June Jobs Data and Thoughts on Current Small Business Challenges in WA State

Two new clients I worked with in June provide this month’s theme:

                  (1) A small construction company of 5 employees, marred by turnover, was trying to process payroll, deposit taxes, and pay garnishments themselves, struggling with the myriad of compliance challenges with doing so. The tasks ate up their time and frustrated their business, culminating in tax penalties and personal stress.

                  (2) A small flooring company looked to get mobile in their payroll technology to gain the ability to process payroll on the jobsite, and to accurately communicate pay information to employees, using a mobile device.

                   Echoed from last month’s job growth, June brought with it a significant increase in jobs across a number of sectors including the construction (21,000 new jobs according to the ADP NER) and restaurant (21,000+ new restaurant franchise jobs according to the ADP NFR) industries. The great thing about these industries is they often offer entry level employment opportunities alongside more tenured jobs, inducing more financially diverse employment opportunities for those in search. The challenging side about these industries, from a business owner perspective, is they tend to be more seasonal, carry a higher rate of employee turnover, and carry a higher risk  of employment in terms of compliance—i.e. garnishment payment processing, unemployment claims, etc…

                   The small businesses that support these industries are looking to not only manage compliance, but to provide quality communication to their employees in terms of their hours worked and pay, in an effort to minimize turnover. They are also trying to get more done in less time, opening a new wave of mobile payroll prospective clients interested in such services.

Data Overview:

Small businesses with 1-19 employees had a net jobs gain of 84,000 jobs nationally (ADP/NER)

Professional/Business Services Industry had a net gain of 40,000 jobs nationally (ADP/NER)

Restaurant Franchise Jobs grew by over 21,000 in June (ADP/NFR)

WA State had a gain of over 6,000 jobs (ADP/RER)

WA State Preliminary Unemployment Rate is 1.6% lower than at the same point last year, June 2012 (BLS)

WA State has added an estimated 67,000 jobs in the last year: June 2012—June 2013 (BLS)

Payroll: Getting Started Guide to Washington State

Congratulations, you're ready to hire your first employee in Washington State!

Here's a short checklist guide of the items you'll need to get set up properly for your first payroll.

When doing payroll in Washington State we have 3 main tax agencies that cover payroll taxes. (Reminder: We have no State Income Tax...yet)

1. IRS - Federal Taxes
2. WA State Employment Securities - the office of Washington State Unemployment
3. WA State Labor and Industries - the agency covering Worker's Compensation Insurance

In order to File and Pay Federal Payroll Taxes, and there are a number of them, your company must have a Federal Employer Identification Number (FEIN or EIN for short). You can apply for an EIN online or complete and submit a hard copy SS-4 Form application. The online application gives you an identification number and receipt of completion instantaneously, and tends to be the preferred option.

The Department of Employment Securities requires an assigned identification number (called an ES Reference Number), as does the Department of Labor and Industries, in order to properly pay their state specific payroll taxes. To obtain both ID numbers, a Washington State Master Business Application must be filed indicating you are now hiring on employees - in doing so, both the Department of Employment Securities and the Department of Labor and Industries will issue identification numbers upon receiving the correctly completed Master Business Application, which can be completed online.

Once you have your three tax identification numbers you'll want to be sure your new employee(s) complete(s) their W4 Form so that you or your payroll company will be able to calculate that individual's payroll taxes accordingly.

Once you've gotten your Tax ID numbers and W4 forms, you can process payroll. There may be some other tax or compliance requirements based on your employee count and/or location of your business, so be sure to consult your CPA or business advisor. Also, there are a number of compliance items to tackle like New Hire Reporting and hopefully you've had your employee(s) complete their I9 Form for Homeland Security purposes.

If you're willing to take on the burden of payroll compliance on your own be sure to review IRS Publication 15 - the Employer's Tax Guide, as well as Employment Securities and Labor and Industries filing and depositing requirements.

If you feel better served having a professional service company take over payroll duties, feel free to contact me at Randy.Harris@adp.com and we can quickly explore if some of our small business payroll services options could ease your concerns. We process payroll and file & deposit payroll taxes for companies with as few as one employee in Seattle, Bellevue, and all corners of Washington State. Reach out for a discussion today.