Tag Archive: payroll

Unique Aspects of Payroll Law and Practice in Texas

Unique Aspects of Payroll Law and Practice in Texas

There is no personal state income tax in Texas. Which means no withholding of State Income Taxes.

The Texas State Agency charged with enforcing the state wage and hour laws is:

The Texas Workforce Commission
101 East 15th St.
Austin, Texas 78778-0001
512-837-9559
www.twc.state.tx.us/

Except for taxes and student loans there are no garnishments in Texas. No creditor other than the IRS or one of the student loan collection agencies can take money out of your paycheck without your permission.

The agency that collects and pays unemployment benefits is the Texas Workforce Commission. Unique Aspects of Payroll Law and Practice in Texas

Its main office is in Austin, Texas. Their address is:

Texas Workforce Commission
101 East 15th Street
Austin, Texas 78778-0001
512-837-9559
www.twc.state.tx.us/

The unemployment rate varies based on your company’s experience but the initial rate starts at 2.7% on the first 9000.00 of wages paid to an employee in the state.

There is no requirement in Texas for a company to carry Workers Compensation Insurance. Texas is the only state where it is not required. Unique Aspects of Payroll Law and Practice in Texas

Texas now allows mandatory imposition of Direct Deposit. The employer just cannot choose the financial institution the employee has the right to pick any financial institution that accepts direct deposits. There must be no additional fees to the employee for direct deposit. Unique Aspects of Payroll Law and Practice in Texas

Another unique aspect of Payroll in Texas is there is no provision in the State law for overtime. All overtime is governed only by FLSA if appropriate. So a purely intrastate employer in Texas does not have to legally pay overtime premium. Unique Aspects of Payroll Law and Practice in Texas

The state minimum wage in Texas is $7.35 per hour. It used to be well under federal rates.

In Texas you must pay at least semi-monthly except that FLSA-exempt employee can be paid on a monthly basis.

Payment on termination in Texas is six days for an involuntary termination and the next regular payday for a voluntary resignation

Texas requires the following information on an employee’s paystub:

  • Employee’s Name
  • Pay rate
  • Gross and net earnings
  • Amount and purpose of deductions
  • Hours worked or work done if piece work

Escheat laws in Texas require that unclaimed wages be paid over to the state after one year and 180 days if less than $100.00. The employer is further required in Texas to keep a record of the wages abandoned and turned over to the state for a period of 10 years. Unique Aspects of Payroll Law and Practice in Texas

Wages due a deceased employee are not covered by any provision in Texas.

Texas State new hire reporting requirements are that every employer must report every new hire and rehire. The employer must report the federally required elements of:

  • Employee’s name
  • Employee’s address
  • Employee’s social security number
  • Employer’s name
  • Employers address
  • Employer’s Federal Employer Identification Number (EIN)

Plus they can optionally report

  • Date of Birth
  • Date of Hire
  • Payroll address for Child Support Notice

This information must be reported within 20 days of the hiring or rehiring.
The information can be sent as a W4 or equivalent by mail, fax or electronically.
There is no penalty currently for a late report.
The Texas new hire reporting agency can be reached at 888-839-4473 or on the web at www.newhire.org/tx .

There is no provision in the Texas State Payroll laws covering mandatory rest or meal breaks. Unique Aspects of Payroll Law and Practice in Texas

Cafeteria Plan and 401(k) deferrals that are exempt from federal income tax are counted as taxable income for unemployment insurance calculation in Texas.

Texas requires magnetic media reporting of earnings and contributions for unemployment insurance purposes if the employer has at least 250 employees to report.

Texas has no State Income tax so no State W2’s have to be prepared, distributed or transmitted to the state

Texas has the following provisions for child support deductions:

    • When to start Withholding? Immediately after receipt of order.

 

    • When to send Payment? Within 7 days of Payday.

 

    • When to send Termination Notice? Within 7 days of termination.

 

    • Maximum Administrative Fee? $2 per month.

 

    • Withholding Limits? Federal Rules under CCPA.

 

The Texas agency charged with enforcing Child Support Orders and laws is:

Child Support Division
Office of the Attorney General
300 W. 15th Street
Austin, TX 78701
512-460-6000
http://www.oag.state.tx.us/child/#services

States have different requirements for maintaining wage and hour records that vary from the two or three years FLSA requires depending on the type of record. Texas has no provision in the law concerning retention Unique Aspects of Payroll Law and Practice in Texas

Payroll Alabama, Unique Aspects of Alabama Payroll Law and Practice

Payroll Alabama, Unique Aspects of Alabama Payroll Law and PracticePayroll Alabama, Unique Aspects of Alabama Payroll Law and Practice

 

 

The Alabama State Agency that oversees the collection and reporting of State income taxes deducted from payroll checks is:

Department of Revenue
Income Tax Division
Withholding Tax Section
50 North Ripley St.
P.O. Box 327480
Montgomery, Alabama 36132-7480
334-242-1300
www.ador.state.al.us/withholding/index.html

Alabama requires that you use Alabama form “A-4, Employee’s Withholding Exemption Certificate” instead of a Federal W-4 Form for Alabama State Income Tax Withholding.

Not all states allow salary reductions made under Section 125 cafeteria plans or 401(k) to be treated in the same manner as the IRS code allows. In Alabama cafeteria plans: are not taxable for income tax calculation; are taxable for unemployment insurance purposes. 401(k) plan deferrals are: not taxable for income taxes; are not taxable for unemployment purposes.

In Alabama supplemental wages are taxed at a 5% flat rate.

You may file your Alabama State W-2s by magnetic media if you choose to.

The Alabama State Unemployment Insurance Agency is:

The Department of Industrial Relations
649 Monroe Street
Montgomery, Alabama 36131
334-242-8990
www.dir.state.al.us/

The State of Alabama taxable wage base for unemployment purposes is wages up to $8000.00.

Alabama requires Magnetic media reporting of quarterly wage reporting if the employer has at least 250 employees that they are reporting that quarter.

Unemployment records must be retained in Alabama for a minimum period of five years. This information generally includes: name; social security number; dates of hire, rehire and termination; wages by period; payroll pay periods and pay dates; date and circumstances of termination.

The Alabama State Agency charged with enforcing the state wage and hour laws is:

The Department of Industrial Relations
649 Monroe Street
Montgomery, Alabama 36131
334-242-8990
www.dir.state.al.us/

There is no provision for minimum wage in the State of Alabama.

There is also no general provision in Alabama State Law covering paying overtime in a non-FLSA covered employer.

Alabama State new hire reporting requirements are that every employer must report every new hire, rehire and recall. The employer must report the federally required elements of:

  • Employee’s name
  • Employee’s address
  • Employee’s social security number
  • Employer’s name
  • Employers address
  • Employer’s Federal Employer Identification Number (EIN)

This information must be reported within 7 days of the hiring or rehiring.
The information can be sent as a W4 or equivalent by mail, fax or electronically.
There is a $25.00 penalty for a late report in Alabama.

The Alabama new hire reporting agency can be reached at 334-353-8491 or on the web at www.dir.state.al.us/nh.htm .

Alabama does allow compulsory direct deposit but the employee’s choice of financial institution must meet federal Regulation E regarding choice of financial institutions.

Alabama has no State Wage and Hour Law provisions concerning pay stub information.

In Alabama there are no statutory requirements concerning pay frequency or the lag between when the lag time between when the services are performed and when the employee must be paid.

Nor for that matter does Alabama have legal provisions concerning when a terminated employee, voluntary or involuntary, must be paid.

Deceased employee’s wages must be paid when normally due to the surviving spouse or custodian of minor children.

Escheat laws in Alabama require that unclaimed wages be paid over to the state after one year.

There is no provision in Alabama law concerning record retention of abandoned wage records.

There is no provision in Alabama law concerning tip credits against State minimum wage.

In Alabama the payroll laws covering mandatory rest or meal breaks are only that: minors under 16 must have 30 minutes rest after five hours of work.

There is no provision in Alabama law concerning record retention of wage and hour records therefor it is probably wise to follow FLSA guidelines.

The Alabama agency charged with enforcing Child Support Orders and laws is:

Alabama Department of Human Resources
Child Support Enforcement Division
50 Ripley St.
Montgomery, AL 36130-1801
334-242-9300
www.dhr.state.al.us/csed/default.asp

Alabama has the following provisions for child support deductions:

  • When to start Withholding? Immediately after receipt of order.

 

  • When to send Payment? Within 7 days of Payday.

 

  • When to send Termination Notice? Within 7 days of termination.

 

  • Maximum Administrative Fee? $2 per month.

 

  • Withholding Limits? Federal Rules under CCPA.

 

Please note that this article is not updated for changes that can and will happen from time to time.

Payroll Best Practices: What Fits Your Small Business Best?

By Cindy Waxer.

Most small businesses understand the value of smart payroll practices. But many fail to anticipate the negative impact of this business-critical activity if poorly executed. While a solid payroll system can keep employees happy and the government satisfied, poor payroll practices can create tax-related nightmares, send labor costs skyrocketing, and prompt an employee exodus.

Fortunately, small businesses need not invest millions in high-end software programs or high-priced consultants to make the most of payroll. Here, experts and entrepreneurs alike chime in on what it takes to put in place world-class payroll practices on a small business budget.

1. The benefits of a do-it-yourself strategy

When it comes to payroll, using pen and paper or a simple Excel spreadsheet is still commonplace. That’s because a manual payroll system is easy to get off the ground and one of the most cost-efficient approaches to issuing checks and tracking payments. What’s more, a DIY-payroll system doesn’t have to bend to the constraints of an off-the-shelf software program. Nor must small business owners spend thousands of dollars customizing a manual payroll system.

Pull-Quote-Tall.pngHowever, there is often an opportunity cost to entrepreneurs who take on the burden of handling their own payroll. After all, hours spent calculating overhead, figuring tax withholding, and issuing payments translate into time not spent on things like refining your business’s current production capability, brainstorming new product ideas, or prospecting for new customers. These intangible losses won’t directly show up on a profit and loss statement, but after a few years of stagnant growth, an entrepreneur might discover that their time is too valuable to be devoted to back-office clerical work like payroll.

2. Deploy a software program that’s right for your business

These days, there’s no shortage of payroll software packages promising to simplify accounting, calculate and remit payroll taxes, print paychecks, ensure government compliance and provide paystubs to employees.

Just ask Barbara Kittrell, owner of Kittrell/Riffkind Art Glass, a Dallas-based art glass studio specializing in custom-stained glass. “When I used to do my taxes, it would take hours because I had no way of tracking it manually,” recalls Kittrell. “It used to take way longer and it all had to be done by hand and then verified. I tended to be a little dyslexic with numbers so I had to do everything over and over just to make sure it was right.”

That is until Kittrell converted to a small business accounting and payroll software solution. Today, Kittrell says payroll activities that used to take an hour-and-a-half now require “just minutes” to complete. Better yet, the system allows her to easily add and subtract new workers as they come and go, making it easy to adjust to seasonal workflows.

CrowdSPRING’s introduction to payroll software wasn’t quite as smooth as that of Kittrell’s but the adventure has since paid off. The Chicago-based online marketplace for buyers and sellers of creative services began with one payroll package that Mike Samson, the company’s co-founder, describes as nothing short of “awful.” Plagued by an unfriendly user interface and poor customer service, he eventually switched to a different software provider and now Samson says crowdSPRING’s 14 employees couldn’t be happier.

“They have access to their accounts, they can print a copy of a check stub, or sign right in and have access to everything,” says Samson. “It saves us money and our employees love it because [with its direct deposit capabilities], nobody wants to have to deposit a paycheck nowadays.”

3. Consider outsourcing

Sometimes running the most seamless payroll processes means not running them at all. At least, not in-house. Many small businesses turn to third-party providers to oversee their payroll practices.

“Because of its complexities and the changing rules and regulations, I’m a fan of outsourcing payroll,” says Tom Gegax, founder of Gegax Advisors and author of The Big Book of Small Business: You Don’t Have To Run Your Business By The Seat Of Your Pants. “A small business doesn’t want to mess around with payroll. Plus, it’s so inexpensive to outsource payroll—for a tiny company, it’s worth it.”

To learn more, check out our earlier article on the decision to outsource payroll.

It’s easy to do the math. Simply calculate the number of hours your employees spend on a weekly basis tending to payroll activities. Then compare these costs to the price of the packages being offered by third-party providers. Don’t forget to factor in additional in-house costs such as printing expenses, distribution fees, creating tax documents, and more. Chances are, you’ll save money by handing over payroll activities to an outsourcing company.

But not all small business owners are ready and willing to sing the praises of outsourcing. As far as Samson is concerned, payroll software offers “phenomenal access to information” while outsourcing arrangements can make business owners feel as if they’ve lost control over their finances and payroll processes, so choose accordingly.

Be true to your company

Doing it yourself, using a payroll software package, or paying for a third-party provider—these are a small business owner’s major choices when it comes to satisfying your employees and providing the best possible payroll practices. But remember: Just as no two companies are alike, no two small businesses are likely to have exactly the same set of processes. So decide what’s right for your specific company and industry.