5 Tips To Prevent Year-End Payroll Headaches

Well it’s that time of year again – Tax Time! And the very first filings that have to be done are the quarterly returns for the last quarter of last year. You also need to prepare and distribute W-2s and 1099s. Before you start preparing these forms you need to get a few ducks in…

Well it’s that time of year again – Tax Time! And the very first filings that have to be done are the quarterly returns for the last quarter of last year. You also need to prepare and distribute W-2s and 1099s. Before you start preparing these forms you need to get a few ducks in a row (Hi Trish!). So here are 5 things you need to do before you get to printing.

What a Contractor Should Know About Umbrella Companies

Umbrella companies have grown over the past decade since it started in the middle of 2000. Using an umbrella company relieves contractors from working through their own limited company and offers a hassle free business structure. It is for this reason there are more than 200,000 people in the UK working through umbrella companies, and…

Umbrella companies have grown over the past decade since it started in the middle of 2000. Using an umbrella company relieves contractors from working through their own limited company and offers a hassle free business structure. It is for this reason there are more than 200,000 people in the UK working through umbrella companies, and the figures are only rising with more and more people joining the self-employed industry. Also, after the IR35 legislation started umbrella companies have become more common in the UK.

How does this work?

Umbrella companies act as an employer to agency contractors who are placed on contract assignments usually through a recruitment employment agency in the UK.

Here is a step to step guide on how this work.

1. You register with the umbrella company (you can do this online or over the phone)

2. You sign a contract of employment with the umbrella company

3. You submit timesheets showing how many hours you worked along with your expenses claim forms to the umbrella

4. The umbrella company invoices the recruitment agency, which typically bills the end-client

5. Once the umbrella company receives payment from the agency, they prepare your payroll

6. Umbrella Company processes your payroll, and pays you a salary, following deductions for taxes (income tax + National Insurance), the pre-agreed umbrella fee, and any other contributions (for pension contributions, for example).

Are there significant tax advantages of using an umbrella company?

You will receive an overarching contract of employment and become an employee of the umbrella company undertaking a variety of roles as suits your abilities at different different locations, these workplaces will be classified as temporary workplaces. This can let you offset compliance and travel expenses reducing the gross salary and subsequently the amount of tax paid. This model is suitable for those contractors who work at different locations.

What about IR35?

The IR35 legislation was introduced on 6th April 2000. It was first proposed by the Chancellor in the 1999 Budget. The aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries. On 27 October 2014, HMRC announced that the 'Business Entity Tests' (BETs) of IR35 will be withdrawn from 6 April 2015. However, the IR35 legislation would still apply.

Umbrella company employees fall outside the scope of IR35 and will not be affected by it.

Contracting and national minimum wage (NMW)

NMW applications to contractors who are employed by a compliant umbrella service provider as there is a contract of employment in place.

Some umbrella companies pay their employees a salary below minimum wage and then make up the difference by including various expenses such as meals or travel costs. HMRC has stated that they are aware of 'schemes' wherey umbrella companies are avoiding paying the National Minimum Wage and that they view them as unlawful and will take action accordingly.

Tips to consider while choosing an umbrella company

How can you ensure you are choosing the right company? While many of them offer compliance and quality services there are a small number of companies that have put the image of the umbrella sector at risk.

If you are just starting as a contractor and looking for an umbrella company, you will be swamped with hundreds of companies all making variety of claims and promises and when you hear one that sounds too good to be true, it probably is.

Here are our seven tips for contractors to consider when choosing an umbrella company.

Experience – look for an established company which has specialist knowledge and provides compliant service.

Higher net pay – if a company guarantees larger take home pay which sounds unrealistic, it is best to keep away from them.

Fee structure – before you choose an umbrella company it is of great importance to establish upfront that there will be no joining and exit fees.

Claim expenses without receipts – any company that allows claims expenses with 'No Receipts' keep away from them. It is best practice to retain receipts even for allowable expenses.

Personal service – make sure you are appointed a dedicated client manager to manage your assignments. Assure it is not just an online system and that you can speak to a real person when required.

Employee benefits – ensure the company you choose gives you the option of employee benefits such as holiday pay, sick pay, maternity and paternity pay.

IR35 compliant – when a company claims that they are “IR35 compliant” it may sound impressive, but this does not apply to contractors that operate through an umbrella company because your payments are processed through PAYE.

Important Factors To Consider In Choosing Your Payroll Solutions Provider

Most small and start-up business owners today are choosing to outsource a lot of their requirements and activities. These requirements or tasks include website design and development, accounting, bookkeeping and payroll. By choosing this option, business owners will not have to worry about going through the tedious task of looking for and hiring the best…

Most small and start-up business owners today are choosing to outsource a lot of their requirements and activities. These requirements or tasks include website design and development, accounting, bookkeeping and payroll.

By choosing this option, business owners will not have to worry about going through the tedious task of looking for and hiring the best talents, training them and helping them get acquainted with the company and other staff. Also, outsourcing certain requirements and tasks will actually be more cost efficient since you will not have to worry about and pay for the taxes, health insurance and other fees that comes with hiring a new employee. Finally, when you choose to get outsourced help, you avoid the hassles and inconvenience of firing the employee and going through the whole process of finding a replacement.

When it comes to getting help with your payroll requirements and tasks, it is important that you take the time to choose the best and most trustworthy service provider. This is because when it comes to your company's salary and more importantly, your employees' salaries, you can not afford to be hasty and careless.

To make sure that you will be choosing and hiring the best and most trustworthy payroll solutions provider, you need to consider the following important factors:

• The technology the service provider uses and has access to. You have to choose a service provider that makes use of the latest software and technology to keep you informed and updated about all the issues related to your company payroll. In addition, your possible outsourcing partner should also be very proficient and knowledgeable about this payroll system and they should be able to deliver the reports to you in real-time when you request for it.

• The scope of services and / or features the provider offers. The payroll outsourcing firm should offer different features that will help you have a hold on and keep track of this business aspect. Some of the services and features that you should be looking for include a wage protection system, preparation and delivery of pay slips, online leave management system and preparation of transfer letters to the bank.

• Customer support capabilities. Ideally, your payroll outsourcing firm should also offer exceptional 24/7 customer support so that they can help you address billing concerns or issues immediately when they arise.

• The service provider's reputation. To ensure that you will be working with company that you can entrust your payroll requirements or activities to, take the time to get to know this firm. Make sure that the service provider has an unpredictable reputation and has not been the subject of any complaints or issues. You can do this by going online to read reviews or comments about the service provider and you can also ask the outsourcing firm for recommendations from their current and previous clients.

How Can Internal Controls Overcome Payroll Fraud?

Payroll fraud occurs when employees get their employers to pay them more wages and compensation than is due to them by making false claims and falsifying records. By being more vigilant and adopting control policies, you can protect your business from the losses you may incur because of payroll fraud. The Association of Certified Fraud…

Payroll fraud occurs when employees get their employers to pay them more wages and compensation than is due to them by making false claims and falsifying records. By being more vigilant and adopting control policies, you can protect your business from the losses you may incur because of payroll fraud. The Association of Certified Fraud Examiners warns that internationally, businesses can lose up to 5% of their revenues every year because of fraud; and small businesses typically suffer more because they lack the elite internal controls that larger companies might implement.

Non-persistent Employees

Your employees could be collecting wages in the name other employees who are not actually working for you; or who have worked for you in the past and have left your company. To overcome this problem, you must make sure that when an employee's services are terminated, your records are updated right away. Also tally the actual number of present employees with the number of paychecks you write. You could also get your employees to physically pick up their paychecks and sign for them. Make sure they provide you with proper identification such as a Social Service Number that you can later verify with the permissions. Also check if your records have actual addresses and all payments show mandated withholding. If any of your employees complains that she has not received her paycheck, you may want to check your own billing process.

False Time Sheets

Another method of claiming undue compensation is by clocking in extra hours than the employee has actually put in. If you have an electronic time card system in place, you can assign a supervisor to punch cards. You can also implement new technology by which employees have to add in a password or a code when checking in to work. Scrutinize overtime payments carefully and put in a system of rotation by which supervisors are reassigned from time to time. Separate payroll duties so that supervisors are not the same person who add up the time clocked and make payroll. If your bonuses are based on work hours, you could take it upon yourself to authorize them.

Bank Statements and Taxation

You can keep a close watch on the wages you're paying by studying your bank statements. For instance, if you see any similar bank details it could be an indicator of double payment. On the other hand, if details of a particular payment are missing, you might want to investigate the recipient. Also be on the alert for any payment codes that were dormant but have suddenly been activated. In case an employee changes his bank account number, you might want to verify and ask for reasons. You could also verify your bank payments against your list of employees. Above all, you could monitor the taxes you're deducting and remitting to the IRS for inconsistencies.

Sales Commissions

Your employees can also add false entries to sales records and commission statements to claim added pay from you. To protect yourself, check your sales revenues against the decisions you're paying. Also confirm if you're paying for sales that did not actually materialize. If your sales figures are going down but the commission charges are constant or even rising, you might want to investigate the issue. Further, carefully study reports of customers not wanting to honor their dues. When making payroll, check the percentages of the responsibilities your employees have requested from you against the sales they claim.

Exempt Vs Non-Exempt Employees And The FLSA

The Fair Labor Standards Act (FLSA) covers several items, including what positions are considered exempt vs. nonexempt positions. The FLSA is a federal law that all states must adhere to and remain compliant with. First, a couple of definitions: Exempt Employee : employees who are salaried and are not eligible to receive overtime pay. Non-Exempt…

The Fair Labor Standards Act (FLSA) covers several items, including what positions are considered exempt vs. nonexempt positions. The FLSA is a federal law that all states must adhere to and remain compliant with.

First, a couple of definitions:

Exempt Employee : employees who are salaried and are not eligible to receive overtime pay.

Non-Exempt Employee : employees who are hourly and are eligible to receive overtime pay.

So, how does a company determine if a position is considered exempt or non-exempt? The FLSA defines and determines what types of positions are eligible for which type of job through an assessment of salary level, salary basis, and job duties. First and foremost, employees may or may not be covered depending on the number of employees in the company, the amount of business the company does per year, and the type of position the employee holds. Also, to be covered under the FSLA, there must be an employee – employer agreement; contract employees are not covered.

There are five main classifications that would qualify an employee to be exempt: executive, administrative, professional, outside sales, and in some cases computer employees. This post will focus on the job duties as the title alone does not qualify an employee as exempt. However, in all cases, to be exempt the employee must receive a minimum of $ 455 per week in wages. It is also worth noting that highly compensated employees receiving $ 100,000 in annual compensation, and meets the requirements of the job test, are exempt from the FLSA.

Specific job duties tests must be connected and met to qualify the employee with one of the above job titles as exempt. This test information comes directly from the FLSA.

Executive Exemption

Fact Sheet # 17B for the FLSA requires the following criteria to be met to determine executive exemption status:

  • The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $ 455 per week;
  • The employee's primary duty must be managing the enterprise, or managing a traditionally recognized department or subdivision of the enterprise;
  • The employee must regularly and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  • The employee must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption

Fact Sheet # 17C for the FLSA requires the following criteria to be met to determine administrative exemption status:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $ 455 per week;
  • The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and
  • The employee's primary duty includes the exercise of discretion and independent jurisdiction with respect to matters of significance.

Professional Exemption

Fact Sheet # 17D for the FLSA requires the following criteria to be met to determine professional exemption status:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $ 455 per week;
  • The employee's primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominately intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
  • The advanced knowledge must be in a field of science or learning; and
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Outside Sales Exemption

Fact Sheet # 17F for the FLSA requires the following criteria to be met to determine outside sales exemption status:

  • The employee's primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
  • The employee must be regularly and regularly engaged away from the employer's place or places of business.

Computer-Related Occupation Exemption

Fact Sheet # 17E for the FLSA requires the following criteria to be met to determine computer-related occupation exemption status:

  • The employee must be compensated either on a salary or fee basis at a rate not less than $ 455 per week or, if compensated on an hourly basis, at a rate not less than $ 27.63 an hour;
  • The employee must be employed as a computer systems analyst, computer programmer, software engineer or other simply skilled worker in the computer field performing the duties described below;
  • The employee's primary duty must consist of:

    • 1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
    • 2) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
    • 3) The design, documentation, testing, creation or modification of computer programs related to machine operating systems; Egypt
    • 4) A combination of the aforementioned obligations, the performance of which requires the same level of skills.

When determining whether an employee is exempt or not be sure to consult with these tests so that your company is in full compliance with the FLSA laws. Keep in mind that state laws also affect how employees are classified. When determining the proper classification for your employees be sure to check the state laws as well. The law that protects the employee the most is the law that should be followed. Additional information on excuse vs. non-exempt employees can be found on the Wage and Hour Division site.

More Bang for Your Bucks With Enterprise 2015

While you think you’re happy in QuickBooks Pro or Premier, I suggest it’s always worth looking at Enterprise Solutions. You may find that Enterprise could make life simpler in your business because of the extra features.The new Enterprise 2015 gives you more bang for your bucks – more data controls, more customization options, more efficient…

While you think you’re happy in QuickBooks Pro or Premier, I suggest it’s always worth looking at Enterprise Solutions. You may find that Enterprise could make life simpler in your business because of the extra features.The new Enterprise 2015 gives you more bang for your bucks – more data controls, more customization options, more efficient workflow, powerful reporting capabilities.

Four Areas Where Spending More Pays Off

It’s generally a good idea to keep overhead costs low so that your business profits will be higher. But there are times when increasing expenses yields great payoffs.

It’s generally a good idea to keep overhead costs low so that your business profits will be higher. But there are times when increasing expenses yields great payoffs.

How Complex Is Dutch Payroll?

Dutch Payroll can be incredibly complicated, but just how complicated? Here we give a very basic outline for those just starting as a contractor or freelancer within the Netherlands.

Dutch Payroll can be incredibly complicated, but just how complicated? Here we give a very basic outline for those just starting as a contractor or freelancer within the Netherlands.

Workers’ Compensation Issues In New York State

Most new business owners are not aware they need to carry Workers’ Compensation insurance in New York State. Many think it is only a requirement of contracting or construction companies. In actuality, all businesses that have employees need this insurance. Lack of coverage can caused many problems for the business owner.

Most new business owners are not aware they need to carry Workers’ Compensation insurance in New York State. Many think it is only a requirement of contracting or construction companies. In actuality, all businesses that have employees need this insurance. Lack of coverage can caused many problems for the business owner.

When Should I Pay Dutch Payroll?

Calculating how much you owe in payroll tax when working within the Netherlands can be a complicated and time consuming process. This article aims to break the process down and help explain when and how to go about paying taxes to the Dutch authorities.

Calculating how much you owe in payroll tax when working within the Netherlands can be a complicated and time consuming process. This article aims to break the process down and help explain when and how to go about paying taxes to the Dutch authorities.

Changes to Dutch Contracting Laws for 2015

Large changes are coming to the Dutch contractor market affecting contracts, salaries, probationary periods, transition payments and notification periods. Coming into force as early as January the 1st 2015, this article breaks down all the major changes that you will need to know about with input from industry professionals and experts in Dutch payroll.

Large changes are coming to the Dutch contractor market affecting contracts, salaries, probationary periods, transition payments and notification periods. Coming into force as early as January the 1st 2015, this article breaks down all the major changes that you will need to know about with input from industry professionals and experts in Dutch payroll.

Problems of Business Owner Compensation Issues

Over the years it has been amazing how many times I’ve been asked the same questions as above and how many times I have witnessed situations where business owners are not on payroll, and where they are not in compliance with payroll regulations. It is more important than ever to be in compliance. The tax…

Over the years it has been amazing how many times I’ve been asked the same questions as above and how many times I have witnessed situations where business owners are not on payroll, and where they are not in compliance with payroll regulations. It is more important than ever to be in compliance. The tax authorities have increased their review of these issues.

What Are Pay Stubs for?

A paycheck stub refers to that part of the paycheck which workers may retain after having deposited the paycheck received by them. The usual information contained there is the amount paid, some personal information of the worker for use of the payer, and an ongoing computation of income all over the year or for the…

A paycheck stub refers to that part of the paycheck which workers may retain after having deposited the paycheck received by them. The usual information contained there is the amount paid, some personal information of the worker for use of the payer, and an ongoing computation of income all over the year or for the entire duration of the worker’s employment. It is most usual for the pay stub to give detailed information of deductions carried towards insurance benefits, taxes, retirement plans, and such like features which could affect the workers’ pay.

Saving Time And Money With Automated Timekeeping

Establishing a reliable timekeeping system is a big part of fulfilling your responsibility as an employer. Even so, manually keeping track of your employees’ hours can take a great deal of time and patience. It could also lead to errors that result in financial losses for your business. Automated timekeeping systems can eliminate many hassles,…

Establishing a reliable timekeeping system is a big part of fulfilling your responsibility as an employer. Even so, manually keeping track of your employees’ hours can take a great deal of time and patience. It could also lead to errors that result in financial losses for your business. Automated timekeeping systems can eliminate many hassles, while saving you both time and money.