the main reasons why small businesses are penalized each year.

It’s also smart to invest in a quality accounting software such as QuickBooks or FreshBooks because they’ll simplify many of the more arduous elements of accounting. This can save you some major time once tax season officially rolls around.


Know Which Tax Form You Need

There are multiple types of tax forms available depending upon the type of business you run. For instance, there is a form for sole proprietors, corporations, partnerships and so on.

Make sure that you choose the correct form and look it over carefully to understand the nuances. Check out this resource from the IRS for more information on how to go about filing and paying business taxes.


Know Your Deductions

It’s important to take advantage of any deductions you may qualify for. These minimize your expenses and maximize your overall annual revenue. Unfortunately, many business owners miss out simply because they’re unfamiliar with the vast amount of small business deductions available. This guide from Small Business Trends offers 20 examples of potential deductions.


Seek Professional Advice if Necessary

According to Wasp Barcode, “46 percent of small business owners don’t want to work with an accountant.” If there is any question in your mind as to whether you’ve done everything correctly, you should always consult a certified accountant.

Significant IRS penalties can occur even with the best of intentions, so it’s best to double-check. An added plus is that they may be able to offer advice to lower your tax bills.

Although tax season may not be your favorite time of the year, it can be fairly painless with adequate preparation. Getting organized is essential for taking care of taxes without ugly complications. Once you understand what you need for your business taxes, use your knowledge to simplify things in the future.


obama overtime rule

Overtime Overruled? Federal Judge Halts Obama’s Overtime Rule

Overtime for white-collar workers has recently been a hot topic. In May 2016, President Obama announced a proposed policy that would extend overtime pay for over four million American workers. But this didn’t go over without scrutiny.

The overtime rule that would have gone into effect on December 1, 2016, was officially blocked in November by U.S. District Judge Amos Mazzant, in Sherman, Texas. This could have some profound implications for many small businesses. If you have employees who are classified as white-collar workers, consider how this will impact your company.


Background on the Policy

A previous post in May discussed the upcoming changes to the Department of Labor’s overtime regulations. Since 2004, the salary threshold for white-collar overtime workers was $23,660, which was under the federal poverty level for a family of four.

Under President Obama’s new policy, the exempt salary threshold would increase significantly to $47,476. The goals were to ensure that hard-working Americans received an honest day’s wage and to keep up with inflation.


The Policy is Met with Resistance

Of course, the policy wasn’t popular with everyone. According to The Society for Human Resource Management (SHRM), “Twenty-one states and the U.S. Chamber of Commerce asked a Texas court to bar the overtime rule from taking effect.”

The primary reason for this resistance is that many business groups feel the new policy would increase their government costs dramatically and create financial hardships for many private employers. This could ultimately trickle down to increased layoffs, which would actually hurt the employees the policy was designed to help. The end result was federal judge Mazzant blocking the overtime rule.


The Implications

It’s important to note that the proposed overtime rule has not been stamped out. There’s still definitely a chance that it will go into effect at some point. The SHRM even suggests that employers should be prepared to follow it exactly as it was written.

However, with Donald Trump taking office in January, it’s reasonable to think that the rule could be dropped or at least appealed. Sources say that Trump is a proponent of a small business exception. An article on Fortune says, “Trump told the website Circa that the overtime rule was an example of the type of burdensome business regulations he would seek to roll back as president, perhaps by exempting small businesses or delaying implementation.”


What Does This Mean for Your Business?

It’s hard to say for sure what the final outcome will be on the overtime rule. Although it’s likely that the rule’s impact will be limited, it could be years before employers are out of the woods completely in terms of an increased salary threshold for white-collar workers. For the time being, you should plan on complying with the rule.

The back and forth on issues like this can be frustrating for employers. But staying up-to-date on recent news is vital for keeping your business compliant. Be sure to stay informed on this topic if this overtime rule directly impacts your company.


W2 vs. 1099

W2 vs. 1099 – The Key Differences You Need to Know

One area where employers sometimes get confused is whether to give a worker a W2 or a 1099 tax form at the end of the year. Determining the right form essentially boils down to whether a worker is classified as an employee or as an independent contractor/freelancer. While making this distinction may sound easy on paper, there can be a lot of question marks when you get down to it. Let’s now compare a W2 vs. 1099 and highlight the key differences.


What is a W2 Tax Form?

According to Investopedia, a W2 is “the form that an employer must send to an employee and the IRS at the end of the year. The W2 form reports an employee’s annual wages and the amount of taxes withheld from his or her paycheck.” Simply put, this form is meant for regular employees in the traditional sense who receive regular salaries.

These individuals work directly for your business and are in no way self-employed, independent contractors or freelancers. In many cases, they receive benefits like discounted health insurance, retirement plans, life insurance etc. They also pay less in Social Security and Medicare taxes because their employers typically contribute half. With a W2, an employee’s taxes are automatically deducted from their paycheck, and this money is sent to the government.


What is a 1099 Tax Form?

A 1099-Misc is defined as “a tax form that reports the year-end summary of all non-employee compensation. This form covers rent, royalties, self-employment and independent contractor income, crop insurance proceeds and several other kinds of miscellaneous income.” This is meant for workers who aren’t employees in the traditional sense and don’t receive a regular salary.

These individuals are usually classified as independent contractors or freelancers and don’t typically receive benefits. They must also pay the full 15.3% of Social Security and Medicare taxes as well as self-employment tax.

Unlike traditional employees with W2s, they get their full pay without any automatic deductions. However, they are responsible for keeping track of their taxes and submitting them to the government themselves. If an independent contractor earns $600 or more throughout the year, they’re supposed to receive a 1099 form.


What it Means For You as an Employer

Generally speaking, it’s better for you to classify workers as independent contractors or freelancers instead of employees. That’s because you’re not required to pay all of the benefits like you would with a regular employee, and you can change or terminate a contract more easily. However, it’s crucial that you classify workers correctly because making the wrong choice can result in IRS penalties. If you have any questions on this topic, it’s a good idea to consult this guide from the IRS to determine whether to classify a worker as an employee or independent contractor.

As a business owner, it’s important that you understand the differences between a W2 vs. 1099. This will ensure that you provide your workers with the correct tax form and should prevent many complications on your end.


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How Human Capital Management Software Can Provide More Control Over Payroll

One of the biggest responsibilities of employers is to handle payroll and ensure that taxes are filed correctly. The problem is that even the most skilled and diligent person can overlook details and make mistakes, which can result in serious penalties. Couple that with the inherently time-consuming nature of payroll, and it can be a major headache. Fortunately, human capital management software can help dramatically and gives business owners more control over payroll. Here are some key advantages.


Task Automation

Part of what makes payroll such a hassle is how arduous and painstaking it is. Employers can end up spending a large portion of their time on payroll, which can hurt productivity in other areas. Utilizing human capital management software is helpful because it automates common tasks such as rekeying information and laborious data entry. This streamlines burdensome tasks and significantly reduces overall payroll running time. Over time, this can save you from a lot of frustration and be catalyst for more overall productivity.


Increased Accuracy With Calculations

One of the key benefits of software is that it takes out the human error factor. As we all know, humans are prone to making mistakes regardless of how skilled and experienced they may be. Even with the best of intentions, a small mistake can come back to haunt a business later on. Using the right platform means that calculations are always accurate and glitches can be virtually eliminated. This translates into extremely reliable payroll and tax filing.


Self-Service Features

Many human capital management software programs offer a self-service component that allows both employers and employees to stay on top of payroll. For example, as a business owner, you could perform paycheck calculations, check on tax information and place direct deposit earnings into your employees’ accounts via a centralized dashboard. For employees, they can check on payment status, view past payments and adjust their personal details, etc.


Detailed Reporting

Keeping tabs on payroll data is another advantage of this software. By logging into an online portal, you have access to robust reporting including payroll summary, tax payments, employee information, pay rates and so on. If you have any questions or concerns, you can quickly find the information you need to stay on top of payroll. This is nice because you’re always in the loop, and important details are less likely to escape your notice.


Branding Capabilities

An additional feature that perhaps isn’t necessary, but is perfect for branding is the ability to include your company logo on checks, payroll reports and self-service dashboards. This adds to the legitimacy and professionalism of your company and reinforces your brand identity. With branding becoming increasingly important in the business world, this can be a huge asset in the long run.

Because many small to mid-sized businesses lack a formal human resources department, payroll can be a real struggle. But by implementing the right human capital management software, this can alleviate much of your problems and simplify your life.

Photo by 401(K) 2013