Payroll Outsourcing May Be Needed by Your Small Business

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How do you know when it's time to start outsourcing your payroll?

Well it's pretty logical; when you run out of time! Too easy? Maybe, but it's true. When there aren't enough hours in the day to handle the day-to-day operations, clients and employees the payroll outsourcing, which is one of the first functions small businesses outsource, can be a cost effective strategy for your business. It should be pretty obvious when the right time arrives but you might ask yourself these questions:

Are deadlines for payroll deposits being missed? Penalties can be as high as 10%Are you sure about the calculations for payroll tax? If not, you can be assessed with penalties.Do you have a lot of employees? With fewer than 20 or so employees just do the math comparing the cost per hour for what your doing now verses the plan a payroll outsourcing firm can provide.

Why start with Payroll outsourcing?

Even if you're the most adept business owner and manager, one of the most time consuming duties you have to perform is payroll. There are also some benefits to outsourcing your payroll to an outside professional company.

Reduce Potential Penalties from the IRS: If your payroll taxes are filed incorrectly it makes you vulnerable to fines. Outsourcing to a pro can give you some peace of mind that deadlines are being met and deposits are on time.Lower Costs: It could be less costly than hiring a temp, adding to your staff overhead or doing it yourself, depending on your needs.Direct Deposit for Employees: This is a common service that can save the people that work for you a trip to the bank. It also reduces end of the month paperwork saving you some time.Changing Regulations: Hiring a payroll pro can provide up-to-date information you can count on for new regulations, changes in forms and rates of withholding.

What services should you expect from a payroll service?

Payroll & tax calculationsReportingPrinting and distributing payroll checksDirect depositsIssuing W-2'sPayroll tax filing Deductions for 401KsTracking benefits for employees

What is the best way to choose a company to outsource your payroll to and what to look for?

One of the best ways is through referrals from friends, other businesses or your accountant or tax professional. You can also start by searching online in your local area. Some things to look for or ask before you make your final selection are:

What are their professional qualifications, licenses, experience etc.?Who will be doing the work and what's their turn-around time and customer service policy; how often can you contact them?Will they handle tax filing for you, assume any penalties if filing is incorrect and handle local filing?What do they charge; base amount, per check extra services like direct deposit? Try to avoid excess add-ons in favor of a flat fee.How will you get the data to them and is it secure?Get references from them a permission to contact them>What will you be responsible for?

Even if you decide to outsource your payroll, you are ultimately responsible so at least, for the first few months till you get comfortable working with the payroll service provider, be sure to review their work each month. This means you still have to know the laws, regulations and paper work. Just go over it with the provider.

At EASNC, we realize the payroll can be a time consuming part of your business but the process of finding a payroll outsourcing firm can be equally time consuming, confusing and disconcerting as to finding someone you can trust. EASNC can help. Our trained IRS enrolled agents will put your mind at ease. Please take the time now to contact us for a consultation.

EXECUTIVE ACCOUNTING SERVICES
976 Trinity Road
Raleigh, NC 27607
Phone: 919-859-8600
Fax: 919-859-8601
E-mail: eas-moreinfo@easnc.com

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National Minimum Wage Increases - How They Affect Umbrella Companies and You

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In April this year, the government announced the national minimum wage (NMW) for over 21s will increase by 15p from October 1 2011 to £6.08. The NMW is reviewed by the government each year and will reflect national inflation and living costs; which we all seem to be struggling with. This increase of 2.5% will intern increase the minimum wage that clients or companies will pay for contract staff through an umbrella firm.

By negotiating an experienced contractor via an umbrella company, prospective employers will have to pay a minimum of £8 an hour for the contractors' services. This is the minimum that umbrellas can process your pay. If you are on a contractor payroll, as opposed to that of a permanent employee, Holiday Pay and Employers' NIC must be taken into account, as well as the fee charged by the umbrella company.

Below is a simple table of the figures involved in your final take home wage:

New national minimum wage - £6.08

Holiday Pay (12.07%) - £0.73

NIC - £0.84

Total - £7.65

Your umbrella company's fee of, for example, £10.99 per week must also be added to the final wage. Over the average working week of 37.5 hours this is calculated at £0.29 per hour. This raises the minimum payment of contractors under an umbrella scheme to £7.94 per hour from October 1 2011.

Since January 2011, the government introduced new guidelines to halt the blatant exploitation of vulnerable temporary workers which has unfortunately taken place within the umbrella industry in previous years. Some companies had exploited their contractors by paying them below the NMW and then topping up their wage with expense claims which they are already entitled to.

This calculation of wages in this manner significantly reduces the amount of tax and NI payable. The employee to whom this is happening, unless clued up about their wage calculations, would be unaware of any wrong doings as their take home pay would be about the same. Companies doing so are avoiding tax and NI obligations and therefore breaking the law, leaving the contractor at risk of future tax liabilities.

HM Revenue and Customs have reiterated that taxable 'benefits in kind', which include meals, fuel and vouchers, do not count towards a contractor's minimum wage. If you suspect your umbrella company is doing this then report them and switch to a more reliable umbrella service immediately.

For the self-employed, tax can be a headache. Using an umbrella company or forming a limited company can be an efficient way to manage tax affairs, but ensuring you get the right structure for your business is essential.

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Choosing An Umbrella Company

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You've taken the brave leap into unknown by becoming freelance or self employed. You've also decided that working through an Umbrella Company, rather setting up a Limited Company (Ltd), is the best route to follow. Now you need just need to decide on which Umbrella service to use. Easy? Well, choosing the right one can make a massive difference to your working confidence by guiding you through the process of becoming an independent contractor.

Contractors are often introduced to umbrella companies offered through their agency. Be aware that these companies may be partners of the agency who will receive referral commissions for recommending certain companies. More often than not they will not be the most efficient companies for you so it's important to research the broad spectrum of umbrella companies out there.

Top 10 tips for selecting the best umbrella company:

Select a company whose fee structure is best suited to you. Do they charge a fixed weekly or monthly charge? Do they continue to charge if you have time off? Others may charge a percentage of your gross earnings. Fixed fee contracts will be best for higher earning contractors, making sure you take home the money you have worked for.
What is the payment frequency, or how often will you get paid? There will usually be a delay from your time sheet being handed in, it being processed and eventually the money being paid into your bank account. You will need to factor into account how long you are willing to wait for you money. Umbrella companies will often pay you through either BACS or CHAPS. BACS (Bankers' Automated Clearing Services) means payment is made to your account within 3 working days and is the most common method of payment. Payments made via CHAPS (Clearing House Automated Payment System) are credited to your account the very same day. Umbrella companies usually charge higher fees for supplying this service.
How long has the umbrella company been operating? Has it got an established contractor client base with good recommendations by other contractors? It may pay to check the company's credit rating. A well established umbrella company with a strong credit rating is less likely to collapse, securing your earnings and giving you peace of mind.
Avoid companies that have entry or exit fees or minimum term commitments with penalties for leaving early. If, for whatever reason, you decide to leave the umbrella company before your contract ends you may be bound to pay exorbitant fees.
Watch out for companies who claim 'special' expense dispensation, or process un-receipted expenses. HM Revenue and Customs insist that ALL expense claims are backed up with receipts and all umbrella companies must adhere to this policy. Those who claim otherwise are breaking the law.
When you join an umbrella company you should be offered a full contract of employment. Benefits of being employed under an umbrella firm are like those of being employed by a company and include entitlement to holiday and sick pay, maternity leave, pension provisions and of course minimum wage.
You are paying an umbrella service to benefit you and therefore it should offer you a guaranteed level of customer service with help and support when you need it. It should also promptly answer any queries you have.
A reputable umbrella company will offer you business insurances if your client or agency require it. This will cover you if you are injured whilst on contract.
Some companies offer perks such as gift vouchers and are usually a company gimmick to lure you into joining. Childcare vouchers on the other hand enable you to get full tax and NIC breaks up to a certain amount of childcare costs. If you have young children it may well be worth considering an umbrella company which does this.
Research and talk to companies. As with all services, it pays to shop around so you can be sure you have made the right decision

Once you've considered all these things, you will find it easier to choose the right umbrella company for you.

For the self-employed, tax can be a headache. Using an umbrella company or forming a limited company can be an efficient way to manage tax affairs, but ensuring you get the right structure for your business is essential.

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Payroll Services Agencies

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Payroll services are offered by agencies and firms that specialize in helping companies and other businesses with the salaries for their employees and workers. Many big and even average sized companies have problems dealing with the salaries and taxes of their workers. They often hire other people to do this but can also have problems with the salaries of these employees also, so instead they hire a firm that specializes in this field. There are a variety of things and support that an agency like this can do for them.

Preparation

One of the foremost things that a payroll services agency is expected to do is to prepare the salaries of the workers of their clients. Depending on the agreement between the agency and the company that hired the, they might be the one in charge of preparing the actual salaries of the employers. The agreement might also include the direct deposit of the actual monies into the bank account of the employee or the issuance of a check or whatever has been agreed upon between the employer and employee. This is usually the case for most firms that management of this nature. There is likely to be several copies of the paperwork that is involved so that they can submit these to the human resources head of the business that hired them. The workers are also likely to receive a copy of their salary report along with the necessary details such as deductions, taxes and other relevant things. Another preparation that is included in payroll services is the filing of annual reports for the income tax and other relevant government taxes that may be included in the salaries of the workers. Taxes come in the form of federal, local and states so it may be confusing if a person who has no background in these computes or prepares them. These taxes may also be deposited straight to the local government agencies that are collecting them. In connection to taxes, the firm that has been hired should also include in their management offer the filing of year-end tax documents of the employees.

Retirement and Savings

Some agencies also offer the management of the savings and retirement plans of the employees and workers of the company that hired the. The health benefits and insurance benefits might also be included in these. Even after the worker has retired there has to be benefits that go to him for the duration of time that he or she has worked in that specific company. Some employees that come from another business establishment might need their retirement plans, benefits and savings coordinated with the present one. The payroll services firm is also likely to keep track and follow up on time clocks that are installed in the business establishment's premises. These are a great help in keeping track of employee's comings and goings.

These are among the most common things that these kinds of agencies are likely to offer their clients. Other payroll services may be brought up specifically for companies that prefer to have specialized management.

Whether your business is small or large, consider Louisiana payroll services to handle a portion of your company's finances. Find out more by visiting http://www.payrollrx.com/.

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Payroll Wage Hour Law - What Is Considered Hours Worked Under The FLSA?

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Meal or Lunch Periods: Meal or lunch breaks are not work time and are not compensable, unless an employment agreement specifically designates meal periods as compensable. For a meal break to be excluded from an employee's working hours, it must be at least 30 minutes under normal circumstances, a shorter period may be considered a meal break under certain circumstances, such as where the employees themselves request a shorter meal period, but generally a period of less than 20 minutes, such as for coffee or snack breaks, should not be treated as a meal break and are usually considered rest periods and should be compensated as such.

Rest periods: Rest periods of 5 to 20 minutes count as hours worked and are compensable, because they are customary in industry, and they tend to increase the efficiency of the worker, which in the long run is beneficial to the employer. A rest period of more than 20 minutes may qualify as a non compensable meal break, if it can be used constructively by the employee. Like meal breaks, rest breaks are required by some states under certain conditions, but not by the FLSA.

Pre-work and Post-work Time: Whether waiting time is or is not compensable as hours worked under the FLSA depends on whether the employee is "engaged to wait" or is "waiting to be engaged". According to the Wage-Hour Division, being "engaged to wait" is compensable while "waiting to be engaged" is not. An example of "engaged to wait" would be employees that are required to stay on the employer's premises while they are waiting for their assignments. However, the employee's presence on the employer's premises is not necessarily the deciding factor. Employees can also be "engaged to wait" when they are working away from the employer's premises, such as when they are waiting to be allowed to enter a customer's home before beginning work. En example of "waiting to be engaged" would be employees who work for temporary help agencies ("Temps") and voluntarily wait in a central location to be sent on a job. Because they are waiting to be engaged, the waiting time is not compensable.

Although employers are not required to pay employees for arriving ahead of schedule for work, they must compensate an employee for the time that they have to wait when they arrive as scheduled and the work is unavailable until later.

Although employers are not required to pay employees for arriving ahead of schedule for work, they must compensate an employee for the time that they have to wait when they arrive as scheduled and the work is unavailable until later.

Travel / Commute Time: Travel from home to work (i.e., commuting) does not typically count towards hours worked. However, there are certain exceptions if the employee uses a company provided vehicle in the following way(s): (a) the commute is made for the convenience of the employer and (b) the employee is engaged in work-related tasks during the commute. Note: Commuting to and from work in a company vehicle within the normal commuting area of the business is not typically considered compensable and is subject to the terms of an employer-employee agreement. Compensable commute time in a company-owned vehicle may also be determined by whether the vehicle is provided for the convenience of the employee versus the benefit of the employer. Other examples of exceptions where travel time is considered hours worked (unless precluded by the terms of an employer-employee agreement) include: (a) traveling a substantial distance on an emergency after-hours call to engage in work for the employer's customers, (b) commuting in a company vehicle that carries heavy, burdensome loads for the benefit of the employer, (c) when an employer demands that an employee spends time driving other employees to work in a company vehicle, or (d) if travel is a part of an employee's principle job activity.

Holiday, Vacation, and Sick Leave: The granting of holiday, vacation, or sick leave, with or without payment, is entirely dependent on the employer and any agreement it may have with its employees. None of the time that an employee spends on holiday, vacation, or sick leave is treated as hours worked, even if the employee is compensated for the time. Leave time is always disregarded in computing overtime.

Example: An employee who actually works 40 hours during a week with a paid holiday is not due overtime for the eight "extra" hours recorded that week for holiday leave

Off-Duty and On-Call Time: Off-duty time refers to a certain amount of time specifically set aside for employees where they are entirely relieved of duty such that they may attend to their own business. Employers are required to give advanced notice of off-duty time so employees may leave work and are informed when work will resume. Off-duty time is not considered compensable unless the employee is required to wait during this time. On-call time is, under normal circumstances, not considered compensable time if the on-call time is not considered "overly restrictive" per se. An exception to this general rule can occur, however, if the employer establishes an overly restrictive on-call policy such that the employee's time is spent predominantly for the benefit of the employer.

PayMatic Payroll Service is a full service payroll bureau based in Monsey, NY providing payroll, HR and time and attendance solutions custom fit to your business needs. Additionally, PayMatic Payroll's team of certified HR professionals can answer questions in regards to wage and hour law, legal compliance and personnel issues in all 50 states.

PayMatic Payroll specializes in payroll for small and mid size businesses in all 50 states and has been providing complete payroll peace of mind since 2007.

Please visit us at http://www.paymaticinc.com/ for more information.

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Independent Contractor or Employee? Know the Financial Rules

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Knowing the law is critical for employers when determining employment status. Today many companies and workers prefer contract employment to permanent, traditional employment. While this system has advantages for both employers and workers, it also opens the door for potential abuses. This can cause conflict on both sides. Understanding the rules upfront can save valuable resources including time and money.

There are three areas of criteria to consider when determining whether a worker is an independent contractor or an employee. The three areas are 1) Financial, 2) Behavioral, and 3) Type of Relationship. While these criteria provide guidelines, it is important to evaluate each situation and ensure that each worker's status is appropriate for the work performed. Here we will take a look at the financial factors to consider when evaluating a worker's classification.

Financial control refers to facts that show whether the business has the right to control the economic aspects of the worker's job. Asking the right questions about financial control can help in differentiating between contractors and employees. Contractors and employers should ask: Has there been a significant investment by the worker? There are no exact amounts that determine significant investment, but a contractor often invests in equipment and supplies. However, some occupations, such as construction, require workers to spend thousands of dollars on equipment and still classify them as employees.

Expense reimbursement is another factor that helps determine contractor versus employee status. Contractors are more likely to have unreimbursed expenses than employees. Ongoing costs that are fixed and are incurred whether work is currently being performed or not, are especially important. However some regular employees have unreimbursed costs.

The opportunity for profit or loss is another important factor. Workers that have significant investment in tools or equipment are at greater risk for loosing money. If expenses exceed income, they incur losses. The possibility of incurring a loss indicates that a worker is possibly and independent contractor.

An independent contractor is generally free to seek out business opportunities. Contractors often advertise, maintain a visible business location and are available to work in the relevant market. This is generally not the case for employees, who may have agreements with employers not to be otherwise employed.

Finally, the method of payment is generally an indicator of employment classification status. An employee is usually earning a regular wage for an hourly, weekly or other time period. An independent contractor is usually paid by flat fee per project. However, it is not uncommon for some professions to pay contractors hourly.

Contractors must file a 1099 form with each of their clients. This form is for anyone who is self-employed and it is necessary when the contractor earns at least $600 from a client. The form reports the contractor's earnings for each client. According to the Internal Revenue Service, contractors are responsible for paying taxes on their profits, not the clients that hired them.

According to Inc Magazine, the IRS suspects 15 percent of workers are misclassified. Microsoft lost a classification case because they treated temporary contractors as regular, full-time employees. Because the workers were told to work on-site, under supervision, at regular times, Microsoft paid penalties for misclassification.

Both contract work and regular employment offer benefits. Learn the rules for financial, behavioral and type of relationship when classifying and paying workers or when taking work. Learning the rules and making prudent decisions now can save time, effort and money later.

Kelli Horne is a freelance writer with Horizon Business Solutions. If you need assistance with any financial concerns, either business or personal, visit here or call 1-614-577-1700 today.

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A Guide to Umbrella Companies

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It's time to start thinking of the term 'umbrella' as something other than an item that can protect you from our lousy British weather. In today's society, the umbrella company is a concept which is increasingly thrown around, yet unless you are considering becoming self employed or a freelance worker you are probably unaware of what the term means or what these companies do.

An umbrella company simply brings together different contractors (individuals who are not employed permanently by a company) such as builders or IT engineers underneath one body or 'umbrella'. Contractors chose join an umbrella company for different reasons.

Why do people choose to contract, go freelance or become self employed?

Lets go right back to the beginning. Deciding to go freelance or self employed is a major decision but as you progress through your career you may reach a point where 'going it alone' seems like a better option. One of the main reasons people chose to become self-employed is the freedom if offers. This may mean you are lucky enough to switch between the days and hours you are willing to work. Choosing to contract allows many the flexibility to spend more time with the family or to simply have more time to themselves. The self employed are free from the frustrating restrictions of the all-empowering employer. If you are unhappy with your employer as a contractor you can easily move on. In addition, freelancing offers a wider range of exciting job opportunities. You may be working for a small independent firm one moment or a national company the next, meeting a broad spectrum of people and expanding your client list.

Contractors generally work through an agency to secure contracts with different employers. Often, the agency will add you to their own in-house payroll system. If you live close to where you are being contracted and therefore have little to reclaim on expenses such as transport then this option may be suitable. On the other hand, if you are contracted to different employers in different areas of the city, county or country, you are entitled reclaim expenses for tax relief. If you work away a lot and are spending money on transport, accommodation and subsistence, this could amount to a lot of income being lost if you are with a agency who do not wish to calculate your deductions.

Why work through an umbrella company?

As discussed above, people chose to contract because they want more freedom and independence. Going it alone means that you are solely responsible for filling in all PAYE and tax returns which HM Revenue and Customs (HMRC) legally require you to do. Those who are experienced in accounting and filing tax returns may wish to tackle this themselves. However, despite the government's claims that 'tax doesn't have to be taxing', completing all the relevant paperwork can add hours to yours to your work schedule; the exact reason why people contract in the first place.

First time freelancers or the newly self employed should be aware of the importance of filling out tax forms accurately and on time. The tax man doesn't care about mistakes, even if they are genuine errors, and will come down hard on any paper work that is not up to scratch. Such mistakes can be expensive and cost your new venture dearly.

Umbrella companies also put you in touch with your hard earned cash by ensuring you claim back all expenses you are entitled to either from the end client or recruitment agency. In this sense, a contractor and an umbrella company form a unique partnership; as long as you are providing the correct receipts for expenses incurred, then an umbrella company will take the stress out of reclaiming. Relief on expenses consequently reduces your overall tax and NIC contributions, increasing the money that you eventually take home in your pocket. Umbrellas take the weight off you by filing paper work and administration duties on your behalf, giving you peace of mind that the tax man is also a happy man.

Convinced that an umbrella company may give you the support and encouragement you need to forge a career as freelancer? It could be the missing the link to a new independent career.

For the self-employed, tax can be a headache. Using an umbrella company or forming a limited company can be an efficient way to manage tax affairs, but ensuring you get the right structure for your business is essential.

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