Prediction: About two weeks from now, an employee at your company is going to call on human resources, or their manager, or the business owner, or you, and ask this question:
"How come I'm getting paid less, they passed the fiscal cliff thing...?"
I'm being facetious of course, but the newly passed 'fiscal cliff bill' has been highlighted as keeping a tax increase from hitting 98% of Americans.
...And that is true in regards to federal income taxes, but what was interestingly (and likely intentionally) left out of the President's late night speech on Jan. 1 was the sunset of the social security payroll tax holiday.
As a result of that sunset, the employee portion of the social security payroll tax will increase in 2013 from 4.2% to 6.2%. Click here for the new IRS Guidance.
A 2% increase for a family earning $50,000 means $1,000 less in take home this year. A family earning $100,000 takes home $2,000 less this year. There is a cap on the tax at $113,700.
Unfortunately today, very few working employees truly understand the taxes and calculations that impact their paycheck. Business owners, managers, and hr directors are likely to have to deal with a number of questions around this fact over the next number of weeks.
Tuesday, January 1, 2013
Saturday, December 22, 2012
Fiscal Cliff Diving for Small Business Owners
Jeepers, its been a year since my last post! I realized my hiadous started when my second child went mobile (parents know what that means...). Time to get back at it.
Fiscal Cliff !!! Yes its an overplayed term, but here's what is likely to happen...
Since its December 22nd and Congress is vacationing for the holiday, there are only two likely outcomes that will happen upon their return: #1. No deal by Jan 1 or #2. A short term fix to be adjusted in 2013.
Either of these paths mean a pain in the rear for small business owners trying to manage payroll.
For those managing payroll in-house using software, you'll likely have to perform a download of the tax tables that will be used starting Jan.1. If the download doesn't work, then you'll have to spend time with customer service. Hopefully service is state-side and they have a large team because if the download didn't work for you it didn't work for others.
You will have to do this twice - because there will again likely be adjustments at some point in Jan/Feb, maybe even March and the adjustments to the income tax tables or payroll tax holiday will likely be retoractive for some tax payers (maybe some or all of your employees).
What my clients are telling me...
I'm hearing owners and managers who have done payroll in-house for years finally consider outsourcing because they don't have the time to spend dealing with these adjustments and making sure they are correct. Obviously incorrect payroll tax calculations = fines and penalties.
It seems outsourcing payroll is a viable plan for the next six months to a year for even the most 'anti-outsourcing' small business owners, at least until we get some stability in the tax code.
Fiscal Cliff !!! Yes its an overplayed term, but here's what is likely to happen...
Since its December 22nd and Congress is vacationing for the holiday, there are only two likely outcomes that will happen upon their return: #1. No deal by Jan 1 or #2. A short term fix to be adjusted in 2013.
Either of these paths mean a pain in the rear for small business owners trying to manage payroll.
For those managing payroll in-house using software, you'll likely have to perform a download of the tax tables that will be used starting Jan.1. If the download doesn't work, then you'll have to spend time with customer service. Hopefully service is state-side and they have a large team because if the download didn't work for you it didn't work for others.
You will have to do this twice - because there will again likely be adjustments at some point in Jan/Feb, maybe even March and the adjustments to the income tax tables or payroll tax holiday will likely be retoractive for some tax payers (maybe some or all of your employees).
What my clients are telling me...
I'm hearing owners and managers who have done payroll in-house for years finally consider outsourcing because they don't have the time to spend dealing with these adjustments and making sure they are correct. Obviously incorrect payroll tax calculations = fines and penalties.
It seems outsourcing payroll is a viable plan for the next six months to a year for even the most 'anti-outsourcing' small business owners, at least until we get some stability in the tax code.
Tuesday, December 13, 2011
Making a January Payroll Switch to a Payroll Company
January 1st is just around the corner, and this time of year I tend to get a lot of calls from business owners and CEO/CFOs looking to outsource their payroll for the first time.
January is a great time to start your payroll outsourcing experience because all payroll tax balances have reset at zero. This minimizes the data that payroll companies have to enter into their system (outstanding payroll tax balances, etc...), and reduces the chance for an error during conversion.
If you have made the decision to outsource I recommend getting the paperwork and set up of your account completed early. There are a lot of companies who begin outsourcing or make a change in providers this time of year and you'd rather be in and done and not caught in a shuffle or near a deadline when your account set up is happening - with so many other accounts being set up simultaneously, quality could be sacrificed.
Schedule a time with the sales representative of your payroll company to be live and on site for the first payroll to help ease the new experience.
Then figure out what revenue generating tasks your going to accomplish with your new free time now that the payroll company is taking the time burden of payroll off your shoulders.
January is a great time to start your payroll outsourcing experience because all payroll tax balances have reset at zero. This minimizes the data that payroll companies have to enter into their system (outstanding payroll tax balances, etc...), and reduces the chance for an error during conversion.
If you have made the decision to outsource I recommend getting the paperwork and set up of your account completed early. There are a lot of companies who begin outsourcing or make a change in providers this time of year and you'd rather be in and done and not caught in a shuffle or near a deadline when your account set up is happening - with so many other accounts being set up simultaneously, quality could be sacrificed.
Schedule a time with the sales representative of your payroll company to be live and on site for the first payroll to help ease the new experience.
Then figure out what revenue generating tasks your going to accomplish with your new free time now that the payroll company is taking the time burden of payroll off your shoulders.
Monday, August 1, 2011
How Direct Deposit Saves Business Owners and Employees Money
Have you ever received a check for a really small sum?
Did you cash it?
The other day I received a check for $.36 (not a typo, 36 cents!). It was the first time I remember thinking, 'it would cost me more money to cash this check, than this check is worth.'
How much does it cost your employees to cash their checks?
Math: let's say $3.80 for a gallon of gas today, 2 miles each way to the bank. Let's say 20 minutes door to door (standing in line at the bank or depositing via the ATM). And how much is your employee's time worth (20 minutes, 1/3 of what they make an hour)?
Some banks may charge fees for cashing a check if the employee doesn't bank there (it might be the closest one to the office), or doesn't have the right level of bank account. Also, if it's a deposit, funds may not be available for a few banking days (is rent due this weekend?).
...And how much does it cost you as an employer?
Bankers will tell you, often the only time people stand in line is on pay day. That's every friday, the 1st, 15th, and end of the month, and the next banking day after holidays. That 20 minutes might be more than 20 minutes.
Did they leave on their lunch break?
Will they make it back in time, or are you paying them to wait at the bank?
How much do they earn every 15 minutes, and how much in payroll taxes are you paying to the government on that employee while their away?
There's another option.
If you utilize direct deposit, funds are available on pay day, and no one has to leave the office to cash a paycheck. Offering direct deposit could save yourself and the employee a significant amount of time and money.
Did you cash it?
The other day I received a check for $.36 (not a typo, 36 cents!). It was the first time I remember thinking, 'it would cost me more money to cash this check, than this check is worth.'
How much does it cost your employees to cash their checks?
Math: let's say $3.80 for a gallon of gas today, 2 miles each way to the bank. Let's say 20 minutes door to door (standing in line at the bank or depositing via the ATM). And how much is your employee's time worth (20 minutes, 1/3 of what they make an hour)?
Some banks may charge fees for cashing a check if the employee doesn't bank there (it might be the closest one to the office), or doesn't have the right level of bank account. Also, if it's a deposit, funds may not be available for a few banking days (is rent due this weekend?).
...And how much does it cost you as an employer?
Bankers will tell you, often the only time people stand in line is on pay day. That's every friday, the 1st, 15th, and end of the month, and the next banking day after holidays. That 20 minutes might be more than 20 minutes.
Did they leave on their lunch break?
Will they make it back in time, or are you paying them to wait at the bank?
How much do they earn every 15 minutes, and how much in payroll taxes are you paying to the government on that employee while their away?
There's another option.
If you utilize direct deposit, funds are available on pay day, and no one has to leave the office to cash a paycheck. Offering direct deposit could save yourself and the employee a significant amount of time and money.
Saturday, May 28, 2011
How to Understand Employee Labor Costs for a Small Business
The other day I was sitting in on a consulting session with a group of new restaurant owners who were sampling ingredients that would potentially make up their restaurant's new panini sandwiches. The group was comprised of approximately five or six people, only one of whom had extensive experience in the restaurant industry.
All of them, however, had experience in business. And one thing they understood was the cost to make the sandwich included more than just bread, lettuce, and other food ingredients.
The employee cutting the bread, slicing the tomatoes, and preparing the sandwich must also be paid, as do the IRS and State governments on employer taxes.
Dividing your employee's hourly wage plus employer taxes by 60 (as in minutes), you'll be able to understand your labor cost per minute. Knowing that it takes five minutes to make your special Chicken Caesar panini, you can add your labor cost for that time to your ingredients to get a better understanding of the your cost of that tasty sandwich. You'll have a better grip on price setting this way too, as, due to your costs, maybe charging $7.99 is more appropriate than $6.99.
Unless, of course, you're in the airport, where $14.99 seems to be appropriate:)
All of them, however, had experience in business. And one thing they understood was the cost to make the sandwich included more than just bread, lettuce, and other food ingredients.
The employee cutting the bread, slicing the tomatoes, and preparing the sandwich must also be paid, as do the IRS and State governments on employer taxes.
Dividing your employee's hourly wage plus employer taxes by 60 (as in minutes), you'll be able to understand your labor cost per minute. Knowing that it takes five minutes to make your special Chicken Caesar panini, you can add your labor cost for that time to your ingredients to get a better understanding of the your cost of that tasty sandwich. You'll have a better grip on price setting this way too, as, due to your costs, maybe charging $7.99 is more appropriate than $6.99.
Unless, of course, you're in the airport, where $14.99 seems to be appropriate:)
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