With about four weeks in a month, these pay structures might look similar at first. However, they are quite distinct. How you compensate your team—whether it’s semi-monthly, bi-weekly, or bi-monthly—can significantly affect your business.

Choosing the right pay period for your business depends on various factors, including:

• The size of your company
• The industry you operate in
• The number and type of employees
• Adherence to the Fair Labor Standards Act (FLSA) and other relevant local or federal regulations

In this guide, we’ll dive into various payroll options and provide insights into the advantages of each.

Semi-Monthly vs. Biweekly Payroll: Which One Suits Your Business?

Navigating the different payroll options can be a bit confusing. The distinction between semi-monthly vs biweekly payroll might seem subtle, but it’s crucial to understand for effective payroll management.

Understanding Biweekly Payroll

Biweekly payroll means employees are paid every other week, totaling 26 paychecks per year. This method is widely used in the United States for several reasons.

Advantages of Biweekly Paychecks:

• Biweekly payroll is well-suited for businesses with both salaried and hourly employees.
• It balances the administrative workload better than weekly payroll and avoids the challenges of monthly payments.
• It simplifies overtime calculations for hourly employees and provides predictable pay schedules, aiding in budgeting.

Disadvantages of Biweekly Paychecks:

While there are a few drawbacks, note that there are two months each year with three payroll cycles. This can complicate HR bookkeeping.

Understanding Semi-Monthly Pay

So what is semi monthly payment? A semi-monthly or bi-monthly pay schedule means employees are paid on two specific dates each month, often on the 1st and the 15th.

Advantages of Semi-Monthly Payroll:

• Semi monthly pay frequencies are particularly suitable for companies with primarily salaried staff.
• The fixed dates for semi monthly payments provide employees with a predictable schedule, aiding in personal budgeting.
• This schedule makes it easier to manage payroll expenses and calculate benefit deductions.

Disadvantages of Semi-Monthly Payroll:

• Some employees might feel that semi-monthly pay lacks consistency since the pay dates vary in terms of the day of the week.

For instance, paying on the 15th and the end of the month could mean different weekdays each month. If a payday falls on a weekend, you’ll need to decide whether to process the payroll on the preceding Friday or the following Monday, as banks don’t typically process payroll on weekends.

Understanding Biweekly Pay Schedule vs Semi-monthly Payments

The distinction between a biweekly pay schedule vs semi-monthly payments lies in their frequency and timing.

Biweekly Pay Schedule:

• In a biweekly payroll, employees receive payment every other week, resulting in 26 paychecks per year.
• This schedule aligns with a consistent 14-day interval between paydays, making it straightforward for employees to anticipate their income.

Semi-Monthly Payments:

• With semi-monthly payments, employees are paid twice a month on specific dates, such as the 1st and 15th.
• Despite occurring twice a month, the timing can lead to pay periods that span slightly over two weeks, due to variations in the number of days in each month.

Understanding these differences helps businesses choose the pay schedule that best suits their operational needs and employee preferences.

Is Semi-Monthly the Same as Monthly?

No, semi-monthly pay periods are distinct from monthly pay periods. Here’s a concise comparison:

Monthly Pay Period: Employees are paid once a month, typically on the last day of the month.

Semi-Monthly Pay Period: Pay periods occur twice a month, usually around the 1st-15th and the 16th-end of the month.

Understanding Semi-Monthly Pay Periods

Semi-monthly pay periods split the month into two distinct payment periods: the 1st through the 15th, and the 16th through the end of the month. The duration of the second pay period varies depending on the specific number of days in each month (28, 30, or 31 days).

Semi-monthly Pay Schedule 2024

Below is an example of the first twelve pay periods of a semi-monthly pay schedule for 2024:

Here’s an expanded table with the pay period start and end dates included for the first twelve pay periods of a semi-monthly pay schedule for 2024:

Key Factors in Choosing a Payroll Schedule

Selecting between biweekly vs. semi-monthly payroll schedules requires careful consideration of several important factors. Here’s what to evaluate before finalizing your payroll system:

Legal Requirements

State laws vary regarding payroll frequencies, with some requiring employees to be paid twice a month on fixed dates. Your payroll schedule must also comply with the Fair Labor Standards Act (FLSA) to meet federal guidelines.

Payment Regularity

Semi-monthly pay can feel inconsistent for employees due to the changing days of the week that paydays fall on. A biweekly pay schedule would provide your employees with a more stable and predictable income.

Financial Planning and Budgeting

Consider your company’s ability to manage budgeting and cash flow projections. If these tasks are challenging, a different pay frequency might simplify your financial management.

Employee Preferences and Payroll Automation

Take into account your company’s overall payroll preferences and your employees’ needs. Automated payments are increasingly common for expenses like utilities and subscriptions. Implementing an automated payroll system can help employees manage their finances more effectively by aligning with their automated payment schedules.

By examining these aspects, you can choose a payroll schedule that supports both your business needs and your employees’ financial well-being.

Best Practices for Implementing Payroll Systems

Implementing an effective payroll schedule involves careful planning and consideration. Here are the key best practices to ensure a smooth transition:

Conduct a Needs Assessment

Use surveys to gather insights on your company’s payroll needs and employees’ payday frequency preferences. Understanding these preferences will help you choose the most suitable payroll schedule.

Communicate Changes Clearly

Inform your employees about the reasons behind transitioning to a new payroll schedule. Clear communication helps ease the transition and ensures employees understand the benefits and impacts of the change.

Review and Adjust Regularly

Regularly monitor the effectiveness of your payroll system. Collect employee feedback and make necessary adjustments to improve the system’s efficiency and meet your employees’ needs better.

By following these best practices, you can implement a payroll system that is efficient, compliant and meets the needs of both your business and your employees.

Optimize Payroll with AttendanceBot

Are you finding payroll management challenging? Tools like AttendanceBot which support both bi-weekly payroll and semi-monthly payroll can help simplify the process. By supporting a range of policies, and integrating with popular platforms like Gusto and BambooHR, AttendanceBot streamlines time tracking and payroll tasks. 

Gusto Integration: Easily map employees, set pay cycles, manage 1099 contractors, and log hours through Slack or Microsoft, ensuring smooth payroll operations.

BambooHR Integration: keep employees in your digital workspace while sending hours and payroll information to a robust payroll software like BambooHR.

Wagepoint Integration: Track employee time and effortlessly import data into Wagepoint for quick payroll processing. 

To Sum it Up

We hope this blog gave you a comprehensive understanding of biweekly vs. semi-monthly payrolls. Choosing between these options involves recognizing the nuances of each. Biweekly payroll means paying employees every other week, totaling 26 paychecks per year. 

In contrast, semi-monthly pay involves two payments per month, often on set dates, resulting in 24 paychecks annually.

Knowing what is semi-monthly pay or what is a semi-monthly paycheck can help you determine the best fit for your company. Consider how bimonthly vs. biweekly payments align with your business needs and regulatory requirements. Each payroll schedule has its benefits and drawbacks, so choose the one that best meets your operational and employee satisfaction goals.

The post Semi-Monthly vs. Biweekly Payroll: Which to Choose? appeared first on AttendanceBot Blog.

So whether you’re an employee who has experienced mandatory overtime or an employer trying to balance the needs of your business and your employees, this blog is for you. Let’s dive in!

What is Mandatory Overtime?

Mandatory overtime is a policy where an employer requires their employees to work beyond their scheduled hours or work extra shifts, usually without the employee’s consent. It means that the employee is obligated to work additional hours, even if they do not want to or have other commitments.

Overtime is often used by employers when they are experiencing high demand, staff shortages, or need to meet tight deadlines. In some industries such as healthcare, transportation, and manufacturing, mandatory overtime is common practice.

Mandatory overtime can have both positive and negative impacts. It can provide employees with increased earnings, but it can also lead to burnout, fatigue, and reduced work-life balance. Many labor laws regulate mandatory overtime, including the maximum number of hours employees can work and the payment for overtime work.

What are the Drawbacks of Mandatory Overtime? 

• Employee fatigue and burnout: Requiring employees to work long hours, especially on a regular basis, can lead to physical and mental fatigue, stress, and burnout. This can result in decreased productivity, lower quality work, and increased absenteeism and turnover.
• Health and safety risks: Long work hours can also increase the risk of accidents, injuries, and illnesses, especially in jobs that require high levels of physical or mental concentration. For example, fatigue and stress can lead to mistakes and errors, which can be dangerous in jobs such as healthcare, transportation, or construction.
• Negative impact on work-life balance: Mandatory overtime can interfere with employees’ personal and family responsibilities, such as caring for children, elderly parents, or managing other obligations. This can lead to dissatisfaction with the job and reduced motivation to perform well.
• Increased labor costs: Depending on the overtime pay rates and the number of employees required to work overtime, mandatory overtime can increase labor costs for employers, especially if it is a frequent occurrence.
• Legal and compliance risks: Employers must comply with federal and state laws regarding overtime pay, working hours, and rest breaks. Failure to comply with these laws can result in legal and financial consequences, such as lawsuits, fines, or penalties.

How is Mandatory Overtime Regulated? 

In the United States, the Fair Labor Standards Act (FLSA) establishes guidelines for overtime pay for non-exempt employees. According to the FLSA, non-exempt employees are entitled to overtime pay at a rate of one and one-half times their regular rate of pay for any hours worked over 40 hours in a workweek.

However, the FLSA does not limit the amount of overtime that an employer can require an employee to work. In other words, mandatory overtime is legal in the United States as long as the employer complies with the overtime pay requirements of the FLSA.

There are some limited exceptions to the FLSA’s overtime pay requirements for certain types of employees, such as executive, administrative, and professional employees who meet certain criteria, as well as some employees in certain industries.

In addition, some states have their own overtime pay regulations that may provide additional protections for employees. For example, some states require employers to provide overtime pay for employees who work more than eight hours in a day or on certain days of the week.

It is important for employees to understand their rights and protections regarding mandatory overtime under the FLSA and any applicable state regulations. If an employee has concerns about mandatory overtime, they should consult with their employer’s human resources department or seek legal advice.

Can an Employee Avoid Mandatory Overtime?

In general, an employee may be required to work mandatory overtime if it is a legitimate job requirement, such as to cover staff shortages, meet project deadlines or deal with emergency situations. However, there are certain circumstances under which an employee may be able to refuse to work overtime, including:

• If the employee’s employment contract or collective bargaining agreement states that overtime is voluntary or subject to certain conditions, such as prior notice or a limit on the number of hours.
• If the employee has a legitimate reason for not being able to work overtime, such as health issues, family responsibilities, or religious beliefs. In such cases, the employer must provide reasonable accommodations or alternative arrangements, where possible.
• If the overtime violates labor laws, such as the maximum working hours, rest periods, or minimum wage requirements.
• If the employee is part of a protected class and the overtime requirement is discriminatory or retaliatory, such as in cases of gender, age, race, or disability.

What is Considered Discriminatory for Non-Exempt Employees Working Overtime?

• Unequal Distribution of Overtime: If an employer consistently assigns overtime opportunities to certain employees based on discriminatory reasons, such as race, gender, age, religion, disability or national origin, this can be considered discrimination. For example, if a female employee is consistently denied overtime opportunities that are offered to male employees with the same job duties and qualifications, this may be discriminatory.
• Harassment: If an employer or co-worker subjects an employee to offensive comments, gestures or behavior based on their membership in a protected class, such as their race or gender, this can be considered discriminatory harassment. For example, if a non-exempt employee is subjected to racial slurs or unwanted advances by their supervisor or colleagues while working overtime, this may be discriminatory harassment.
• Retaliation: If an employee complains about discriminatory practices or refuses to work overtime due to discriminatory reasons, and the employer retaliates against them by, for example, reducing their hours, demoting them, or terminating their employment, this can be considered discriminatory retaliation.

It is important for non-exempt employees to be aware of their rights under anti-discrimination laws and to speak up if they experience or witness discriminatory practices while working overtime. They can file a complaint with their employer’s human resources department or with a government agency such as the Equal Employment Opportunity Commission (EEOC).

What are the Alternatives to Mandatory Overtime? 

Hiring Additional Staff

Employers can hire more employees to help distribute the workload, especially during peak seasons or periods of high demand. This can also provide more opportunities for part-time or flexible work arrangements.

Cross-Training Employees

Employers can train employees to perform multiple tasks or functions, which can increase flexibility and agility in responding to changing work demands. This can also enhance employees’ skills and knowledge, which can lead to career advancement opportunities.

Adjusting Work Schedules

Employers can adjust work schedules to better accommodate employees’ needs and preferences, such as flexible work hours, compressed work weeks, or telecommuting. This can improve work-life balance and reduce the need for overtime.

Offering Overtime on a Voluntary Basis

Employers can offer overtime opportunities to employees on a voluntary basis, allowing them to opt-in or opt-out based on their availability and preferences. This can reduce resentment and burnout associated with mandatory overtime.

Implementing Job-Sharing Arrangements

Employers can allow two or more employees to share the same job responsibilities, allowing for a more flexible and balanced workload. This can also provide more opportunities for part-time or flexible work arrangements.

Outsourcing 

Employers can consider outsourcing or subcontracting some work to third-party vendors or contractors, which can reduce the workload on existing employees. However, this option may also have cost and quality implications that need to be carefully evaluated.

Conclusion

In conclusion, mandatory overtime can have both positive and negative impacts on employees and employers. It is important for employers to communicate openly and transparently about mandatory overtime. And to consider alternative options to ensure a healthy work-life balance for employees. Employees also have the right to understand their legal rights and protections regarding overtime work.

The post Mandatory Overtime 101 appeared first on AttendanceBot Blog.

What is Copay?

Both the insurer and insured share the expenses of medical treatment when an insurance policy has a copay clause. Further, the clause may include a condition of a fixed amount or fixed percentage. The policyholder must give the fixed amount or percentage, while the insurer pays the remaining amount.

Example of Fixed Amount and Fixed Percentage Copay

In a fixed amount clause, the policyholder pays a fixed amount, say USD 5000, irrespective of the total treatment cost. The insurer will cover the rest of your medical treatment.

In a percentage clause, the policyholder has to pay in percentage of the total treatment cost. Say 15% is the agreed amount, and USD 10,000 is the total treatment expenses. In such an example, the policyholder will have to pay 1,500 USD of the total amount while the insurer will handle the remaining 8,500 USD.

What is a Deductible?

Consider deductible a flat fee levied each year on most eligible medical services or medications. You have to pay the amount upfront, post which your insurance plan will contribute to your medical expenses. Deductibles can be an annual contribution or may vary for each treatment.

Note: If you have a high-deductible health plan, you may be eligible to set aside money in a tax-advantaged Health Savings Account.

Example of a Deductible

If you have a deductibles clause stating an amount of USD 3,000, you will have to pay it upfront. The company will only activate the health insurance policy after you pay USD 3,000 toward deductibles per the clause.

What is Coinsurance?

Coinsurance is the percentage of medical treatment expenses you would incur after you pay the deductibles. It is usually defined as a fixed percentage or amount, called coinsurance after deductible. Coinsurance is identical to the copayment clause under health insurance.

Coinsurance Example

If the coinsurance clause in your insurance policy states a 10% fixed percentage, you’ll bear 10% of the treatment expenses. The insurance company will cover the remaining 90% of the total expenses. However, the company calculates this amount after you pay your deductibles, referred to as coinsurance after deductible.

Note: Always check for the list of the covered services. If some of your expenses are not eligible for cover under the policy, you have to pay the entire bill yourself, otherwise known as 100 coinsurance.

What is an Insurance Premium?

A health insurance premium is the recurring payments you make to manage your health insurance plan. Mostly, you pay a health insurance premium at a monthly or biweekly interval and it may include a high-deductible. As an employee, the healthcare premium would be deducted from your paycheck.

Features of Out-of-the-Pocket Health Insurance Expenses

Are you wondering, “how does health insurance deductible work?” To illustrate how copay and coinsurance works, we have compiled the features for you.

Copay

Here are the features of copay that you need to understand.

• The feature is popular in metropolitan cities where the average cost of treatment and the disposable income of individuals are higher.
• Because the average treatment cost for senior citizens is higher, this clause is more popular in insurance policies.
• The health insurance premium is higher when the fixed copayment component is lower.
• With copayment features, the insurer covers most of the treatment cost. Here, the policyholder only has to bear the fixed amount. If there’s no copayment feature/clause in the insurance policy, the entire treatment expense will be borne by the insurer.

Deductible

Let us now move on to deductibles and understand their features.

• Deductibles help in reducing the number of healthcare premium payments toward health insurance policies.
• However, it might lead to a rise in the total cost incurred by the policyholder toward their treatment.
• It is usually levied on policyholders to guard insurance provider’s against unnecessary claims.

Coinsurance

Let us run through the features of coinsurance for a better picture of health insurance in the United States. 

• Like with deductibles, the coinsurance plan will only come into play when the policyholder pays the deductible amount. It is called coinsurance after deductible.
• It protects policyholders against claims, especially larger ones.
• The coinsurance percentage provided by the insurance company remains fixed.

Source

Deductible vs Copay

Check the different parameters below to gauge the difference between deductible and copay.

Deductible vs Copay: Applicability

Copay: The health insurance policyholders must pay a fixed amount or a fixed percentage of their total medical treatment costs. Besides, the insurance provider/company will cover the rest of the sum. Moreover, the copay clause says that the policyholder and the insurer will share the expenses incurred.

Deductible: It is what policyholders have to pay before their policy starts contributing to their medical expenses. Further, it is usually a fixed amount of money that the clause states. The insurance provider decides on the amount. They also determine whether the clause is applicable on a per-treatment or per-year basis.

Deductible vs Copay: Impact on Premium

Copay: When the copay amount is higher, the policyholder is liable to pay smaller premium amounts.

Deductible: Deductibles usually allow the insurance policyholders to pay smaller premiums.

Deductible vs Copay: Impact of Coinsurance Clauses

Copay: Insurance providers often use Copay and coinsurance clauses interchangeably.

Deductibles: When a coinsurance clause is added, policyholders have to pay the coinsurance after the deductible amount. The payment is on top of deductibles as part of the clause.

Deductible vs Copay: Implementation

Copay: Copay does not apply to all healthcare services. It only applies to specific ones.

Deductibles: It is implemented before the insurance policy starts. Therefore, to avail of the insurance, it is mandatory to pay the deductibles.

What is Coinsurance vs Copay?

We have been through all three cost-sharing terms of health insurance and deductible vs copay. It brings us to the next big question if you wish to know about the terms in depth. What is the difference between copay and coinsurance or coinsurance vs copay?

Applicability

Copay: The health insurance policyholders must pay either the fixed amounts or fixed percentages of their total medical costs. The insurer covers the rest. The copay clause says that the policyholder and the insurer will share the expenses incurred.

Coinsurance: Coinsurance is generally associated with deductibles with a payment structure similar to copayment. It is the percentage of medical treatment expenses you have to contribute after the payment of deductibles. Usually paid in the percentage form, it remains fixed and in line with the coinsurance clause.

Payment Process

Copay: Every time you take any medical service, you’ll have to make your portion of payments based on the copay clause.

Coinsurance: After paying your deductibles, coinsurance comes into the picture. You are liable to pay for this to avail of a medical insurance cover.

Payment Intervals

Copay: You have to make the payment while availing of the medical service/treatment.

Coinsurance: Your insurance provider will bill your due amount from the payment. You have to make the payment directly to your insurer.

Relationship with Deductibles

Copay: Payment of deductible with copay is not mandatory. Further, the copay clause counts toward the deductibles only in some cases and under specific circumstances.

Coinsurance: Concerning the coinsurance clause, the coinsurance after deductible amount is only paid after paying the deductible.

Deductible vs Coinsurance

Let us also see through the difference between deductible and coinsure to see the bigger picture.

Applicability

Coinsurance: It is the percentage of medical treatment expenses you would incur after you pay the deductibles. Further, coinsurance after deductibles is defined as a fixed percentage.

Deductible: It is what policyholders have to pay before their policy starts contributing to their medical expenses. Deductibles are usually a fixed amount of money that the clause states. The insurance provider decides on the amount, and whether the clause is applicable on a per-treatment or per-year basis.

Limitation in Payments

Coinsurance: Each time you claim for insurance, you are liable to pay coinsurance as the policyholder.

Deductible: Once you have paid the mandatory deductible amount for one year, the payment toward that year ends. It is a yearly payment.

Variability in Payment Amounts

Coinsurance: The payment amount toward coinsurance depends on the treatment expense since it is a percentage of the total costs incurred.

Deductible: Deductibles are fixed yearly payments and do not depend on the treatment costs whatsoever.

Various Risk Factors

Coinsurance: Coinsurance is directly proportional to the total treatment cost incurred (a percentage of total expense). Therefore, when the cost of medical treatment is high, the out-of-pocket expenditure will be too.

Deductible: There is no significant risk in the case of deductibles. Deductibles are fixed amounts that are not in sync with the total cost of expenses.

Source

What is Out-of-Pocket Maximum?

Let us now analyze deductible vs out of pocket. The deductible is the maximum amount the policyholder has to pay for their covered medical costs in a particular year. The maximum amount includes all the money spent toward deductibles, coinsurance, and copays.

Once policyholders reach their out-of-pocket maximum in a year, their health plan will cover the remaining medical and prescription costs. However, note that the health insurance premiums don’t count here.

Out of Network vs In-Network Providers

Some health insurance plans have two sets of clauses (deductibles, copays, coinsurance, out-of-pocket maximums), one for each provider. These are in-network and out-of-network.

Usually, in-network providers are cheaper compared to out-of-network providers. It is because the insurance company negotiates and brokers deals with the doctors and hospitals in the network.

The in-network provider can be anywhere and not necessarily near where you live. Ensure you choose to go with in-network providers for availing most of your services. It is beneficial as they are cheaper and also make more fiscal sense.

FAQs

What Does ‘0 Coinsurance’ Mean?

Contrary to 100% coinsurance, ‘0 coinsurance’ means you do not have to pay any part of the health care cost. It indicates that you have no out-of-the­­­-pocket payment obligation. Further, it includes coinsurance after deductible, or the obligation to pay deductible always applies.

What Does 20 Coinsurance Mean?

A 20 coinsurance is all about the math, as it means you are responsible for 20% of your medical bill. It indicates that you shall contribute 20% of the total amount: USD 2000 for USD 10000 worth of treatment received.

What Is An Annual Deductible?

The annual deductible is the mandatory amount you need to pay before your policy starts to contribute. Furthermore, imagine you need to analyze deductible vs premium. Here, a premium is a recurring payment you make to maintain the insurance policy. Contrarily, a deductible is a once-in-a-year payment that you make before your insurance policy starts providing.  

What Is Coinsurance After Deductible?

A coinsurance policy pays after you pay the deductible amount. Generally, deductible works with coinsurance. Hence, it is referred to as coinsurance after deductible.  

Deductible vs Copay: The Final Answer

While knowing the terms is critical, it is also crucial to understand that they are not mandatory in every policy. If you catch sight of policies with copayment, coinsurance, and deductible clauses, you are able to understand how they bring down the premium. This means that you agreed to pay a small recurring amount, only to pay quite a bit out of pocket in the future.

A possible decision would be to choose policies that do not include cost-sharing clauses. While they will spare you the hassle of situations where you don’t have the money for co-pays and need urgent treatment, they can be a quite expensive upfront.

Whatever be the case, it is sensible to set aside time and money for the health insurance needs for you and your family.

The post Deductible vs Copay: Unpacking Health Insurance Costs for Smart Choices appeared first on AttendanceBot Blog.

In this article, we’ll take you through the definition of CA SI, who pays for it, the eligibility criteria, and if employers are allowed to opt-out.

What is CA SDI?

CA SDI or the California State Disability Insurance program provides benefits in case of temporary disability to eligible employees. Employees who cannot work due to a short-term illness or injury can take advantage of CA SDI. The California SDI provides wage replacement to the employees who qualify for the Employee Development Department or EDD Disability.

Under this program, the employees may collect weekly pay till they recover from their temporary, non-work-related illness. The compensation is tax-free in the hands of the employees. Employees can avail of these short-term disability benefits for a maximum of one year. The benefits under CA disability tax max out at around 60-70% of the employee’s salary in a quarter.

Who Is Accountable for CA SDI: Employer or Employee?

Employees who have a short-term disability in California can claim CA SDI benefits. Employees pay for California Disability Insurance from their monthly salary each month. Employers can deduct CA SUI SDI tax from their employees during payroll. In online portals, employers deduct employees’ contributions toward short-term disability insurance automatically. 

Employees should enter the details of CA SDI tax when they file their W2 form. Further, they can find details of CA SDI on the W2 form in Box 14. Note that the deduction makes provision for financial assistance under the CA disability tax. After that, it lowers the annual income of the employees and reduces their tax liability.

Employees can get California State Disability forms from the website of the EDD and fill them to avail of the benefit. They are available under the heading EDD disability forms on the website.

What Is the Rate of CA SDI?

The rate of CA SDI is the percentage of tax withheld from the employee’s paycheck to contribute to the CA SDI program. California disability pay cover provides financial aid to the employees who are unable to perform their duties. The reason could be physical or mental illnesses not related to their job.

Historically, the CA SDI rate has ranged from 0.9 to 1%. But the CA SDI rate for 2021 is 1.2%. The taxable wage limit is $128,298 annual pay and the maximum amount that can be withheld for CA SDI is $1,539.58.

What Is the Base Period Determination for CA SDI

It is essential to understand the base period for calculating the SDI benefits. California SDI provides financial assistance for up to one year. The benefits under this scheme equal 55% of the employee’s average gross income in the base period.

For California SDI, the base period is four quarters preceding the current and the previous quarter. The amount of benefit an employee will receive depends on their average pay.

What Are the Eligibility Criteria For CA SDI?

It is paramount to know which employees are eligible for California Disability Insurance. All the employees working in California can avail of this benefit irrespective of their citizenship or immigration status. If an employee cannot work because of a temporary illness, they must receive this compensation. The employees must meet the following eligibility criteria:

• Should be unable to carry out their office duties for a minimum of eight days continuously.
• Must have earned a minimum of $300 as wages in the last 12 months.
• Employers must have made a deduction for CA SDI from their salary in the previous 12 months.
• Must be unable to earn their wages due to their disability and not for any other reason.
• Should be working or seeking work while applying for disability payments in California.
• Must consult a licensed physician or practitioner for the first eight days of the illness or disability. They should be under medical supervision and care.
• Should claim the EDD disability cover within 49 days from the start of the disability. They cannot claim the benefit before nine days of the disability.
• Must ensure that their physician or practitioner has completed a medical certification of disability.

Employees can log in to the EDD disability portal to claim short-term disability insurance. People who are self-employed or are working as independent contractors can take advantage of the California State Disability program. They can make individual contributions to the EDD Disability Insurance Elective Coverage scheme. If an employee is not eligible for the California SDI program, they can opt for the DIEC program. However, they need to pay quarterly premiums for cover under the Paid Family Leave and Disability Insurance programs.

Is CA SDI Taxable?

Employers and employees must know whether CA SDI is taxable or not. No, the government of California has not made California SDI taxable. If an employee leaves their job temporarily due to disability, they are entitled to receive disability benefits. These EDD disability benefits are exempt from taxes in the hands of the employees.

It is significant to note here that disability benefits paid as a substitute for unemployment benefits are taxable. If an employee is unemployed, they receive unemployment benefits. While receiving unemployment benefits, if they fall ill or become disabled, they receive disability benefits. These disability benefits are taxable.

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Types of Claims under California SDI

There are several kinds of claims under CA SDI.

Disability Insurance Claim

Employees in California can apply for disability insurance to get short-term monetary assistance. People who cannot work because of a temporary disability or illness unrelated to their job can get wage replacement benefits.

Pregnancy

If an employee cannot do their job because of pregnancy, they can get a pregnancy claim. During pregnancy, the disability period starts four weeks before the delivery and continues to six weeks after delivery. Furthermore, in Cesarean delivery, the period extends to eight weeks after the delivery. Some employees may have a lengthier disability period owing to medical complications.

Paid Family Leave Bonding Claim

Employees can avail of the Paid Family Leave (PFA) Bonding claim to establish a bond with a new child. They might take time off to take care of the newborn or adopted child.

Paid Family Leave Care Claim

Employees can also seek help under the Paid Family Leave Care claim. The claim is advantageous if they have to take care of a family member. To specify, the family member could be the parents, child, spouse, grandparents, grandchild, sibling, or parent-in-law. However, the family member must be seriously ill and require constant care and support.

Paid Family Leave Military Assist Claim

PFL also gives benefits to employees who take temporary leave to be a part of a qualifying event. A qualifying event could be a military event or an urgent need arising from a family member’s deployment call.

Part-time Worker Disability Insurance and PFL

Part-time workers can also apply for Disability Insurance and Paid Family Leave. EDD assesses the eligibility of their claim before they receive the disability benefits.

Reduced Wages Disability Insurance and PFL

If an employee has suffered a wage loss and is working at a lesser pay due to disability, they can apply for these benefits.

State Disability Insurance and Non-Industrial Disability Insurance for State Employees

The Non-Industrial Disability Insurance covers state employees. Here, the employees receive partial wage replacement if they cannot perform their duties due to non-work-related disability, illness, or injury.

Benefits of SDI Online

Employees can submit their Disability Insurance and Paid Family Leave claim forms online too. It is convenient and safe to submit claims online. To do so, employees and employers can log in to the EDD website to submit the forms. Online form submission has the following merits:

Time-saving

The online process of form submission is time-saving. It takes less time to process the claim online.

Confirmation

Once an employee submits the claim, the portal or website confirms it immediately. 

Access to Information 

Employees and employers can access the information by logging into the portal. The portal saves the data. Therefore, employees can access it and check the status of the claim anytime.

Secure

The online process of claim submission is secure and safe. It has the required security safeguards to trace and mitigate fraud.

Employer Responsibilities Regarding Making CA SDI Information Available

Employers must understand and shoulder their responsibilities regarding CA SDI.

In the case of this social security program, employers don’t need to contribute funds towards this insurance. But they need to be meticulous with the contributions of employees toward California SDI. 

Employers need to tell their employees about the employment laws and guidelines, working conditions, and employee benefits. Additionally, an employer should post these posters containing relevant information about EDD disability programs.

Notice Regarding Paid Family Leave/ Disability Insurance/Unemployment Insurance (DE 1857A)

The poster contains crucial information regarding an employee’s right to claim Unemployment Insurance, Disability Insurance, and Paid Family Leave benefits. However, the employer should file Notice DE 1858 for the employees if the Unemployment Insurance does not cover them.

Notice Regarding Provisions of Disability Insurance (DE 2515)

Employers must give this brochure to new hires. The new hires can then go through the brochure and learn their rights. Further, employers should also duly inform their employees who want to take a leave because of temporary disability. 

Notice Regarding Paid Family Leave Benefits (DE 2511)

Employers should give the brochure containing this notice to all the recruits. They should also provide this information to employees who take leave to take care of a newborn baby. Moreover, employees taking time off to take care of a critically ill family member should read this information.

Employer Duties Regarding Disseminating Information About CA SDI

The employers are responsible for disseminating information regarding the provisions of CA SDI to employees. In addition to this, when an employee files a claim for California SDI, an employer must respond accordingly.

Disability Insurance Claim Filed (DE 2503)

The employer receives the form for Disability Insurance Claim after the employee has claimed it. Therefore, employers should complete the form and submit it to the Employment Development Department within two days. You can submit it online and verify the employee’s claim.

Paid Family Leave Claim Filed (DE 2503F)

The employer receives the form once an employee files a Paid Family Leave Claim. After that, they should complete the form and submit the hard copy to the EDD. Finally, they should ensure to submit the form within two working days after verifying the claim information.

Opting Out of CA SDI

Organizations can opt out of California SDI if they want. However, they should have a private plan for providing voluntary disability insurance to their employees. Additionally, the voluntary one must meet the following requirements:

• It should provide and include all the benefits given by CA SDI.
• The voluntary plan must have one extra benefit not included in California SDI. It should be better than the EDD Disability cover.
• The cost of the voluntary plan should not be more than CA SDI.
• The employees of the organization should approve the voluntary plan before employers implement it.

A voluntary plan is beneficial as it allows employers to give better coverage to the employees. Employers can provide more benefits without any additional cost. If the claim rate is low, employers can use the contribution to give extra advantages. Moreover, employers should get the voluntary plan approved by EDD. They need to create a security deposit with the EDD to ensure that it meets all the conditions.

The Bottom Line on California SDI 

CA SDI is advantageous for both employers and employees. Employees benefit because they continue to get monetary assistance during the disability. Simultaneously, employers also benefit as they do not have to pay for the disability benefits. They must only make deductions from the employees’ salaries to provide for disability benefits. 

The post The Comprehensive Guide to CA SDI appeared first on AttendanceBot Blog.

Regardless of employment status, Americans are constantly on the lookout for health insurance that best suits their healthcare needs. But when an individual’s employment status changes this issue can be all the more pressing. If their health insurance coverage is in flux, they could be one hospital stay away from bankruptcy. That’s how dire the situation is for many Americans.

These life events shouldn’t be when employees learn about alternate forms of health coverage. But quite often, that may be the case.

In this article, we’ll take you through what COBRA health insurance is, what it covers, and how much it will cost.

What is COBRA Health Insurance?

After quitting their jobs, employees may miss out on the benefits of health insurance coverage offered by their employer. In the United States, the federal government provides insurance coverage to employees and their families between jobs. The law that grants this safety net is called COBRA, which stands for Consolidated Omnibus Reconciliation Act.

COBRA coverage applies by default to employees covered under a medical, vision, or dental plan sponsored by employers. It is mandatory for companies that have more than 20 employees in their organization. Employees are allowed to include their spouses and dependents under the COBRA plan.

Those employees who have been fired OR have resigned from their previous jobs must know the following.

When Does COBRA Coverage Start?

Usually, employees must subscribe to COBRA coverage within 60 days of the end of their previous employment. It starts from the day the benefits of their former health insurance plan end. The main advantage of COBRA insurance is it works as health insurance for unemployed people too. If a medical emergency arises during this period, COBRA health insurance will provide coverage to the employees and their families.

Getting COBRA Insurance After Quitting Your Job

COBRA insurance allows employees to retain the health benefits offered by their employer after leaving the job. The employees need to pay the COBRA policy premium till they find a new job or get a separate policy. Further, it also applies to employees facing reduced working hours due to misconduct or other reasons. Therefore, it becomes necessary for employees to know how much the COBRA insurance premium is.

The COBRA policy premium is much higher than general insurance policies. This is because the employer will no longer pay the substantial part of the premium as they did previously. Also, employees cannot choose COBRA coverage in the following cases:

• If the employer is no longer providing a health insurance plan due to suspension of health coverage. 
• The organization has been shut down and, therefore, does not offer health coverage to the employees.

How Long Does COBRA Insurance Last?

The length of coverage determines whether or not they will be able to claim the benefits of the health insurance plan. Once the previous health insurance plan benefits end, the COBRA plan remains active for 18 months. In some cases, it may last up to 36 months.

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State-Wise COBRA Coverage

As COBRA insurance applies to employers across the US, employees are entitled to the benefits and coverage in various locations. However, it is administered differently by every state. Here are some of the primary differences: 

• COBRA insurance California offers coverage for 36 months for both employees and their dependents. 
• On the other hand, COBRA insurance in Florida provides coverage for only 18 months.
• COBRA insurance Illinois offers coverage for up to nine months for employees covered continuously for the initial three months. 
• COBRA insurance New Jersey implements COBRA rules for the organizations that have two to 50 employees. 
• However, COBRA insurance in New York only includes those organizations that have fewer than 20 employees. 
• Finally, COBRA insurance Texas is implemented for all the employers who provide group health insurance.

Despite these dissimilarities, most states offer ways to enable employees to continue their health insurance coverage. Most of the states require employees to be covered for a certain period before quitting. Three months is the coverage period that is accepted by most states.

Also, for continuing COBRA coverage, the employees need to pay out of pocket. They have the option to convert their group insurance policies to an individual health plan after quitting their jobs. 

Rules Associated with COBRA Insurance

Before getting COBRA coverage, every employee must learn more about the rules. The employees will need to subscribe to a new health insurance plan before the COBRA coverage retroactive period ends. There might be instances when an individual is unable to find a new job even after 18 months. In such cases, the employee can choose any one of the following options.

Joining Their Partner’s Health Insurance Plan

Employees can join their partner’s or spouse’s health insurance plan if they leave their current jobs. Joining their partner’s health insurance coverage is also possible if they are not covered under any group insurance plan.

For this, both partners must enroll in the health insurance plan offered by the spouse’s employer. Also, they should do it within 30 days after one of them leaves their job.

Subscribing to a New Health Insurance Plan

Employees need not wait to enroll in their partner’s health insurance plan if they leave their current job. They also need not qualify for any other life event that requires medical coverage. Instead, they can subscribe to a new health insurance plan by comparing the best available insurance plans in the marketplace. The benefits of the new insurance plan will apply from the first day of the month that follows, once the employee has left the job.

Eligibility for CHIP

The employees who belong to moderate or low-income families might qualify for CHIP (Children’s Health Insurance Program). CHIP is co-sponsored by the federal government and states. They can find more details about this healthcare program through the official healthcare website of the federal government.

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Cost of COBRA Coverage 

Generally, employees pay around 20% for an individual policy premium and 30% for a family policy premium. The employer pays the remaining amount. However, the employees need to pay 100% of their COBRA premium costs, as well as a 2 percent additional charge for administrative costs. Therefore, the amount payable to maintain the insurance benefits is higher than the standard wage deduction during their regular employment. 

Still, this amount will be lower than the premium of a separate health insurance plan obtained from the open market. Also, the employees will be entitled to the group discount that they were getting from their previous employer’s insurance plan.

Employees can pay the COBRA coverage premium from their Health Savings Account (HSA). Also, they can subscribe to a much cheaper health insurance plan during the subsequent open enrollment period.

The difference between COBRA policy premium and standard wage deduction made against an employer’s health plan is given below:

How Does COBRA Insurance Work?

One must remember that COBRA insurance is a temporary health coverage plan. It enables employees to continue receiving the benefits of a health care plan after leaving their jobs. Therefore, it is essential to understand how COBRA insurance works before getting it. 

The employees have a period of 60 days to decide whether they need COBRA coverage. On failing to choose COBRA insurance within this period, the insurance benefits end once the employer’s health coverage ends.

Employees who choose COBRA coverage will get coverage from the day the employer’s insurance provision ends. The benefits will be similar to those offered by the employer’s group insurance policy. Therefore, the employees can get treatment from the same clinics or choose doctors they had previously consulted.

COBRA coverage will end on the day the employees get a job that provides health insurance. It may also end abruptly if the employees do not pay the policy premium within the stipulated time. 

COBRA medical insurance does not provide additional benefits or coverage other than those available in the group insurance plan offered by their previous employer. If the employees had taken a separate health insurance cover, life insurance policy, or disability insurance, the benefits would not be covered under COBRA. 

The employees can get clarity about their eligibility for COBRA health insurance from their employer’s Human Resource Departments. They can also seek information regarding COBRA coverage from the insurance provider.

The insurer must include information on COBRA rights in their policy documents for the employees’ reference while purchasing health insurance. 

What are COBRA Qualifying Events?

COBRA qualifying events are the instances or conditions during which COBRA insurance can come into play. Here are the main COBRA qualifying events that every employee working in the United States must know:

• The primary condition is that the employees should have been covered under the group insurance plan of their previous employer. Also, they must have resigned, been fired or laid off, or faced reduced work hours to be eligible for coverage.
• If an employee dies, their spouse may be eligible for COBRA medical insurance. The spouse of the employee who has filed for a divorce or legal separation also qualifies for COBRA. 
• Dependents of the employees eligible for COBRA qualify for the medical coverage extended by this law.

Is an Individual Health Plan or COBRA Health Insurance Better?

The suitability of a health insurance plan for an employee depends on their health requirements.

• COBRA insurance is preferred over individual health insurance because it allows employees to continue receiving the coverage without a break.
• An individual may opt for an additional health insurance plan after quitting the job. In this case, they may get the same health coverage at a much lesser price than COBRA insurance. The new insurance plan usually comes with a waiting period and might not offer the immediate relief as COBRA benefits.

Employees might get maximum coverage with a minimum waiting period through a separate health insurance coverage plan. For this, they must explore the applicable individual health care plans even when the enrollment time is not open.

Source

FAQs About COBRA Coverage

What happens if the COBRA insurance premium is not paid on time? 

Some employees may leave their job or have their working hours reduced. They must pay their first premium within 45 working days of choosing COBRA insurance through the election form. If the premium is paid is made on time and in full, the COBRA retroactive period will be covered consistently. If the employees fail to pay the policy premium, the employer might not provide COBRA continuation coverage.

In such cases, they may restrict the benefits only to Medicare. The employer might also stop the coverage if the employees are insured via another plan or exhibit suspicious conduct.

What happens if an employee has subscribed to both Medicare and COBRA coverage?

The Medicare plan will cover the expenses during an emergency first if employees have both Medicare and COBRA insurance coverage. The expenditure outside the scope of the medicare plan will be taken care of by COBRA health insurance.

Is an employee entitled to receive the benefits of COBRA insurance even after the company closes down or terminates their health insurance plan?

If the company closes down or terminates its health insurance plan, the COBRA plan benefits will not remain applicable. In such cases, the employees will have to look for other health coverage alternatives.

Are employees entitled to the benefits of the COBRA health insurance plan if the employer furloughs them? 

Furlough is a situation in which an employer lays off or grants temporary leave to their employees. During the furlough period, the employer decides whether to continue the coverage of the group insurance policy. If the coverage and benefits are discontinued, the employees can take advantage of COBRA insurance. Sometimes, the employer may provide health coverage and benefits, even for the furloughed employees. Therefore, the employees do not need COBRA coverage to manage their healthcare requirements.

The post The Comprehensive Guide to COBRA Insurance appeared first on AttendanceBot Blog.

Since tax laws and tax filing requirements change every year, HR must cross-check with the IRS website that the W3 form information is being reported correctly to the authorities. Understanding tax forms like the W-3 can save businesses time and reduce stress during tax season. With a sample W-3 form or example W-2 as a guide, filling out essential information—such as Social Security wages and Medicare wages—becomes much simpler.

By the end, you’ll not only feel confident in your tax reporting, but you’ll also discover tips to streamline your process and avoid common pitfalls. Let’s get started on the path to tax filing success! 

What is a W3 Tax Form?

A W3 tax form is a tax declaration form submitted to the SSA, declaring total earnings, social security wages, Medicare wages, and withholdings for all employees from the previous year.

The W3 form is called the ‘transmission of wage and tax statement.’ The W2 form report is used to prepare the W3 form. That is, all employees’ wages are added in the W2 form, preparing the base to assemble relevant data for the IRS W3 form.

What is the Need for a W3 Form in Business?

If the business is solely based in the United States, HR must have all the relevant information about the IRS W3 form. This is because the business owners are required by law to report employee payroll and income data, whether or not they are US citizens. If this sounds confusing, it’s because it is!

Let us explain how things work at your end. When a person contacts your business for employment purposes, HR has no choice but to ask them for their personal information, including their Social Security Number (SSN).

HR must collect the full name, address, and SSN of the employees they are hiring. This information is essential because they have to report the exact wages in the employees’ tax filing form.

If the employees already have one, the HRs must ask about their date of birth (DOB). The DOB matters because most SSNs are valid for 80 years, and before they expire, employees must inform authorities if they plan to continue using them.

Under federal guidelines, HR must verify the employees’ identities before hiring them. Failing to follow through with these procedures could result in legal ramifications to the business, including fines. Always remember that hired or temporary workers are subject to the same rules, that is, completion of a similar verification process.

When Should a W3 Form be Filed?

HR is obliged to file the W3 tax form with all the W2 forms of employees before the end of January, after the tax year. The deadline for W3 submission is January 31st.

We suggest that HR give the W2 forms to the employees a few weeks earlier. This will give them enough time to check their forms and correct any potential errors before submitting them to the SSA.

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When an employer perceives a possible delay in submitting the W2 and W3 forms to the SSA, they can request an extension of up to 30 days to file returns using Application 8809. The IRS grants extensions only under reasonable extraordinary circumstances.

Difference Between the IRS W2 and W3 Tax Forms

The W3 and W2 forms are quite similar. 

The marked difference between the IRS W3 and W2 forms is that the latter is for information regarding the salaries and total taxes per employee. On the other hand, W3 forms report employees’ total wages and taxable salaries to the SSA and IRS.

Filling Out the W2 Tax Form

The IRS W3 form contains complete information on the total taxable wages and sums up all the taxes that incur from business in a year. The primary purpose of W3 forms is to summarize all the W2 forms and act as a ‘cover sheet’ for W2 forms.

Filling Out the W3 Tax Form

Before filling the IRS W3 form, an HR professional must collect all the W2 forms first. It is also necessary to report the addition of the tax information given in the W2 form.

Both forms comprise boxes and letters and have similar instructions for completion. You can also find a sample W3 form below for more clarity.

Source

HR will need to carefully look at the boxes from A to H in the W3 form.

• Section A is for assigning a control number
• Section B has two parts: the type of employer and payer
  • The first part of Section B is for the employer, where you have to check the box and identify the kind of payer they are. You can classify the relevant section by recognizing the form name used to file the quarterly tax report of employees.
  • The second part of Section B describes the type of employer they are; so, check the required section according to the business type.
• In Section C, you have to mention the number of W2 Tax forms being submitted.
• Section D asks about the Establishment Number. The box is relevant to companies that have multiple businesses under the same firm. As an HR professional, you have to state the same Establishment Number mentioned in the W2 forms.
• In Section E, fill out the EIN of the respective business.
• Section F needs the the registered name of the company.
• In Section G, enter the valid address of the business.
• Section H is for employers who have used different EINs in the same year. If there is any change in the ownership in the current year, the new and the former owners will have separate EINs.

As an HR professional, you have to enter the full income report from the data given in the W2 forms in Sections 1 to 19.

How to Make Corrections in the IRS W3 Form

If an employer makes mistakes on the W2 forms and realizes this after submitting the W3 form, HR can file the W2c and W3c tax forms with the corrections.

The IRS does not have an official deadline for this type of correction. However, HR should make the corrections as soon as possible after discovering the errors. You are also obliged to give the W2c copy to the affected employees.

How to File the IRS W3 Form

As an HR professional, you can use these three options to file IRS form W3:

• E-filing online
• Mailing the forms
• Hiring an accountant to file 

E-filing Online

The SSA encourages filing all the forms online because e-filing is more accurate, faster, and more secure. If the total number of W2 forms is greater than 250, HR professionals must file them online along with the W3 forms.

HR professionals must use the Business Services Online (BSO) portal to file the forms online. 

As an HR professional, you can use either of these two options to file IRS form W3 under the BSO portal:

• You can build a fill-in form and print the copies to submit

• You can upload the wage files from the businesses tax and payroll software from which the BSO portal will automatically create a similar W3 form online.

The tax payment can be made online using the EFTPS (Electronic Federal Tax Payment System).

The benefits of filing IRS W3 and W2 tax forms online are as follows:

• Electronic tax filing saves HR professionals’ efforts and time and helps ensure correctness and accuracy.
• HRs do not have to calculate and submit an IRS W3 form; the SSA makes a W3 form automatically.
• The due date for submitting an electronic application is at the end of March, which is one month later than submitting these forms by mail.
• HRs can verify employees’ SSN for reporting the wage information at the BSO portal.
• The BSO site offers a tutorial, manuals, a checklist, and other helpful information to file those W2 forms electronically.
• If HR professionals make an error on one or more W2 forms after submission, they can submit W2c forms to correct the mistakes.

Mailing the Forms

While the SSA promotes filing all the forms online, small businesses can also mail the IRS W3 and W2 forms.

As an HR professional, you need to order the paper copies of W3 and W2 forms from the IRS before posting and making a payment. After ordering and filling out the W3 forms, you have to send the document to the address given below:

Social Security Administration

Direct Operations Center

Wilkes-Barre, PA 18769-001

HR professionals can send the W3 forms more rapidly by choosing private carriers. The current address for quick shipment is as follows:

Direct Operations Center

Social Security Administration

ATTN: W2 Process

1150 E. Mountain Drive

Wilkes-Barre, PA 18702-7997

Hiring an Accountant for Filing

You can also hire an auditor to file the IRS W3 form for all the deposits and outstanding payments. The tax professional will handle all the filing and tax depositing requirements.

Is Filing a W3 Mandatory?

Whether you’re new to handling tax forms or just looking for a refresher, familiarizing yourself with what a W-3 looks like can be incredibly helpful. From filling out a W-2 form to clarifying the difference between W-2 and W-3 forms, ensuring accuracy in your wage statement filings is key to maintaining compliance and a smooth HR operation.

In this article, we have covered all the important points for HR in the US to know before filing IRS W3 forms. Here are some quick points to remember:

• The IRS W3 form contains a full report on the wages, and the total salary companies give their employees
• All the HR professionals who file one or more of the W2 tax forms must also file the IRS W3 form
• You can get copies of forms on the IRS portal and can e-file from the BSO portal of the SSA

The post W3 Form: Your Essential Guide to Hassle-Free HR Tax Filings appeared first on AttendanceBot Blog.

It allows you to compare the headcount levels of businesses within any industry. In this article, we’ll take you through why a full-time equivalent figure is important for businesses in the United States. 

What’s Considered Full-Time?

Full-time equivalent (FTE) allows employers to measure the number of full-time employees they need. FTE calculations are done based on the employees’ work hours per week.

Technically, a full-time employee can be the equivalent of two part-time workers. Employers treat part-time employees as a percentage of full-time employees. Thus, it is possible to consider full-time equivalent employees by combining multiple part-time employees.

An employer has to follow various employment laws, but not all of them apply to every company. The number of personnel on hand usually determines the laws that apply in particular enterprises. The measure of FTE determines the number of employees (also known as a threshold) of an enterprise. It is calculated to: 

• Comply with the employment laws
• Benchmark revenues
• Check qualifications for business loans

Who Qualifies as a Full-time Equivalent Employee?

An FTE employee is evaluated based on the total number of hours the employees have worked in the organization, although the FTE calculation may not consider all the employees hired by the organization. Here are some general criteria for the employees to be considered as full-time:  

• An employee who works in a full-time work schedule as per your organization’s standards is a full-time employee. 
• Two employees hired part-time who work half of your company’s daily work schedule are equal to a single full-time employee. 
• Four employees hired part-time for a quarter of the work schedule are also equal to a single full-time employee. 

The Current Full-Time Equivalent Schedule

The length of the average full-time work schedule has drastically changed over the recent years. Due to changes in legislation around the world, employees that companies hire full-time nowadays work 20-30 hours less per week than employees from the previous century. Many companies have even chosen the 32-hour workweek schedule.

Is 32 hours considered full-time? The answer is both yes and no, as these figures differ in various countries.

In the Netherlands, the average full-time work schedule of the employees is approximately 29 hours and 18 minutes per week. Whereas in Colombia, the average full-time work schedule per week is nearly 48 hours. 

According to the IRS, a US employee has to work 30 hours every week or 130 hours a month to qualify as a full-time employee. In reality, the employees usually have 32-40 hours workweeks. In many organizations, the most typical work schedule is 40 full-time hours per week. Generally, employees work 8-hour shifts for five days every week.

How Many Hours a Year is Full-Time?

Identifying the total number of hours employees work in a year can help you in determining their hourly compensation. While the procedure for determining hourly wages is simple, the actual result may vary depending on the workweek pattern used in the organization.

Is it a 40-hour or a 32-hour workweek schedule?

How many leaves does the company provide?  

Once you’ve determined the weekly working hours and the overall number of holidays granted to employees, the rest is simple. Simply multiply the number of weeks in a year by the number of work hours in a week. For example, if you have a 32-hour workweek, multiply it by 52 weeks. That equates to 1,768 hours a year for each full-time employee. 

However, not every company has a 32-hour workweek. The 40-hour workweek is the most prevalent work schedule. In this schedule, each full-time employee works 2,080 hours each year.

Why is Full-Time Equivalent Important?

The FTE determines if a business qualifies as ALE (Applicable Large Employer).

ALE is a designation that indicates that an employer has 50 or more full-time employees. It can also indicate a combination of full and part-time employees that equate to 50 full-time employees in the preceding calendar year. 

If your company meets the requirements for ALE certification, the Affordable Care Act’s employer mandate requires you to provide group health insurance to your employees. If you are in ALE status, you must also submit your 1094-C and 1095-C tax forms that describe the type of coverage you provide to your team. Make sure to submit these documents alongside your application.

How to Calculate Full-Time Equivalent?

When an employee works a typical full-time workweek, the equivalent of all employees who work full-time is calculated by dividing the scheduled hours of the employee by the total number of hours worked. Employers often use a 40-hour workweek to calculate full-time equivalents. Employees who work 40 hours per week fall in the 1.0 full-time category. Employees who work 20 hours per week qualify as 0.5 full-time equivalents under federal wage and hour laws. 

In the case of a 35-hour workweek, an employer would simply divide an employee’s scheduled hours by 35 to arrive at the equivalent rate. For example, when the full-time employees’ workweek is 35 hours, an employee assigned to work 21 hours a week will have an FTE rate of 0.6.

The number of full-time employee equivalents is determined not by the number of employees but by the hours worked. You could have four full-time workers and only one part-time worker. Four 0.25 employees would be equivalent to one full-time employee. For instance, Janice, Ben, John, and Josh could each work ten hours per week for a total of forty hours per week, or one full-time employee can work based on a 40-hour workweek schedule.

Employers can use the FTE calculation for various purposes, including benchmarking earnings or profits per employee comparisons. It is beneficial to convert the hours worked by part-time employees into full-time equivalents when calculating these metrics.

 The Patient Protection and Affordable Care Act (PPACA) specifies how an FTE is calculated. It requires employers to calculate the full-time equivalent to determine whether the law applies to their company.

How to Calculate FTE to Determine the Number of Full-Time Employees?

Consider the following scenario. You are attempting to determine the HR requirements for a project that will take 1200 hours and require your team to work 8-hour shifts per day. By dividing 600 by 8, you can determine the number of days your team has to work to complete their tasks. It will also help you identify the required number of employees to complete the task in the specified days.

1200/8 = 150 hours per day

All you need to do is decide the number of people you need to employ and the type of job you will assign them. Here are some of the options:

• Hiring 10 full-time employees gives you an FTE rate of 10.0 and can help you finish the project in 15 days. 
• Hiring 7 employees full-time and 1 part-time gives you an FTE rate of 7.5, and you can complete the project in 20 days.
• If there is no time constraint, you can hire 5 people to complete the same project. They can complete the project in 30 days. 
• Hiring a team of 15 employees full-time gives you an FTE rate of 15, and you can complete the entire project in merely 10 days.

The allocation is dependant on the time-sensitivity of the project. 

Now that you know the aggregate number of hours employees have to work each day, you can pick your days-per-employee ratio for carrying out the projected volume of work. Also, here is an FTE conversion chart to aid in the proper division of human resources.

Calculating Eligibility for the Paycheck Protection Program (PPP) 

Small and medium-sized businesses participating in the CARES Act’s Paycheck Protection Program receive assistance from the program to keep their employees on a payroll.

It specifically assists small and medium-sized businesses in covering eligible salary and non-payroll expenses for up to 24 weeks. The Flexibility Act of 2020 was made a law on June 5, 2008; eight weeks before implementing the Paycheck Protection Program. 

Once the small and medium-sized businesses complete their PPP requirements, the money they borrowed from the program will be forgiven in the following situations:

• The funds covered payroll costs. 60% of funds spent on monthly pays, hourly earnings, commissions, additions, and other incentives. With non-payroll costs consisting of 40% of the funds spent on rent, interest on loans, or conveniences of the employees.
• The small business owners maintained an FTE level in their organization from February 15, 2020, till December 31, 2020. The company must have maintained optimal equivalent employee levels by retaining current employees. They could also or rehire employees laid off or furlough them between February 15, 2020, and April 26, 2020.
• The business is eligible if salaries and hourly wages were not cut by more than 25%. It is also suitable if the organization could not function at the same level of business activity as before February 15, 2020, due to COVID-19 compliance and regulations.

Does Your Business Need a Full-Time Equivalent? 

There are multiple reasons to calculate full-time equivalents using various calculation methods. Planning for project work in an organization by setting deadlines and a budget becomes more accessible using this tool. Having accurate employee equivalents can help HR in a number of ways. It can be useful to calculate paid time off for employees and if the business is eligible for federal programs. 

The post The Comprehensive Guide to Full-Time Equivalent for Businesses appeared first on AttendanceBot Blog.

Let’s find out why the payroll tax holiday is a deferral and what the long-term ramifications are.

What are Payroll Taxes?

Payroll taxes are all the taxes levied by the state and federal government bodies on both employers and employees. It usually includes taxes deducted from paychecks by employees and the taxes paid by employers based on their income. These taxes include: 

• Social Security Tax
• Federal and State Income Tax
• Federal & State Unemployment Tax 
• Medicare Tax 

The federal payroll tax rates are decided and levied across the nation, whereas state payroll tax rates differ by state. The federal income tax rates are gradual and increase in stages based on the total income.

As the overall income of the people increases, they move to a different tax bracket with higher tax rates. For Social Security tax rates, it is paid according to the set percentage of the total income but to a limit. Lastly, the Medicare tax is a flat percentage of all earnings. 

What is a Payroll Tax Holiday? 

On August 8, 2020, former President Donald Trump issued an executive order to create a payroll tax holiday. This allowed people to defer employee payroll taxes without sustaining any penalties or fees. 

The only tax affected by the executive order is the Social Security tax, and the tax rate for it is 12.4%. However, the Social Security tax is split between the employer and the employee, so effectively, employees only get a 6.2% benefit. Also, the employees that benefit from the payroll tax holiday are those whose biweekly income is below $4,000. 

Do All Employers Have to Apply for a Payroll Tax Holiday?

The answer is that it depends.

All federal government employees are eligible for payroll tax holidays. But for the private sector, it’s an optional program. It’s entirely up to your employer and is not required by law. You can enjoy the benefits of the program if your employer or organization chooses to join the program.

But under no circumstances is the payroll tax holiday a right. 

On the other hand, if the business is participating, the program will likely be in effect for all employees or for those who chose it on an individual basis.

Why Would an Organization Not Participate in the Payroll Tax Holiday?

If your organization does not participate in the program, it’s likely due to the following reasons:

It isn’t a “Holiday” it’s a Deferral

The payroll tax holiday program allows employees to defer only on Social Security. Since most employees are likely to stick to the organization they currently work for, they will have to pay those deferred taxes in 2021. To put it in simple words, the paychecks of the employees will be considerably smaller than usual, which will lead to more financial instability for the employees and no benefits.

Complicates the Payroll Process Unnecessarily

While most employees are likely to stay with the organization, there is no denying that some may leave. Even when employees leave your organization, the deferred taxes are still owed and must be paid to the U.S. Treasury. This means that the organization has to pay for the deferred amount according to the payroll tax holiday program. Many businesses are not doing well during the pandemic, and there is a possibility that they may have to downsize their workforce. Adding employee exits to the mix, it’s just too big of a risk for organizations. 

Is the Payroll Tax Holiday Worth Taking?

I am sure the thought crossed your mind, “ Let’s enroll for the payroll tax holiday and see if the federal government forgives the debt.”

Well, it’s not that simple. Payroll, especially on an undertaking like this, has an enormous amount of administrative burden. A lot of notifications must be sent out, as well as numerous accounts set up and individual pre and post-tax calculations done for each participant who wants to opt for the program. 

A lot of organizations chose not to opt for this program.

Employee Payroll Tax Holiday: The Effects

While most private companies will most probably implement the payroll tax holiday, the employees that fall in the low-income bracket will be the most severely hit group. They will suffer a massive financial burden as the deferred taxes have to be paid back to the federal government. If the employee earns the maximum eligible amount, they might be able to overcome the financial burden of paying back the deferred tax amount, but the same cannot be said for those that earn $30,000 or less annually. The burden of paying back the taxes can lead to massive financial instability. 

The Biden Administration has yet to make a public statement on the repayment process for the deferred payroll tax that he will inherit from President Donald Trump. The most favorable options include: 

• Prolonging the deferred payroll tax repayment period so that there is less impact on people that earn less than $4,000
• Forgiving the deferred payroll taxes completely

However, if the decision of forgiving the deferred taxes is put into motion, it will be unfair to those whose taxes are being withheld. Additionally, it could also lead to destabilizing Social Security by reducing the amount that is allocated to its funding.  

Another potential issue for those that have deferred taxes is that they might just get slammed with more taxes, especially those that earn less than $4,000 biweekly. If these employees are participants of the payroll tax relief, they might just take a surplus of $496 per month in their paychecks for four months. This may put them in a higher tax bracket, which would result in them paying more taxes. Every dollar you earn that surpasses the lower tax bracket will be taxed higher.

How to Survive the Payroll Tax Holiday?

Here are some tips to overcome the potential financial instability due to reduced paychecks in 2021. 

Analyze the Impact

2020 has been unprecedented, and people are now trying to seek their normal way of life. The payroll tax holiday was another surprise that people didn’t know what to do about or how to solve its aftermath. 

The first thing that you need to do is to get a precise estimate of how much your paycheck will be affected. Start by reducing your last paycheck in December by 8%. This accounts for the 2% payback and the 6.2% payroll tax break. Employees that are serving will suffer a lesser financial burden as they will receive a 3% increase in their paychecks in 2021.

Nonetheless, 8% should help you create a steady cash flow to support yourself and your family. Assuming you will be making payments totaling the amount owed each month over the next 12 months. 

Save Some Money

Many employees, especially those that work for the government, will witness an increase in their paychecks. If you don’t have the necessary expenses and can spare the cash, consider saving it for the coming months. Your paycheck will be reduced in 2021, and you can use the excess that you are saving during this time to ease the financial burden of the payroll holiday. While the idea of saving some money is not something out-of-the-box, keeping your expenses in check and setting aside money can be really helpful in difficult times.  

Re-Evaluate your Expenditures

The coronavirus pandemic has already destabilized the finances of many. While many employees have already kept a keen eye on their expenses and changed their spending habits, the payroll tax was yet another surprise that no one knew what to make of. Although people were relieved at first knowing they could defer taxes, they got confused upon understanding the implications.

They will get financial relief, but they have to pay it back this year. This means an additional annoyance to your financial dilemma. In such cases, it’s best to re-evaluate your expenses and limit those that aren’t necessary. Look for expenses that you can cut back on. Stop services that aren’t necessary, put a hold on spending habits and purchases that you can avoid. It might make you analyze all your expenses, but it’s definitely worth the effort. You don’t necessarily have to put a stop to all expenses other than those that fulfill your basic needs. Start small, for example, a subscription to a streaming platform, and then find similar expenses. 

Find Ways to Boost Income

Last year shook many families financially, but it also led them to find new ways to support their expenses. Putting effort into finding side jobs can be the key element to restoring your finances and attaining stability. Making some extra cash from your hobby, contract work, selling stuff, or running a side business from home can help you overcome the financial instability caused by the taxes taken out of your paychecks. 

Reach Out for Financial Aid

Hoping that it doesn’t come to this, but if you are in a really tight spot, ask for financial aid. Various organizations such as the Navy-Marine Corps Relief, Army Emergency Relief, We Care for America, and more, are always on standby to help those that struggle to get by daily.

Changing Jobs Could Lead to Severe Implications

While government employees have to defer on their taxes, it’s optional for private organizations. But if you have deferred on taxes, it’s best to put a hold on the idea of changing jobs for a while. Doing so could potentially result in a highly deduced paycheck or some form of unwanted surprise from a previous employer. Make sure to check with the employer about the implications that you would face on doing so. 

Do Employees Have a Say in the Implementation of Payroll Tax Holiday?

Well, whether they have a say in it or not totally depends on the business. 

Federal Employees

If you work for the government, then you don’t have a choice. All federal and government employees will automatically receive a payroll tax holiday. You will witness an increase in your paychecks due to the deferred taxes for four months. You will have to pay those bases in the upcoming months in 2021.

Private Employees

As for private employees, their say in the matter totally depends on the way their employer approaches the payroll tax deferral. If your employer is not interested in the program, then it’s unlikely that they would implement it as the mandate is optional for the private sector. But there are employers that have implemented the payroll deferral program. Also, some employers have even asked for the opinions of their employees on the matter. In such cases, the decision is based on a majority vote. If the employees want to leverage the deferred tax holiday, then they need a majority vote and vice-versa. 

What’s Next for the Payroll Tax Holiday? 

While the employees that have deferred tax will enjoy a surplus in income till December, they need to know that they will have to pay it back eventually. This means that they will see a significant decline in their income in 2021. While the relief does sound good. It may be devastating to those with low income in the under $4,000 dollar mark. They could witness a massive financial burden. 

Rather than relief, think of it as a no-interest loan that employees are borrowing from the government. Employees will have to pay it back in full. 

The post The Ultimate Guide to the Payroll Tax Holiday appeared first on AttendanceBot Blog.

With so many employees living paycheck to paycheck, organizations must ensure that the wages and salaries are paid on time. However, sometimes, it becomes challenging to make the payments if payday falls on a holiday.

Before we dive into the nitty-gritties of processing payroll on holidays, you can refer to our article on federal holidays for the year. By knowing what the holidays are you can map out when a pay date falls on a holiday.

Why Can’t Employers Make Payments if Payday Falls On a Holiday?

You must be wondering why the salary payments cannot be made on holidays. The answer is quite simple. All the payments are made through the bank, and the banks are closed on the weekends and federal holidays. Due to this, there is no possibility of bank payments on bank holidays.

Most employers pay their employees through direct deposit. In this process, the money goes from the company’s payroll account directly to the employee’s account. This transfer is facilitated by the Automated Clearing House (ACH), an electronic network for making direct deposits.

However, it is impossible to make any direct deposit on holidays. The ACH functions from Monday to Friday, excluding holidays. When the payday falls on a weekend or bank holiday, wages to the employees get postponed by a day. If there is a payday after a bank holiday, the payroll process gets delayed for the week.

What to do if Payday Falls On a Holiday?

There are typically three solutions that can be adopted if payday falls on a holiday. With so many employees living paycheck to paycheck it becomes important to pay them with as little uncertainty as you possibly can. With employee satisfaction being the end goal, there are three options available to employers.

Run the Payroll at the Usual Pace

One solution is to run the payroll as usual, where the employees get paid after the holiday, even if payroll falls on a holiday.

Although there is nothing mentioned in the Federal and State Labor Laws that go against this solution, one must always consider the employee satisfaction and attrition rates when adopting these solutions.

Decisions need to be taken according to the compliance laws and policies of the organization. However, it should be made sure that employees are kept in the loop and informed about any changes in the pay date.

If the organization has partnered with a third party for payroll management, it should be ensured that there is clear communication regarding the payroll processing schedule.

Run the Payroll Earlier

In this case, the employees get paid before the holiday.

For example, if the payday falls on a weekend, say Saturday, ensure that the employees get paid on Friday. You can start collecting the timesheets by Monday of the same week, processing them by Wednesday so that you can pay the employees by Friday.

For instance, if Friday is a holiday, as is the case with New Year in 2021, you will have to start the process one business day earlier than your regular payroll process. Start on Thursday by collecting timesheets and submit the payroll documents on Friday. Your employees will then get their salary one day before payday.

In short, your employees will be getting paid early on holidays.

Another case is if there is a payday after a bank holiday, the employer will need to start the payroll process one or two business days before the usual cycle. For instance, the payday is on Thursday, and Wednesday is a bank holiday. Then make sure that the payroll documents are submitted by Wednesday of the previous week to prepare the direct deposit by Thursday.

If you forgot about the holiday, you can expedite the payroll process so that the employees receive their salaries on time. You might have to pay a small fee for each direct deposit transaction expedited.

For example, if your payroll process takes four days for completion, using this option, you can get it done in two days. You can submit payroll on Wednesday and Friday; the payment will be made to your employees.

Creating a direct deposit calendar and schedule will help you plan your work according to the bank holidays and weekends. It will come in handy if payday falls on a holiday.

Delay the Payroll Process

This process can be adopted if it is aligned with the company policy and compliance regulations. For instance, if payday falls on a holiday, say Sunday, the organization can decide to make the payments a day later, i.e., on Monday.

However, it could lead to the employees being disgruntled as quite a few live paycheck to paycheck. Any delay in this payment could create inconvenience for them and negative sentiment toward the organization. Employee welfare should be the primary concern while making payroll decisions and policies.

US Laws Regarding Payroll

If Payroll Falls on a Holiday

The Fair Labor Standard Act of 1938 necessitates the regular payment of minimum wage and overtime pay. However, it does not dictate any provisions for when remuneration timelines if payday falls on a holiday. The Act states that the companies are obligated to pay the wages and salaries on the regular payday to the corresponding pay period.

Regular paydays are scheduled on working days for the business. It is primarily from Monday to Friday. According to the best HR practices, the salary should be paid a day in advance if payday falls on a holiday. For instance, the US General Services Administration pays its employees a day in advance if the payday falls on a bank holiday.

Change in Payroll Frequency

There are strict laws that govern payroll frequency. However, pay frequency can be altered in case the following conditions are fulfilled:

• The reason for the change is legitimate
• The change is permanent
• Minimum wages and overtime are being accounted for and paid
• There is no delay in wages without a valid reason

Factors Affecting Payday Schedules if Payday Falls On a Holiday

Different payday schedules depend upon the type of business, cash flow, automated payroll processes, number of employees, and the geographical distribution of the employees. In some workplaces, weekly paydays are more convenient due to the frequent changes in the workforce and simpler bookkeeping.

Employers also issue payday calendars that help the employees get a better idea about when a pay date falls on a holiday. It enables the workers to understand the beginning and end of pay periods. It helps establish the details of delayed or early payments way in advance allowing employees to plan their finances ahead of the paydays.

Curious about pay periods and how pay cycles work? Click here to know more.

Tips to Manage Payroll if Payday Falls On a Holiday

Plan in Advance

At the beginning of the year, sit with HR to plan the payroll process for the entire year. Maintain a calendar and mark the dates on which the direct deposits need to be made earlier than usual. Circulate this calendar among the employees so that they are aware of the changes in pay dates. For the employees, getting paid early on holiday is preferable to a delayed payment.

Create a Schedule

Create a schedule for the paydays and mark the days you have to perform the various payroll management functions. A schedule will help you stay on track and keep a tab on all the approaching bank holidays. Using the schedule, you can also manage third-party payroll providers if payday falls on a holiday.

Maintain Transparency at all Costs

After the schedule is created, share it with the employees to maintain awareness and transparency about the paydays. The schedule will also help employees know when they have to hand in their timesheets and stay regular for proper payroll processing. The employees will be paid on time even if payday falls on a holiday.

Maintain Consistency

Ensure that when you are making salary payments for paydays that fall on holidays, you choose to go for an early payroll process. Start the process one business day earlier than usual and inform the employees about the same. Try not to juggle between delayed and early payroll processes, stick with one to ensure that employees can manage their finances with some degree of certainty. 

Create Reminders and Alerts for Payroll Processing

Ensure you send in regular reminders and alerts to the employees to fill in their timesheets whenever there is an approaching deadline. Remind them whenever there are payroll changes and their payday is different from the usual. Set reminders to inform them about when they will receive their payments if payday falls on a holiday.

Automate your Process with a Payroll Provider

Using a manual method for payroll processing usually eats into a lot of your time and does not ensure 100% accuracy. A payroll provider can automate your processes and workflows. They take care of your payroll schedules, pay dates, and the holidays. They provide a platform for easy timesheet upload and attendance tracking.

For instance, Gusto has an integration with AttendanceBot to upload timesheets directly into Gusto. If you’re a Gusto power user, give AttendanceBot a try to find out how our time tracking software can help payroll processing.

Some payroll providers even offer tax compliance services. 

Keep These Aspects in Mind During the Payroll Process

While you may take the necessary steps to ensure the payment of the salary/wages to your employees in case payday falls on a holiday, there are a few things that you must always consider before the payroll process:

Employee Satisfaction

A major reason for building a framework around the payroll processes is to ensure that the employee can manage their expenses better. It must be designed and implemented in a way that helps employees.

Employer Branding

An employer’s processes in an organization for personnel management stays with the employee even after they leave the organization. It is imperative that all the processes are systematic and workflows are simple to follow. Employees remember an organization through their experience with its various elements. Payroll is one of the processes where employees can get put out very easily. 

As HR, it is integral that their experience is overwhelmingly positive. A positive experience here is surely a benefit to employer branding.

Attrition Rate

Attrition rate refers to the rate at which the employees leave an organization. The payroll process adopted by an organization can impress or frustrate the employees, depending on the way it is executed. It must be ensured that an unorganized payroll process does not become a significant reason for attrition. An efficient payroll system will help troubleshoot problems if payday falls on a holiday.

Cash Flow Management

The cash flow into the organization is dependent on the type of business. There must be a balance between employees’ best interests and the cash flow situation of the business. The payroll processes should then be finalized. 

Avoiding Confusion

The goal of a payroll process should be to avoid confusion and frustration in the workplace. The systems and processes should lead to a healthy work relationship between the employer and the employee. This goal can be achieved if confusion related to workflows, transparency, and compliance are avoided.

Key Takeaways for Employers for Payroll Management if Payday Falls on a Holiday

We hope this article helped you gain insight into how you can manage payroll when payday falls on a bank holiday.

The key to payroll processing for your employees is to plan in advance and maintain transparency. Although there is no legal provision for payroll processing if payday falls on a holiday, ideally, early payroll processing is preferred. However, the employer can always make a call depending upon cash flow and other business factors.

Nevertheless, employee satisfaction and financial conditions should be factored in while making a call. A delay in the payments might cause discontent among employees that can be cushioned by prior scheduling and maintaining complete transparency.

The post What Can an Employer do if Payday Falls on a Holiday? appeared first on AttendanceBot Blog.