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2017 FUTA Credit Reduction – How much will you owe?

The U.S. Department of Labor released the listing of FUTA Credit Reduction States for 2017. The standard FUTA rate is 6.0 percent on the first $7,000.00 of wages. Employers in most states will receive a credit of 5.4 percent against the rate, resulting in net tax rate of 0.6 percent; however, California and the Virgin Islands had loans with the Federal Unemployment Trust Fund that were still outstanding. As a result, these states will have their FUTA credit amount reduced for 2017 filing as a way to recover the funds still owed to repay these loans.

Employers in the following states and jurisdictions will have their credit reduced from 5.4 percent to 3.3 percent for 2017 making the FUTA tax rate 2.7 percent:

  • California
  • Virgin Islands

The FUTA credit reduction only applies to employers who pay SUI wages to California and the Virgin Islands All other employers will receive the full FUTA credit of 5.4 percent.

The following is a summary of all states with a 2017 credit reduction and their net FUTA rate:

State              Credit Reduction Percentage             Maximum Tax Increase Per Employee             2017 Net FUTA Rate
California                    2.1%                                                               $147.00                                                           2.7%
Virgin                           2.1%                                                               $147.00                                                           2.7%
Islands

For example, clients with a weekly frequency will have the amount they owe divided by three. Clients that are bi-weekly and semi-monthly will have the amount they owe divided by two. The client letters indicate the incremental billing, if applicable. This process will reduce client burden. Please contact Quality Assurance with requests for additional installment payment options.

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Compliance Alert: December 31, 2017 and January 1, 2018 Local Minimum Wage and Paid Sick Leave Updates

Effective December 31, 2017, covered employees in the following local jurisdictions will be subject to a new minimum wage rate.

The new minimum wage rates are listed below and linked to the applicable ordinance for additional details regarding coverage.  The links can be accessed by hovering over the text and clicking.

 

New York Jurisdictions:

 

Effective January 1, 2018, covered employees in the following local jurisdictions will be subject to a new minimum wage rate.  The new minimum wage rates are listed below and linked to the applicable ordinance for additional details regarding coverage.  The links can be accessed by hovering over the text and clicking.

Arizona Jurisdictions:

 

California Jurisdictions:

 

Maine Jurisdictions:

 

New Mexico Jurisdictions:

 

Washington Jurisdictions:

 

Paid Sick Leave Laws/Ordinances

The following paid sick leave rules are effective as of January 1, 2018 in the following jurisdictions.  Complete coverage requirements can be found in the linked laws/ordinances, which can be accessed by hovering over the text and clicking.

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The Thanksgiving Tradition Continues at Advantage

Owner Bruce Patz continues the 20-year tradition of giving each staff member a fresh Thanksgiving turkey. A big thank to Bruce and Bob’s Turkey Farm in Lancaster, MA.

famBob’s Turkey farm is a family owned and operated business. Robert Van Hoof started this business in 1954 with just 125 turkeys.  Bob is now retired, but likes to check in with us occasionally.  We are now raising approximately 12,000 turkeys on our farm in Lancaster.

Richard Van Hoof, Bob’s son, is responsible for the breeding, hatching and raising of the turkeys. Susan Miner, Bob’s daughter, is responsible for the retail part of the business as well as the bookkeeping.  Casey MacGregor, Bob’s grandson, is now responsible for our farm kitchen. We have a team of dedicated and loyal employees who have been with us for years and are more than willing to help you and answer your questions when you call the farm.

Our turkeys are a Broad Breasted White Turkey originating in Andover, MA. We breed, raise, and slaughter all of our own turkeys here in Lancaster. All of our turkeys are fed a well balanced grain diet. We do use a preventative feed while they are baby turkeys, however, it does not contain antibiotics. This gives our birds a healthy start before they transition to natural nutrients. Our birds are grown in barns and outdoor pens, free to move around as they wish.

Even though we had a devastating fire June 30, 2016 we are open as usual six days a week and will have Thanksgiving Turkeys for sale.  Thank you to all our customers, friends, family and community for all the support and kindness you have shown us since the fire, we truly appreciate everything. www.BobsTurkeyFarm.com

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2018 State Minimum Wage Increases

Dear Valued Client:

To assist with your planning, the following indicates states with increased minimum wage rates effective January 1, 2018.

Note:   The New York effective date for minimum wage changes is December 31, 2017.

State Non-Tipped Employees Tipped Employees
Alaska

$9.84

N/A

Arizona

$10.50

$7.50

California $11.00 (Large ER)

$10.50 (Small ER)

N/A
Colorado $10.20 $7.18
Florida $8.25 $5.23
Hawaii $10.10 $9.35
Maine $10.00 $6.00
Michigan $9.25 $3.52
Minnesota $9.65 (Large Employer)
$7.87 (All others)
N/A
Missouri $7.85 $3.925
Montana $8.30 N/A
New Jersey $8.60 $2.13 (didn’t change)
New York $10.40* N/A
Ohio $8.30 $4.15
Rhode Island $10.10 $6.21
South Dakota $8.85 $4.425
Vermont $10.50 $5.25
Washington $11.50 N/A

*Minimum wage rates may vary by industry and location within New York State.

We are happy to assist you in complying with these new minimum wage rates. Review your payroll to determine if your business and employees are affected by these changes and notify us of any necessary adjustments. Failure to comply with minimum wage laws may result in substantial penalties.

Important:      Advantage will not make any changes to your employees’ payroll, including rate changes without your express instructions to do so.

If you have questions, please contact your payroll specialist.

 

Sincerely,

The Specialists at Advantage

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Washington issues rules for mandatory paid sick leave in 2018

November 3, 2017 by 

Mandatory paid sick leave in Washington starts in just over two months. Last week, the Department of Labor & Industries (L&I) released new state requirements on how the paid sick leave law will be implemented. As a result of voter-approved Initiative 1433, employers are required to provide paid sick leave starting January 1, 2018. The newly adopted rules provide details on how the law will be carried out, covering topics like how employees accrue paid sick leave, what they can use it for, when they can use it, and how to calculate rates of pay for paid sick leave.

Enforcement phase of rulemaking underway now.

A second phase of rulemaking on mandatory paid sick leave is just getting underway. It will detail how the new law will be enforced. This process also offers opportunities to provide input, including two public hearings in November. The deadline for public comment is November 17.

2018 minimum wage.

Along with mandatory paid sick leave, Initiative 1433 also increases the state minimum wage annually over the next three years. In 2018, the state minimum wage will climb to $11.50 an hour. The initiative also ensures employers pay their employees tips and service charges.
For more information about the upcoming public hearings and the paid sick leave rules process, go to www.Lni.wa.gov/WorkplaceRights/Wages/Minimum/1443.asp. (Washington State Department of Labor & Industries News Release, October 20, 2017.)

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Important Information About Year-End

Year-end 2017 Is Almost Here!

Dear Valued Client,

Advantage is committed to providing you with the highest level of customer service. To help ensure accurate processing of you year-end package, we are providing this year-end newsletter. Please review it carefully, as it contains a wealth of information that can help make your year-end tax and payroll reporting easier, as well as accurate. For your convenience, the final page of the newsletter is a Fringe Benefit Payroll Worksheet, which will help you report any fringe benefits and other special processing requests. Simply complete the worksheet and email/fax to your payroll specialist before you process you last payroll of 2017. If you use our On-line Instant Payroll® product to submit your payroll, please contact our Instant Payroll® Support Team if you need assistance in posting your fringe benefits.

Please note that our offices will be closed on Monday, December 25, 2017 and Monday, January 1, 2018 in observance of the Christmas and New Year’s Day holidays. Please share this information with your Tax Advisor. It has been our pleasure serving your payroll and tax needs in 2017 and we look forward to an outstanding year-end. If you have questions regarding this information, please call our office: 978-637-2266.

Sincerely,

Advantage Payroll Services

Verifying Social Security Numbers/Names

There are two Internet options you can use to verify that your employee names

and Social Security numbers (SSN) match Social Security Administration’s (SSA) records. You can logon to www.socialsecurity.gov/employer/ssnv.htm

  • Verify up to 10 names and SSNs (per screen) online and receive immediate results. This option is ideal to verify new hires.
  • Upload overnight files of up to 250,000 names and SSNs and usually receive results the next government business day. This option is ideal if you want to verify an entire payroll database or if you hire a large number of workers at a time. You can also verify 1 to 5 names/SSNs by calling SSA’s toll-free number for employer, 1-800-722-6270, Monday to Friday 7 a.m. to 7 p.m. Eastern Time or SSA’s general toll-free number 1-800-772-1213, Monday to Friday 7 a.m. to 7 p.m. local time. Verification will be given over the phone.
2017 Payroll Reporting Deadlines

In order for us to produce timely and accurate payrolls for your final processing of the year, we ask that you observe our deadlines for reporting payroll information.

The payroll check date determines the year in which the payroll is reported – payroll period start and end dates do not. To avoid tax reprocessing and amendment charges, all payroll information for 2017 should be reported by Friday, December 29, 2017 or before a payroll with a January 2018 check date is processed. Please note that once a payroll has been processed with a 2018 check date, any changes to your 2017 files will be processed as adjustments. Please see the section “Adjustments to Tax Year 2017” for more detailed information.

Please contact your payroll specialist for specific cut-off times. Please also remind your accountant to report payroll adjustments no later than the cut-off date. Please review and verify your check dates carefully when reporting payroll at year end.

Thank you for your cooperation and understanding.

Changes to Agency Filing of Forms W-2 and 1099

Starting in 2016, Forms W-2 and 1099 will be due on January 31 of the following year, rather than February 28 as they have in the past. Many state and local tax agencies are also following this change.

In December 2015, President Obama signed into law a provision in the Consolidated Appropriations Act passed by Congress. Part of this provision changes the filing date for employer copies of Forms W-2 and 1099 from February 28 (March 31 if filed electronically). Now all Forms W-2 and 1099 are due on January 31, including electronic filing. In addition to SSA filing, these forms are now being filed with the IRS.

The W-2 filing deadline is only changing for employers. The deadline for employees to file with the Internal Revenue Service will remain April 15.

Adjustments to Tax Year 2017

Advantage will close all client payroll accounts on Friday, December 29, 2017. Reporting changes to payroll information after Friday, December 29 could result in amended / revised tax returns. Both amended and revised returns may be subject to additional processing fees and late deposit penalties from the IRS. Please contact your payroll specialist for an estimate of these additional fees.

 

Please note that should corrections be needed, the original Form W-2 should be submitted to the Internal Revenue Service (IRS) WITH the Form W-2C for any changes.

Should you have any questions, please contact your payroll specialist.

Magnetic Media Forms W-2

Employers who submit 250 or more employee Forms W-2 for the calendar year are required by the Social Security Administration (SSA) and some state and local agencies to file this information electronically. Failure to comply could result in costly penalty assessments.

Clients who do not use our Tax Filing Service received a letter in November regarding out Tax Reconciliation option that reports and reconciles year-end information in accordance with federal, state, and local requirements. Please contact your payroll specialist if you did not receive this letter.

Critical Due Dates for 2017 Taxes

Please note the following deadlines for tax payments for tax year 2017. Due date for undeposited tax liability of $100,000 or more is Tuesday, January 2, 2018. Final 2017 due date for monthly depositors is Tuesday, January 16, 2018 Please contact your payroll specialist for details.

Reporting Health Coverage on 2017 Forms W-2

Federal regulations require employers who filed 250 or more Forms W-2 for the prior tax year to report the total aggregate cost of certain types of health care coverage.

The reporting is informational only and must be reported as a single item in Box 12 on Form W-2, labeled with code “DD”. Please report this amount to your Payroll Specialists so that it can be properly reported on Form W-2.

Certain employers are not subject to this reporting, including Indian tribal governments and small employers-defined as fewer than 250 Forms W-2 in the prior tax year.

Taxpayer Identification Numbers

An individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the IRS to individuals who are resident or non-resident aliens, who are NOT eligible for a Social Security Number (SSN) because they do NOT have work eligibility granted by the U.S. Bureau of Citizenship and Immigration Services (BCIS). ITINs are also issued to their spouses and dependents. ITINs are a nine digit number formatted like a SSN but with the first digit of “9”. ITIN’s are only used for Federal income tax purposes.

The issuance of an ITIN does not: Entitle the recipient to Social Security benefit or the Earned Income Tax Credit (EITC), create an inference regarding the individuals’ immigration status or give the individual the right to work in the U.S.

Do not accept an ITIN in place of a SSN for employee identification or for work eligibility. An individual with an ITIN who later becomes eligible to work in the United States must obtain a SSN.

Missing Agency ID Numbers

Many state and local agencies are moving toward requiring electronic filing of payments and returns. Some state agencies will not allow payments to be made or returns to be filed without a valid ID. You may be responsible to remit tax payments and returns until Advantage receives a valid ID.

Tax agencies do not send ID numbers to Advantage, so we rely on you to report this information to us with acceptable documentation of your ID number, such as a copy of any pre-printed agency correspondence or a tax return that includes you ID number.

As a reminder, it is important that you always forward any payroll related notices, forms, coupons, or other correspondence that you receive from any federal, state or local agency. This allows us to verity that we have the most up to date information for your account.

Our goal is to obtain missing information so that we can process your tax returns and payments correctly. If you are unsure how to contact an agency to register for an ID, please talk with your payroll specialist.

2018 Federal Tax Deposit Frequency

Each fall, the Internal Revenue Service (IRS) mails Tax Deposit Frequency letters to all employers, notifying them of their deposit frequency for the next year. Your tax deposit frequency will either be semi-weekly or monthly, based on your company’s total federal tax liability for the look-back period of July 1, 2016 to June 30, 2017.

This notice contains important information for Advantage to correctly calculate due dates for your federal tax liability. Please forward a copy of the notification letter to your payroll specialist as soon as you receive it.

Please note: If you are a monthly depositor and your tax liability exceeds $100,000 within one deposit period the associated deposit is required the next business day and your filing frequency change to semi-weekly for the remainder of the calendar year.

2018 Rate and Filing Frequency Changes

Most State review and update employers’ unemployment insurance (SUI) rates effective January 1 for the New Year. You should receive a new rate notice in late 2017 from each state in which you are registered.

You may also receive notification of revised state and local filing frequencies for your 2018 tax payments via agency communication.

Please forward copies of rate notices and agency letters to your payroll specialist so that we have the most current information. Advantage may not receive updated information from the different tax agencies.

Verifying Company and Employee Information

The Social Security Administration (SSA) requires that all Forms W-2 are complete and accurate. Please help us by Verifying the accuracy of your company name, address, and all tax identification numbers on file. This information is listed on the cover sheet of your third quarter 2017 tax returns. The cover sheet in your third quarter tax package also lists the employer name that will be reported on your Forms W-2 and 1099 and verifies the address to which the forms will be sent. If you find a discrepancy in your employer name and/or address, please contact your payroll specialist as soon as possible.

Prior to year-end, please request an Employee Status report from your payroll specialist. This report contains each employee’s name, address, and social security number. Please take a few minutes to verify that this information is correct and report any changes to your payroll specialist before December 29, 2017. The SSA may issue penalties for each Form W-2 submitted with an incorrect social security number or employee name. W-2C’s required to correct information that is reported after December 29 may be subject to additional fees.

Most state tax agencies are mandating electronic upload process at year end. To ensure that your returns are filed successfully and timely, it is crucial that the company and employee data is accurate. Some tax agencies edit employee information including Social Security numbers (SSN’s) and addresses. Missing SSN’s and now missing employee address can cause a return to be rejected from an agency. Filing returns on paper may result in penalties issued by the state.

Fringe Benefits

Please review your fringe benefit requirements with your accountant or tax adviser. If you use our On-line Instant Payroll® product to submit your payroll, please contact our Instant Payroll Team if you need assistance in posting your fringe benefits.

Some examples of fringe benefits:

  • Personal user of a company vehicle
  • Dependent care assistance (non-Section 125 Plans)
  • Employee business expense
  • Group term life insurance over $50,000
  • Moving expenses
  • S-Corp health insurance
  • Pension Plan
  • Employer Contributions to HAS

The taxation of fringe benefits varies by state and how it is reported on Form W-2. Due to taxation requirements, fringe benefits must be reported to Advantage and processed on or before December 29, 2017.

Ask you payroll specialist about reporting your fringe benefits during the year to eliminate the last-minute rush.

Bonus Payrolls

Bonus checks can be produced along with your scheduled payroll; however, if you want separate paperwork or you want checks issued for a date other than your normal payroll date, bonus checks must be processed separately. Please specify how the bonus checks are to be taxed, if any voluntary deductions should be withheld and whether you want checks to be live or direct deposited. If you have any questions about how your bonus checks should be taxed, contact your accountant. Report all bonus payroll in writing by faxing or emailing the information to your payroll specialist. Please provide 48 hours advance notice for exception processing.

Forms 1099

If you have independent contractors who were paid through our payroll system in 2017, Advantage will automatically prepare Form 1099-MISC for all individuals who are properly coded, regardless of the amount paid. Please notify us before December 29, 2017, if you do not want Forms 1099 prepared for contractors with less than $600.00 to report.

If you want Advantage to prepare your off-system Forms 1099, simply provide the year-to-date payment information to your payroll specialist before December 29. Be sure to include the contractor name, Address, valid tax identification number, amount paid and the specific earnings type, ie: Rent, Non-Employee Compensation.

Advantage will automatically prepare Form 1099-R (Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc) if we process checks to individuals during the year. Please be sure to provide your payroll specialist with specific distribution code reporting. If you do not want Form 1099-R prepared and/or filed, please contact your payroll specialist.

Other versions of the Form 1099 family of reporting are not offered at this time.

Reporting Amounts on Form W-2, Box 14

The Internal Revenue Service allows employers to use Form W-2, Box 14 (Other) to report certain earnings or deductions to an employee’s pay (for example, charitable contributions and union dues). Use of this box is optional, but many employers find it beneficial to note or clarify information for an employee. Let you payroll specialist know if you want to use this feature and provide the four-character description you would like printed on the Forms W-2.

Form W-2 Delivery

Advantage payroll Services understands how important your year-end tax forms and employee Forms W-2 are to you, your business and your employees. With this in mind, we have partnered with United Parcel Services (UPS) to deliver your Forms W-2 by two-day air delivery service. Please note, a signature is not required for residential locations. However, a signature is required if delivery is made to a commercial address. UPS has an unparalleled reputation for quality service and on-time deliveries.

In order to bring you this efficient services with tracking information, we ask all clients to review the street address we have on file for delivery of your tax forms. This will not affect the address to which payroll or other materials are sent. If you would like to have your Forms W-2 delivered to a P.O. Box, we can accommodate your with U.S. Express Mail for an additional fee.

Please note that deliveries outside of the United State will be charged fees based on a case-by-case basis.

 

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Yankee Lobster Company

Bruce and long time client Dennis Kelley of Yankee Lobster Company.

 

The Zanti family, owners of Yankee Lobster Company, have been in the fishing business for many generations. From the little fishing village of Augusta, Italy, Guiseppe Zanti Sr ventured to America in 1898 seeking the fertile fishing grounds that he had heard so much about from brave fishermen that had gone before. He spent several decades fishing from George’s Bank to the Gulf of Alaska. Guiseppe’s stories of fishing intrigued his son, Guiseppe Jr, and in 1921, also ventured to America to make a better future for his family.

Guiseppe Jr. started fishing for lobsters, crabs and fish in the Boston Harbor area throughout the 1920′s and 1930′s. As his sons grew up, the art of fishing was eventually passed on to them as well. By the end of World War II, Guiseppe could see that his family’s future was in the lobster industry. He began to focus his operation exclusively on lobster fishing, while the other fisherman were still seeking crab. With his sons back from military service, Guiseppe invested in several boats and expanded his fishing operations. In 1950, his sons Joseph and Frank saw an opportunity in the wholesaling of their catch.They convinced their father to open a wholesale-retail operation called “Commercial Lobster” after Guiseppe retired.

In 1989, Joseph Zanti (Frank’s son) and Dennis Kelley (Frank’s son-in-law) took over operations and have been running Commercial Lobster ever since. They continue to provide the finest in fresh seafood from the boat to your kitchen, operating from their new state-of-the-art facility on Boston’s new waterfront.

Check-out Yankee Lobster Co. on the Food Network:

Stop by or order out:
300 Northern Avenue
Boston, MA 02210-206
617-345-9799

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Employers Can Claim Tip Credit Despite Employees’ Non-Tip Work

Employers at several restaurants can claim the tip credit even though their servers and bartenders were required to perform some duties that didn’t generate tips, according to a recent federal court ruling.

Basics of the Law

The Fair Labor Standards Act (FLSA) allows employers to:

  • Pay tipped employees a cash wage of $2.13 per hour, and
  • Claim a tip credit of up to $5.12 per hour to meet the federal minimum wage requirement of $7.25 per hour, if certain requirements are met.

The law provides that employers can only claim the tip credit on hours worked by the employee in an occupation that qualifies as a “tipped employee.” So when an employee is employed in a “dual job,” employers cannot take advantage of the tip credit when the employee performs tasks unrelated to his tipped occupation.

The law gives this example: A maintenance man in a hotel who also serves as a waiter. This situation “is distinguishable from that of a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses.”

The dual jobs regulation states that when employees perform duties that are related to their tipped occupations, employers can apply the tip credit and continue to pay employees below the minimum wage rate.

The law doesn’t define “related duties” but the Department of Labor’s (DOL) Field Operations Handbook cites a regulation that “permits the taking of the tip credit for time spent in duties related to the tipped occupation … provided such duties are incidental to the regular duties of the server (waiter/waitress) and are generally assigned to the servers. However, where the facts indicate that specific employees are routinely assigned to maintenance, or that tipped employees spend a substantial amount of time (in excess of 20%) performing general preparation work maintenance, no tip credit may be taken for the time spent in such duties.”

Facts of the Recent Case

A restaurant server filed a lawsuit alleging that his employer improperly claimed the tip credit. The server’s complaint was one of several filed in the district court alleging the same theory of FLSA liability so the cases were consolidated before a single judge.

The servers and bartenders argued that they spent more than 20% of their time doing non-tipped work (for example, brewing tea and coffee, cleaning the soft drink dispensers, stocking ice, wiping tables and walls, taking out the trash, sweeping floors and cleaning restrooms). Even though the time spent in all of these tasks didn’t generate tips, the employer took a tip credit for the employee’s entire work time. The employee believed that he was entitled to compensation for the difference between the full minimum wage and the cash wage he was paid for the time spent on tasks that didn’t generate tips.

If the employee was correct, the employers in this lawsuit could be liable not only for “unpaid minimum wages,” but also for “an additional equal amount as liquidated damages.”

The employee based his claim on the DOL Field Operations Handbook’s (FOH) interpretation of the law, which in 1988 was revised to state that where “tipped employees spend a substantial amount of time (in excess of 20%) performing preparation work or maintenance, no tip credit may be taken for the time spent in such duties. This was a significant departure from the DOL’s earlier guidance.

Instead of determining whether an employee was engaged in two jobs by looking for a “clear dividing line,” as it did in its Opinion Letters, the DOL’s 1988 guidance required an employer to sort the employees’ tasks into two different categories (tip-generating tasks and related tasks that aren’t tip generating). Then, the employer should determine whether the related tasks took up more than 20% of the total time worked. If so, the employer could take a tip credit only for the time spent on tip-generating tasks.

The Court’s Ruling

In ruling in favor of the employers, the Ninth Circuit U.S. Court of Appeals rejected the employee’s reliance on the FOH. The court stated that:

  • The FOH ignores the law’s requirement to identify distinct jobs.
  • The examples in the law don’t say that an employee is engaged in two distinct jobs merely because he or she performs different tasks over the course of the day.
  • The regulation requires an assessment of whether a cluster of different tasks constitutes a particular job, as that job is ordinarily understood.
  • The FOH’s minute-by-minute and task-by-task approach is contrary to the statute, which considers only whether an employee is engaged in a single job that generates the requisite amount of tips.

The court pointed out that many jobs have dual responsibilities. Waitresses and waiters may perform some tasks that don’t generate tips, but they’ll still be considered tipped employees as long as they receive at least $30 per month in tips. (Marsh v. J. Alexander’s LLC, Dkt. No. 15-15791, 9/6/17)

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President Issues Executive Order Pushing HRA Expansion

October 17, 2017 by 

The President has issued an executive order that requires several agencies to consider proposing regulations that would, among other things, expand Health Reimbursement Arrangements (HRAs). HRAs are tax-advantaged, account-based arrangements that employers establish for employees to give employees more flexibility and choices regarding health care. Expanding the flexibility and use of HRAs would provide many Americans, including employees who work at small businesses, with more options for financing health care, according to the Administration.

Expanded HRAs
Specifically, within 120 days of the date of the order, the Secretaries of the Treasury, Labor, and Health and Human Services must consider proposing regulations or revising guidance, to the extent permitted by law and supported by sound policy, to increase the usability of HRAs, to expand employers’ ability to offer HRAs to employees, and to allow HRAs to be used in conjunction with nongroup coverage. In addition, The Secretaries are required to consider and evaluate public comments on any regulations proposed pursuant to the order.
Required Reports
The Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor and the Federal Trade Commission, must provide a report within 180 days of the date of this order and every 2 years thereafter, to the President that: (a) details the extent to which existing state and federal laws, regulations, guidance, requirements, and policies fail to conform to the policies set forth in the order; and (b) identifies actions that states or the federal government could take in furtherance of those policies.

(Presidential Executive Order: Promoting Health Care Choice and Competition Across the United States, October 12, 2017.)

Original article may be found by Clicking Here

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What Portion of Revenue Should Go to Payroll?

Q: Is there an ideal percentage of revenue that should go to payroll?

A: In my opinion, anyone who claims such a thing exists is full of it. Truth is, the figures vary widely among not only entire industries but also among the companies within them. Some industries pay low wages but have high rates of employee turnover (fast food being the prime example). The low wages may be great for owners, but turnover usually results in high costs for acquiring and training replacements—expenses that need to be added to the total cost of payroll.

The age of your staff can make a difference, too. Having young workers may provide opportunities to limit your costs for medical insurance, life insurance and retirement plans, since many young people won’t avail themselves of these benefits even if offered. (This is no excuse to practice age discrimination. I bring this up to point out the sizable—and growing—costs associated with benefits beyond wages.)

To find the right percentage for your business, start with a competitive analysis, but don’t strive to find an average number for your industry. You want to figure out what the highly profitable companies in your industry are doing. Trade associations can be a gold mine in this respect, especially for learning about members outside your local market with whom you don’t compete directly. 

Depending on what industry you’re in, there may be journals or reporting services that track this financial information. If a subscription to such a service is too expensive for your company, seek out a resource who may be a subscriber, such as your financial advisor, an accounting firm or an outside CFO like me. When I share reports from these services with my clients, they are usually shocked (in good and bad ways) by what they learn and then delighted to have the information.

Most important: Don’t obsess over achieving the “proper” percentage—it’s a guideline, not a law. If labor is a relatively unimportant cost for your business, you can still complete this exercise, but focus on other areas first; doing so can help you reduce overall costs. Additionally, keep in mind that if your long-term growth and profit strategies require creative types or high-level (read: expensive) sales, operational or management experts, you’ll have to pay for them now to set things in motion for the future.

 

Figure it out

How to calculate the percentage

To reach your revenue number, use your gross revenue minus sales taxes or items such as freight charges that you collect but then pass on to the shipping company, or equipment rentals that are billed to your client. Then tally up your total labor costs, including every item associated with employee compensation. Here’s a quick list:

  • Gross wages
  • Paid vacation pay
  • Health insurance
  • Life insurance
  • 401(k) contributions
  • Auto allowances
  • Other benefits
  • FICA taxes
  • Other state or local taxes
  • Unemployment insurance
  • State disability insurance

Divide your payroll number by your revenue number, multiply by 100, and that’s your percentage.

This story appears in the November 2014 issue of EntrepreneurSubscribe »

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