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Recruiting talent for any size business can be a challenge in today’s marketplace. Adding to the stress in many states and localities are new laws that prohibit companies from asking candidates for their salary history. This new wave of legislation has many small companies confused: why would salary information be any more problematic than asking for work history?

But the new laws have their benefits, for workers as well as business. If you do business in any of the states or municipalities, and there are almost 30 to date, that prohibit requesting salary information, you understand what’s required, but you may not know why. For businesses not in these locations, be aware that legislation might be coming soon. A best practice may be to stop asking about salary history in the early stages of the hiring process, just to be ready for any change that may occur.

Why do laws require hiring without salary history?

The logic of salary history bans is twofold.

First is equal pay for equal work. Two staff members, side by side that perform the same job should earn the same rate of pay.

The second issue, also logical, has a more long-term and detrimental history. When a company recruits and hires a candidate whose asking salary is lower than they’re prepared to pay, it makes sense to make an offer at that rate. The job seeker is getting (hopefully) an increase, and the business saves a bit of money. No harm, no foul, right? But this practice, when repeated with every job move (or even promotion) has the long-term effect of keeping up the cycle of lower pay throughout the worker’s career. Studies indicate women and minorities are the most adversely affected by the practice. For the candidate, salary inquiry bans are a net benefit.

How do laws on hiring without salary history benefit business?

It might seem counterintuitive that not saving a bit of money when hiring would be beneficial to companies, but it can be. As workers are looking for more transparency from their employers, equal pay for equal work is one of the basics job seekers and employees want. In a tight applicant market, that level of transparency can mean more candidates.

Many companies, not under salary history bans in their jurisdiction, are embracing publishing their starting wages to good effect. Corporate social responsibility is another positive trend for business: and it begins with fairness to all employees and job seekers. Pay equity goes a long way to demonstrate a business is a good corporate and community citizen. That type of positive branding can only be a boost to business large and small.

How to hire without asking for salary history

Most businesses are aware of what they can afford to pay for any given position. They may have established salary ranges or pay bands that outline what they are willing to offer. Creating these in advance, and sticking with them to the extent market conditions allow, helps business plan for sustainability as well as growth.

Payroll is typically a small business’s largest expense. Keeping cost contained and manageable is necessary. Still another benefit of hiring without asking for salary history can have a direct impact on cost-conscious companies.

Not asking for salary history has put many companies in the position of publishing their wage range. When a job seeker sees the amount offered in an ad or posting, they can self-eliminate if the salary isn’t in their range. That can mean a lot fewer candidates to screen through, saving time for recruiters and hiring managers. When all the job seekers you interview are in your salary range, you can hire quickly and effectively. Retention rates may even increase, since new hires are already comfortable with their rate of pay. .

Hiring without salary history in uncharted territory

Many businesses are looking to hire workers in new or expanding areas of their company. You may have decided an in-house IT person is the best choice now that your business has grown. Sales representatives may be needed to expand your reach. A new level of manager may be on the horizon.

But if you’ve never hired in those categories, you may not know fair market rates. For many, understanding what a candidate has earned in the past offered guidelines to what a fair offer should be. That can be misleading.

Perhaps the candidate’s seniority at the company boosted their wage level. It’s possible they’re not being 100% honest about their former compensation – and with many companies avoiding reference checking – you may not be able to verify. There may be many reasons why their past wages were higher (or lower) than market value. Using salary history as a basis to set your own wage range may not be the best option.

Compensation management tools help you hire without salary history

Compensation management tools are critical to making an offer that’s competitive without overpaying for your market. They offer insight into salary benchmarking data that assures business is on point with wages and other benefits, based on the role, the location, and the level of experience and credentialing. A quick look at compensation management tools could mean the difference between overpaying a new hire, or unsuccessful recruitment campaigns that net no qualified applicants from which to choose.

An IT professional in a large metropolitan area may have the same skills and background as their rural counterpart, but less competition in your geographic area could mean cost savings. A skilled worker may be more valuable than entry level, but how much more should you pay? In addition to qualifications and location, what market conditions impact your company at the time of hire? These can fluctuate rapidly and unexpectedly. A large company near you shuttering its doors can mean a wealth of available talent, while new competition can create a squeeze.

Compensation management is a must for every business that needs to keep current with the market conditions that affect their business. Salary history bans may be new to business, but in addition to helping job seekers, they appear to have unexpectedly beneficial consequences for business. More than market fairness, these new laws may help companies look closer at their pay bands and compensation plans. They should drive business to leverage the wealth of data available through compensation management tools to assure they’re hiring exactly right for their market. That can only help companies hire better and smarter, and keep their competitive edge.

This article is intended only for informational purposes. It is not a substitute for legal consultation. While we attempt to keep the information covered timely and accurate, laws and regulations are subject to change.

The post The Small Business Guide to Hiring Without Asking for a Salary History appeared first on Zenefits Blog.

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If you work for yourself or have your own business, you are probably all too familiar with the headache that is filing your business taxes. On top of the fact that it can be complex to calculate them, it changes every year.

Fortunately, if you have a plan in place, you can easily file your self-employment tax 2019 and predict what you’ll have to pay. This handy guide will tell you how.

What Defines “Self-Employment”?

Simply put, a self-employed person is legally defined as someone who does not work for a specific employer who pays them a salary or wage. Self-employed individuals, also known as independent contractors, do business directly with clients. The IRS defines self-employed individuals as independent contractors, sole proprietors of businesses, and individuals engaged in partnerships. Additionally, you are considered self-employed if you made $400 or more in net earnings from self-employment or $108.28 or more for church employee income.

What is the Self-Employment Tax?

The self-employed tax is a special tax filing for individuals who are self-employed. The tax accounts for social security and Medicaid. Those who consider themselves self-employed are required to submit taxes for themselves using the 1040 form Schedule through the IRS.

In a traditional W2 employee relationship, most of the burden falls on the employer to pay Medicaid and social security. For the self-employed, all the tax burden falls solely on the independent contractor’s shoulders, causing it to be higher than a salary or wage job.

How to Calculate Your 2019 Self-Employment Tax Rate

The IRS states that the self-employment tax 2019 rate is 15.3 percent on the first $132,900 of net income plus 2.9 percent on the net income in excess of $132,900.

Ultimately, for the self-employment tax 2019, you’ll have to pay both portions of employer and employee social security and Medicare, which breaks down as follows:

  • The employee’s portion of the Social Security tax, which is 6.2 percent of the first $132,900 of net income
  • The employer’s portion of the Social Security tax, which is 6.2 percent of the first $132,900 of net income
  • The employee’s portion of the Medicare tax, which is 1.45 percent of all net income (no cap or limit on net income)
  • The employer’s portion of the Medicare tax, which is 1.45 percent of all net income (no cap or limit on net income)
Self-Employment Tax Deductions

It’s no secret that people who are self-employed pay much more in taxes. However, you do have the luxury of deductions and cuts when calculating your net income for self-employment tax 2019.

The most common 1099 tax deductions for the self-employed are:

  1. Educational Expenses and Materials
  2. Home Office
  3. Travel
  4. Outrageous Costumes (If you’re a performer)
  5. Office Supplies and Equipment
  6. Licenses and Permits
  7. Work From Other 1099 Contractors
  8. Advertising and Promotional Materials

The good news is that we’re starting to move toward a society that better nurtures the self-employed individual. There are countless resources you can refer to in order to educate yourself about the self-employment tax 2019 and create your best case self-employment scenario.

The post What is Self-Employment Tax and What are The Rates for 2019? appeared first on Zenefits Blog.

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Americans’ attitudes toward marijuana use are changing rapidly, and state laws are reflecting that reality. In 2019, nearly two-thirds (62 percent) of Americans say that marijuana should be legalized. As luck would have it, many of them live in states where it has been.

A total of 33 states allow medical marijuana use, and in ten of them plus the District of Columbia, the drug is fully legal. Another 13 states have decriminalized marijuana, meaning that prosecutors either won’t bring charges for marijuana-related offenses, or sentences have been reduced.

This is a huge change from just eight years ago, when only 17 states and the District of Columbia allowed medical marijuana, and recreational marijuana was illegal across the country.  

This rapid metamorphosis of state laws has led to a bumpy and confusing start for cannabis businesses that have rushed in to take advantage of the growing legal market. One problem common to cannabis businesses is a lack of access to banking.

Although marijuana use is legal in many states, its use is still a violation of the federal Controlled Substances Act. This means that operating a cannabis business, even one that follows all applicable state laws, might be a federal crime. And that makes other businesses skittish about partnering with them.

The banking industry, in particular, is wary of working with state-licensed cannabis retailers. As a result, many marijuana-based businesses must operate on a cash-only basis. This makes them vulnerable to robberies. It also makes cannabis payroll challenging.

But a new bipartisan bill recently introduced in the Senate would solve this problem. The Secure and Fair Enforcement (SAFE) Banking Act is sponsored by Senators Jeff Merkley (D-OR) and Cory Gardner (R-CO), along with 20 other cosponsors. If enacted, this bill would mean that banks would be shielded from federal punishment for maintaining accounts for state-legal cannabis businesses. Another version of the bill cleared the House Financial Services Committee in March.

How Would This Bill Affect Cannabis Payroll?

Marijuana’s status as a controlled substance under federal law affects how dispensaries track income and pay their employees. Since most cannabis businesses operate on a cash-only basis, the business owners have only a few options for payroll.

Some operate their cannabis payroll by depositing their business earnings into a personal account and then writing checks to employees. Some pay all of their bills–including payroll, taxes, and services–in cash. And others pay extra for the scarce banking and payroll services that are available to them.

This lack of traditional payroll options has a big effect on employees and their personal finances. For one thing, no payroll often means no benefits, so employees of marijuana dispensaries and retailers are on their own for health insurance and other common perks. In addition, it is difficult for these employees to qualify for car loans and mortgages, as lenders won’t allow them to report income from an employer that the federal government considers illegal.

Demetrios Karagiannis, owner and proprietor of Third Day Apothecary, told the Colorado Independent “It’s kind of interesting because I was an engineer for the government for like 25 years, I have an 800 credit score, and I’m stuck with holding cash,” he says. “It’s like, we want to do things the right way, and they won’t even let us.”

There are a few banks in marijuana-legal states who will do business with cannabis employers, but they charge high fees and have long waiting lists.

But if this bill becomes law, all that would change. The SAFE Banking Act would block federal agencies from being able to “prohibit, penalize, or otherwise discourage a depository institution from providing financial services to a cannabis-related legitimate business or service provider or to a State or political subdivision of a State that exercises jurisdiction over cannabis-related legitimate businesses.”

Hopefully, this would make banks more willing to work with marijuana businesses and allow employers access to traditional payroll services, including the administration of benefits.

What Is the Timeline?

As we noted above, the House version of this bill has already cleared its first hurdle. It passed out of committee in March. The full House is expected to vote on it in the next few weeks. The Senate bill is not yet scheduled for a committee hearing.

Treasury Secretary Steve Mnuchin indicated during a hearing on April 9 that he would be in support of this legislation.

“If this is something that Congress wants to look at on a bipartisan basis, I’d encourage you to do this,” he said. “This is something where there is a conflict between federal and state law that we and the regulators have no way of dealing with.”

Advocates hope that the Secretary’s support is a positive sign that President Trump would sign the bill into law.

Marijuana is legal for either medical or recreational use or both in many US states. Business owners have responded to the changing laws by opening dispensaries and retail stores that try to operate within the law. But conflicts between federal and state laws have made this difficult, particularly in regard to banking and financial services.

This new legislation might change all that. If passed, it could solve significant payroll and financial problems for the cannabis industry in the US.

The post New Legislation to Potentially Support Cannabis Payroll Federally appeared first on Zenefits Blog.

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The trend for states and localities to offer paid sick leave continues with Glenview, Illinois soon to join the ranks of those offering the popular form of leave.

Beginning July 1 2019, the village, which is an affluent village located a few miles outside Chicago, will implement the paid sick leave guidelines of surrounding Cook County. That means employers in Glenview must provide all employees working more than five hours per week paid sick leave, according to a statement available from the Village of Glenview’s website. Workers will earn one hour of paid sick leave for every 40 hours worked with a maximum of 40 hours of paid sick leave.

Under Cook County sick leave requirements, an employee may carry over up to 50% of their unused accrued paid sick leave from one 12-month accrual period to the next 12-month accrual period, up to a maximum of 20 hours.

Federal employees and state government and units of local government are excluded from the county sick leave ordinance.

The village ordinance will be repealed if state or federal legislation addressing the matter is adopted.

The Village Board voted to opt into the Cook County Sick Leave Ordinance on Feb. 7.

July 1 minimum wage increase cancelled

An increase in Glenview’s minimum wage that was scheduled for July 1 has been cancelled because of state action on the matter. Village workers will still see an increase in the entry-level wage but that will happen on Jan. 1, 2020.

When the Village Board approved adopting Cook County’s paid sick leave requirements, it also approved adopting Cook County’s minimum wage ordinance, which meant that the entry-level wage for workers in Glenview would have increased to $12 an hour on July 1. However, the increase was approved with a provision that it would be repealed if state or federal legislation addressing the issue was adopted.

On Feb. 14, state legislators did just that, voting to raise the state’s minimum wage to $15 per hour by 2025. The bill was signed into law by Democratic Governor Pritzker on Feb. 19. The Illinois entry-level wage, which is now $8.25 an hour, will rise to $9.25 on January 1, increase again to $10 per hour on July 1, 2020, and then increase $1 per hour each year on January 1 until it hits $15 per hour in 2025.

Because of the state’s actions, the state schedule will apply to Glenview.

Under the Cook County ordinance that was made moot by state action, the minimum wage would have increased to $12 on July 1, increase to $13 on July 1, 2020 and, thereafter, increase based on the annual Consumer Price Index.

“Although the state and Cook County wage increase schedules differed, the end result is that both will achieve a minimum wage of $15 per hour by 2025,” the Glenview statement notes.

The Glenview statement also observes that the state law creates a tax credit to help businesses with 50 or fewer employees offset some of the cost of wage increases.

Opposition and popular support

The Glenview Chamber of Commerce had opposed the increase in the entry-level wage, arguing that it will hurt local businesses and that the Village Board should wait to see what action the state takes, the Chicago Tribune reported.

But both measures have popular support. Glenview’s decision to increase the minimum wage and to add a paid sick leave policy followed on the heels of a non-binding advisory referendum on the ballot in November in which Glenview voters showed strong support of the Cook County sick leave and minimum wage ordinances, according to law firm Jackson Lewis writing in The National Law Review. About 76% voted “yes” to the minimum wage referendum question while about 82% voted for paid sick leave, according to the Chicago Tribune.

State and local sick leave policies

Currently, 11 states, Washington D.C. and about 20 localities require paid sick leave. Arizona, California, Connecticut, Maryland, Massachusetts, Michigan, New Jersey, Oregon, Rhode Island, Vermont, Washington state as well as Washington, D.C. offer paid sick leave for workers to recover from an illness, seek medical care or care for a sick relative.  

The post Affluent Village Outside Chicago Drops Minimum Wage Increase, Adds Paid Sick Leave appeared first on Zenefits Blog.

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This year, several minimum wage increases are set to occur across the United States and your company might be affected. In total, 26 states, the District of Columbia, and 46 other localities were impacted by these changes and for many this is just the first of several increases that are scheduled to happen each following year. As several of these changes have already occurred for 2019, your company will want to review your current non-exempt employee’s hourly wage and make adjustments accordingly. You can find a review of these changes in our tables below.

January 1, 2019 Minimum Wage Updates
Location Previous Jan 1, 2019 Jan 1, 2020
Alaska $9.84 $9.89 N/A*
Arizona $10.50 $11.00 $12.00
Flagstaff, AZ $11.00 $12.00 $13.00
Arkansas $8.50 $9.25 $10.00
California $11.00 $12.00 $13.00
Belmond, CA $12.50 $13.50 $15.00
Cupertino, CA $13.50 $15.00 N/A*
Daly City, CA $10.50 $12.00 $13.75
El Cerrito, CA $13.50 $15.00 N/A*
Los Altos, CA $13.50 $15.00 N/A*
Mountain View, CA $15.00 $15.65 N/A*
Oakland, CA $13.23 $13.80 N/A*
Palo Alto, CA $13.50 $15.00 N/A*
Redwood City, CA $11.50 $13.50 $15.00
Richmond,CA $13.41 $15.00 N/A*
San Diego, CA $11.50 $12.00 N/A*
San Jose, CA $13.50 $15.00 N/A*
San Mateo,CA (For-Profits) $13.50 $15.00 N/A*
San Mateo, CA (Nonprofits) $12.00 $13.50 N/A*
Santa Clara, CA $13.00 $15.00 N/A*
Sunnyvale, CA $15.00 $15.65 N/A*
Colorado $10.20 $11.10 $12.00
Florida $8.25 $8.46 N/A*
Illinois $8.25 $8.25 $9.25
Maine $10.00 $11.00 $12.00
Maryland $10.10 $10.10 $11.00
Massachusetts $11.00 $12.00 $12.75
Michigan $9.25 $9.45 $9.65
Minnesota $9.65 $9.86 N/A*
Missouri $7.85 $8.60 $9.45
Montana $8.30 $8.50 N/A*
New Jersey

*See also July 1st updates*

$8.60 $8.85 $11.00
New Mexico $7.50 $7.50 $9.00
Albuquerque, NM $7.95 $9.20 N/A*
Bernalillo County, NM $8.85 $9.05 N/A*
Las Cruces, NM $9.20 $10.10 N/A*
Sante Fe County, NM $11.40 $11.80 N/A*
Ohio $8.30 $8.55 N/A*
Rhode Island $10.10 $10.50 N/A*
South Dakota $8.65 $9.10 N/A*
Vermont $10.50 $10.78 N/A*
Washington $11.50 $12.00 $13.50
Seattle, WA

Employers with 500 or more employees in the U.S that pay towards individual employee’s medical benefits.

$15.00 $16.00 N/A*
Seattle, WA

Employers with 500 or more employees in the U.S. that do not pay towards individual employee’s medical benefits.

$15.45 $16.00 N/A*
Tacoma, WA $12.00 $12.35 N/A*
January 1, 2019 Small Business Minimum Wage Updates

Several of these locations have set a different minimum wage for smaller businesses.

Location Previous Jan 1, 2019 Jan 1, 2020
Arkansas

Employers with 3 or fewer employees

Federal Minimum Wage
California

Employers with 25 or fewer employees

$10.50 $11.00 $12.00
Illinois

Employers with 3 or fewer employees

Federal Minimum Wage
Maryland

Employers with 14 or fewer employees

$9.25 $10.10 $11.00
Minnesota

Employers annual gross revenues are less than $500,000

N/A $8.04 N/A*
New Jersey

Employers with 5 or fewer employees

$8.85 $8.85 $10.30
Seattle, WA

Employers with 500 or fewer employees in the U.S. Employer pays towards individual employee’s medical benefits.

$11.50 $12.00 $13.50
Seattle, WA

Employers with 500 or fewer employees in the U.S and the employer does not pay towards individual employee’s medical benefits.

$14.00 $15.00 $15.75
March 1, 2019 Minimum Wage Updates
Location Previous July 1, 2019 July 1, 2020
Santa Fe, NM $11.40 $11.80 N/A*
July 1, 2019 Minimum Wage Updates
Location Previous July 1, 2019 July 1, 2020
Alameda, CA $11.00 13.50 $15.00
Emeryville, CA $15.69 $16.30 $16.42
Fremont, CA $12.00 $13.50 $15.00
Los Angeles County, CA $13.25 $14.25 $15.00
Los Angeles, CA $13.25 $14.25 $15.00
Malibu, CA $13.25 $14.25 N/A*
Milpitas, CA $13.50 $15.00 N/A*
Pasadena, CA $13.25 $14.25 $15.00
San Francisco, CA $15.00 $15.59 N/A*
San Leandro, CA $13.00 $14.00 $15.00
Santa Monica, CA $13.25 $14.25 $15.00
District of Columbia $13.25 $14.00 $15.00
Illinois **See January 1st updates $10.00
Chicago, IL $12.00 $13.00 N/A*
Cook County, IL $11.00 $12.00 $13.00
Montgomery County, MD $12.25 $13.00 N/A*
Portland, ME $11.00 $11.10 N/A*
Minneapolis, MN $11.25 $12.25 $13.25
Nevada $8.85 N/A* N/A*
New Jersey **See Jan 1st updates $10.00 **See Jan 1st updates
Oregon

Non-Rural Counties

$10.75 $11.25 $12.00
Oregon

Rural Counties

$10.50 $11.00 $11.50
Portland Metro Area, OR $12.00 $12.50 $13.25st paul
July 1, 2019 Small Business Minimum Wage Updates

Several of these locations have set a different minimum wage for smaller businesses.

Location Previous July 1, 2019 July 1, 2020
Alameda, CA

Employers with 25 or fewer employees

$10.30 $13.50 $15.00
Emeryville, CA

Employers with 55 or fewer employees

$15.00 $16.00 $16.42
Freemont, CA

Employers with 25 or fewer employees

$11.00 Increases to $15.00 in 2021
Los Angeles County, CA

Employers with 25 or fewer employees

$12.00 $13.25 $14.25
Los Angeles, CA

Employers with 25 or fewer employees

$12.00 $13.25 $14.25
Malibu, CA

Employers with 25 or fewer employees

$12.00 $13.25 $14.25
Pasadena, CA

Employers with 25 or fewer employees

$12.00 $13.25 $14.25
Santa Monica, CA

Employers with 25 or fewer employees

$12.00 $13.25 $14.25
Chicago, IL

Employers with 3 or fewer employees

Federal Minimum Wage
Cook County, IL

Employers with 3 or fewer employees

Federal Minimum Wage
Montgomery County, MD

Employers with 10 or fewer employees

$12.00 $12.50 $13.00
Montgomery County, MD

Employers with 11-50 employees

$12.00 $12.50 $13.25
Montgomery County, MD

Employers with 51 or more employees

$12.25 $13.00 $14.00
Minneapolis, MN

Employers with 100 or fewer employees

$10.25 $11.00 $11.75
St. Paul, MN

Employers with 6 or fewer employees

N/A N/A $9.25
St. Paul, MN

Employers with 6-100 employees

N/A N/A $10.00
St. Paul, MN

Employers with 100-10,000 employees

N/A N/A $11.50
St. Paul, MN

Employers with 10,001 or more employees

N/A N/A $12.50
October 1, 2019 Minimum Wage Updates
Location Previous Oct 1, 2019 Oct 1, 2020
Delaware $8.25 $9.25 $9.75
December 31, 2019 Minimum Wage Updates
Location Previous Dec 31, 2019 Dec 31, 2020
New York $11.10 $11.80 $12.50
New York

Fast Food Employees

$12.75 $13.75 $14.50
New York City, NY

Employers with 11 or more employees

$15.00 N/A* N/A*
New York City, NY

Fast Food Employees

$15.00 N/A* N/A*
Nassau, Suffolk and Westchester Counties, NY $12.00 $13.00 $14.00
Nassau, Suffolk and Westchester Counties, NY
Fast Food Employees
$12.75 $13.75 N/A*
December 31, 2019 Small Business Minimum Wage Updates
Location Previous Oct 1, 2019 Oct 1, 2020
New York City, NY

Employers with 10 or fewer employees

$13.50 $15.00 N/A*

* These locations have yet to state what the upcoming minimum wage will be in 2020.

How can you stay on top of minimum wage changes?

In order for your company to remain compliant with these increases, you will want to frequently review the minimum wage updates in your company’s varying work locations and adjust employee’s hourly wage if needed.

Need help determining what to pay your non-exempt hourly employees? Our Advisory Team can help!

This article is for informational purposes and is not meant to provide legal, regulatory, accounting, or tax advice. This article also does not reflect changes made after it’s publishing date, 4/18/19.

The post 2019 Minimum Wage Changes in the United States appeared first on Zenefits Blog.

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In a move with a bit of legislative drama, Maryland legislators last month voted to gradually increase the minimum wage to $15 per hour. Maryland’s minimum wage in 2019 is $10.10 an hour.

Companies with more than 15 workers will have to pay the higher entry-level wage by 2025. Companies with 14 or fewer employees must start paying the wage by July 1, 2026.

A violation of Maryland’s wage and hour law is a misdemeanor with a fine of up to $1,000.

The first increase is scheduled for Jan. 1, 2020. That will bring the minimum wage to $11 an hour for all employers. The next increase comes Jan. 1, 2021, raising the entry-level wage to $11.75 an hour for businesses with 15 or more employees and to $11.60 for businesses with 14 or fewer employees.

The law, “Fight for Fifteen,” does provide that, if the economy nosedives, a wage increase can be set aside. The minimum wage will increase each year on January 1. However, a minimum wage increase can be suspended if the seasonally adjusted total employment is negative, according to the legislative analysis of the bill.

A violation of Maryland’s wage and hour law is a misdemeanor with a fine of up to $1,000. In addition, if an employer pays less than the minimum wage, an employee can bring an action to recover back wages, liquidated damages and legal fees.

The federal minimum wage is $7.25 an hour.

Governor’s veto doesn’t stop Maryland minimum wage increase

The increase was rejected by Republican Governor Larry Hogan. Hogan vetoed the bill when it landed on his desk. In a letter to General Assembly leaders, Hogan said the measure would cost jobs and negatively impact the Maryland economy.

Noting that the minimum wage in Maryland had increased 40% since he took office in 2014, Hogan said Maryland’s $10.10 an hour was the highest in the region. The minimum wage for Virginia and Pennsylvania is $7.25 – the same as the federal minimum wage, while Delaware and West Virginia have a minimum wage of $8.75.

Hogan said the rate hike would make Maryland a “more expensive place to do business.” “Small businesses faced with the choice between a $7.25 wage in Virginia or $15 in Maryland will be forced to create jobs in the lower cost location and possibly reduce jobs or eliminate operations in Maryland,” Hogan wrote.

He also said that a recent study indicated that the $15 minimum wage would lead to a reduction of 99,000 jobs in private sector employment and would reduce the state’s economic output by more than $61 billion over the next decade.

Instead, Hogan offered a compromise, proposing that the minimum wage increases to $12.10 by 2022 and an increase above that amount can only happen if the surrounding states reach a combined average of 80% of Maryland’s wage.

However, the bill had passed the Democratic-controlled General Assembly with veto-proof majorities, so, when the Governor’s veto was sent to the legislature, the House voted 98-39 to override the gubernatorial rejection of the measure and the Senate’s veto override vote was 30-15.

Opposition to Maryland new minimum wage law

In addition to Gov. Hogan, the National Federal of Independent Businesses and Maryland’s Chamber of Commerce also fought against the bill’s passage into law.

In an opinion piece in the Annapolis, Md.-based Capital Gazette written when the bill was under consideration by Maryland’s General Assembly, the state director for the National Federation of Independent Businesses, Mike O’Halloran, said the minimum wage is not supposed to be a living wage and that every time the entry-level pay goes up, employers also pay more in payroll costs, workers’ comp insurance, and benefits – causing significant negative impact to the state’s small businesses.

Larry Richardson, vice president of government affairs for the Maryland Chamber of Commerce, told the Baltimore Business Journal, before the bill was vetoed, that the measure would cost jobs and also argued that raising the minimum wage would disproportionately affect small businesses.

Neither O’Halloran nor Richardson returned a call for comment by press time.

State minimum wage increases this year

Maryland is the sixth state to approve the $15 an hour entry-level wage. California, Illinois, Massachusetts, New Jersey, and New York passed laws to phase in the $15 minimum wage, as has the District of Columbia, according to the legislative analysis of the Maryland bill.

This year has seen a number of changes to the minimum wage in several states. Eighteen states began 2019 with higher minimum wages, according to the National Conference of State Legislatures. Eight states — Alaska, Florida, Minnesota, Montana, New Jersey, Ohio, South Dakota and Vermont — automatically increased their rates based on the cost of living, while 10 states — Arizona, Arkansas, California, Colorado, Maine, Massachusetts, Missouri, New York, Rhode Island, and Washington — increased their rates due to previously approved legislation or ballot initiatives, NCSL says.

Other states that will see rate increases during the 2019 calendar year include D.C., Delaware, Michigan and Oregon, NCSL notes.

Federal action on minimum wage increases

There are a small handful of bills advocating for a federal minimum wage hike currently circulating on Capitol Hill. A Democratic-backed bill, the “Raise the Wage Act,” that proposes to raise the federal minimum wage to $15 in about five years, with an immediate increase to $8.55, has gotten the furthest in the legislative process. The measure cleared the House Committee on Education and Labor on March 6 on a 28-20 party-line vote. The bill has 205 co-sponsors in the House. A mirror bill is in the Senate. The Senate bill has yet to be scheduled for a subcommittee or committee vote.

The post Maryland Minimum Wage to Rise to $15 After Lawmakers Override Veto appeared first on Zenefits Blog.

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Everyone knows that a 401k plan benefits the employee. Company match programs and vesting options make them a no-brainer for staff. But did you know that an employer-sponsored 401k does also benefit the employer? If you’ve been thinking about offering retirement benefits to your staff, here are some benefits to consider.

How Does a 401k Benefit an Employer?

Recruit and Retain. In today’s workforce, it’s becoming the norm to expect certain benefits such as retirement and healthcare. From an employers perspective, offering a 401k can give you that extra edge to stand out amongst your competitors. Attractive benefits are now a must.

Incentivize Performance. Employers also have the ability to use retirement perks as incentives. Many organizations tie their contributions to specific goals, and when employees meet these benchmarks they are rewarded by increases in their 401k contribution. Depending on how you choose to structure your benefits program, they can be used to incentivize performance, which ultimately helps the company succeed.

Tax Perks. 401k plans also help the employer come tax season. Matched contributions and administrative work associated with the benefits plan are tax-deductible. Lower your tax burden with a company-wide 401k program.

These three perks are highly beneficial from a production and financial standpoint. Not to mention, a retirement program lets your staff know that you value their financial future. Showing you care can do wonders for company culture.

How Does an Employer Contribution to a 401k Work?

Employer contributions, also known as employer matching, are the primary benefit of a 401k for employees. Workers typically choose to enroll in a 401k instead of another retirement option because matching is only allowed through an employer-sponsored 401k. Employer contributions are the portion of retirement dollars given to an employee by the employer.

Companies usually choose to match a percentage of the employee’s contribution. Organizations can match up to 100 percent of the savings added by staff members. This perk encourages the account holder to contribute larger amounts to receive a greater contribution from their employer.

It’s important to note that there are federal regulations for matching, which can be found in the Employee Retirement Income Security Act (ERISA). These limits were designed to make retirement savings plans fair for every employee.

How Much do Companies Typically Match for a 401k?

The majority of businesses match half of the employee’s contribution. In other words, for every dollar invested by the employee, the company matches 50 cents. Less than 40 percent of companies match dollar for dollar. This is uncommon in most industries. Check out the 2019 401k match limits here.

Are 401k Contributions Tax-Deductible for Employers?

Yes. As mentioned earlier, 401k plans are tax-deductible for employers. Because 401k plans have several tax benefits, they are usually less expensive to offer than defined-benefit plans. The good news is that usually, every dollar a company contributes to a staff member’s 401k is a write-off. This is a common reason why companies choose to match a large amount of employee contributions. Higher matching means fewer taxes owed by the business.

How Much can an Employer Contribute to a 401k in 2019?

Every year, retirement plan contribution limits can change to account for inflation. In 2019, employer contribution maximums rose by $500 to $19,000 per employee. However, for those 50+, the “catch-up contribution limit” is the same, holding steady at $6,000.

If you’re wondering about the employer and employee contribution limits, it increased $1,000 in 2019 to $56,000. However, if you’re considered a highly compensated employee (or HCE) your minimum compensation increased to $125,000 this year.

The post How Does Offering a 401k Benefit an Employer? appeared first on Zenefits Blog.

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If you have at least one employee on your payroll, you’re responsible for paying employer payroll tax on a yearly basis. This might at first seem like a basic part of being an employer; however, these tax forms must be completed with a high level of accuracy. To make sure you’re checking all the boxes, here’s what you need to know about employer payroll tax.

What payroll taxes are employers required to pay?

To report payroll, employers must calculate gross monthly wage earnings for each employee. Additionally, it’s important to keep track of various deductions to ensure that net pay is accurately calculated. Employers are responsible for reporting their payroll by making a number of federal tax deposits throughout the year.

These include the following:

  • Wage and Tax Statements (Form W-2)
  • Annual federal unemployment tax return (Form 940 or 940EZ)
  • Employer’s quarterly payroll tax return (Form 941)
  • Annual Return of Withheld Federal Income Tax (Form 945)
Which taxes are only paid by the employer?

Some taxes are shared by both the employee and their employer. For example, the Federal Insurance Contributions Act (FICA) consists of both Social Security and Medicare taxes. Each party pays half of these taxes adding up to a total of 15.3 percent paid per each employee.

Employers are responsible for paying these taxes in addition to state unemployment and federal unemployment taxes. At the state level, these taxes are used to pay unemployment benefits to state workers, with the rates being determined by the state. The federal unemployment taxes are administered to federal job and insurance services.

How much does the employer pay in payroll taxes?

The amount that a business pays in employer payroll tax depends on a number of factors. For example, state and local tax agencies might also require certain employer taxes to be filed, which can cause an increase or decrease in your employer tax depending on the location. These state taxes go towards things like recreation, healthcare, transportation, local safety, and more. Nine states do not have an income tax on wages, and these include Texas, Florida, Washington, Nevada, Tennessee, Wyoming, New Hampshire, South Dakota, and Alaska.

How much does a company pay in employer payroll tax for each employee?

Tax rates can fluctuate over time, so it’s important to stay updated with the most recent changes. In 2018, the Social Security tax rate requires that employers pay 6.2% in taxes on the first $132,900 of wages paid. The Medicare tax rate is much lower, clocking in at 1.45% for the first round of $200,000 of wages. For wages paid above $200,000, employers expect 2.35% for wages.

As discussed, state taxes can vary greatly depending on where you live, so this may or may not apply to you. Moreover, payroll taxes must be filed correctly to avoid penalties. This means that they must be paid on time and in the correct amount. They also must be submitted using the proper filing system.

The post Three Common Employer Payroll Tax Questions appeared first on Zenefits Blog.

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Many employers in New Jersey will be paying their staff a higher wage starting July 1. Governor Philip D. Murphy and the New Jersey state legislature made a deal that will raise the minimum wage to $10 per hour by that date. By 2024, New Jersey’s minimum wage will be $15 per hour.

What does this mean for workers and small businesses? Let’s take a look.

New Jersey minimum wage facts

Right now, the minimum wage in New Jersey is $8.85 per hour. As mentioned above, for employers with six or more employees, the minimum wage will generally be increased to $10 per hour on July 1. On January 1, 2020, it will be $11 per hour. Then the new law states it will increase by $1 per hour every January 1 until 2024, when it reaches $15 per hour.

For employers with six or more employees, the minimum wage will generally be increased to $10 per hour on July 1st of this year.

Employers of all sizes will also be required to pay tipped employees a minimum of $2.63 per hour, up from the previous $2.13 per hour.

There is also a separate timeline for seasonal employees and people who work for small businesses with five or fewer employees. For those workers, the minimum wage will reach $15 an hour by 2026.

Agricultural workers have a slight exception also; the minimum wage will reach $12.50 an hour by January 1, 2024. At that point, a special committee will review whether to raise farmworkers’ minimum wage to $15 an hour by 2027.

That $15 minimum wage puts New Jersey ahead of much of the country in progressive labor policies. California, New York, and Massachusetts have passed similar legislation, with their minimum wages set to increase to $15 per hour sometime in the next few years. Washington, DC’s minimum wage will be $15 per hour by 2020.

How will the New Jersey minimum wage affect workers?

According to the New Jersey Policy Perspective (NJPP), a left-leaning research group, raising the minimum wage to $15 per hour will boost the incomes of over 1 million New Jersey workers.

NJPP reports that low-income workers badly need this pay raise. In New Jersey, unemployment has dropped quite a bit in recent years. It was 5.3 percent in 2017, down from 6 percent in 2016 and 10.9 percent in 2011 at the height of the recession.

But poverty rates are even higher than they were before the recession. The New Jersey poverty rate in 2017 was 10 percent in 2017, up from 8.6 percent in 2007. That means that 143,000 more New Jerseyans are living in poverty than were 10 years ago.

Advocates hope that the increased minimum wage will lead to an improved quality of life for many low-income workers in New Jersey.

What’s worse, those numbers are based on the federal poverty level. The cost of living in New Jersey is actually much higher than the US average. When you factor in the cost of living differences, NJPP says that 22.89 percent of New Jerseyans were living in poverty in 2017, up from 20.89 percent in 2007.

Advocates hope that the increased minimum wage will lead to an improved quality of life for many low-income workers in New Jersey.

How will the New Jersey minimum wage affect small businesses?

This new law does have its opponents, of course. Some business leaders oppose raising the minimum wage because they believe it will cause economic hardship to small business owners, and possibly force them to eliminate jobs.

In an interview with the New York Times, Michele N. Siekerka of the New Jersey Business and Industry Association said that the increased minimum wage was “another hit to small businesses who are absorbing cumulative costs in the form of new mandates, more subsidies for energy delivery and increased taxes.”

Siekerka continued, “Most small business owners pay what they can afford for their workers. Now that it’s a mandate, it is inevitable that some of those with the smallest of profit margins will struggle, stagnate or simply fail.”

Contrary to conventional wisdom, the fast food restaurants in New Jersey who had been affected by the wage change actually increased employment by 13 percent relative to similar restaurants in Pennsylvania.

However, some studies suggest that might not be true. For instance, a 1992 study by economists David Card and Alan B. Krueger looked at the effect of another New Jersey minimum wage increase on fast food business and employment.

That year, New Jersey’s minimum wage increased from $4.25 to $5.05 per hour. In neighboring Pennsylvania, the minimum wage stayed the same–$4.25 per hour. The study compared business and employment at fast food restaurants in both states to see if the minimum wage increase had affected them in any way.

Contrary to conventional wisdom, the fast food restaurants in New Jersey who had been affected by the wage change actually increased employment by 13 percent relative to similar restaurants in Pennsylvania.

Other studies have produced similar results. For example, this 2018 study found that minimum wage increases had very little effect on low wage employment rates.

Still, other academic studies have found that minimum wage increases can cause a lot of job loss. A 2018 study from economists Paul Beaudry, David A. Green, and Ben M. Sand found that minimum wage increases cause job loss in the long term, mainly due to businesses closing down. They propose that this type of job loss can’t be measured in the immediate term, which is why other studies might not have found any difference in employment rates one year after a minimum wage increase. Firm closings take some time, which is why these job losses are best measured after a significant period of time.

A few older studies, like this one and this one, also found that employment rates for younger, less skilled workers dropped when minimum wages went up. Often, the reason for the increase in unemployment is that some firms had to shut down because they could no longer afford labor costs.

The bottom line is, it’s difficult to know exactly how this will affect small businesses. Most likely, it will depend a lot on each individual business’ circumstances and industry.

The post New Jersey Minimum Wage Increases July First appeared first on Zenefits Blog.

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Wondering how to do labor cost allocation? We’ll walk you through it.

When you own a business, you have a lot of costs to consider. How much will you pay for your space, materials, and marketing, for example? One of the largest costs for most businesses labor. And as any accountant will tell you, your business can’t make money until you learn how to do labor cost allocation.

What Is Labor Cost Allocation?

Businesses need to know a lot more about their labor costs than just how much they’re paying people in salary and benefits. They need to know how much it costs them, in labor, to produce whatever products or services they sell. This is especially true for businesses who sell more than one product or service.

Let’s say you own a housecleaning business– we’ll call the example ABC Cleaning. You offer a variety of services. For most customers, ABC Cleaning does a standard maid service once a week. You send in a cleaning crew of three people, and they mop the floors, scrub the kitchens and bathrooms, vacuum the carpets, and dust the furniture. Some of your clients also purchase “extras,” like window washing, laundry folding, and carpet shampooing.

In order to know how much to charge for all of these services, you need to know how much each one costs your company. Perhaps it takes three employees a total of two hours to clean a two-story house top to bottom. It takes another 40 minutes for one of those workers to wash all the windows while the other two work elsewhere in the house. You also paid a scheduler for a few minutes of time to book the appointment, and a billing specialist to process the payment.

So how much did it cost you to clean that client’s windows? To arrive at that answer, you must go through a process called “labor cost allocation.”

Calculating your labor cost allocation is a little more complicated than simply adding up everyone’s salary. Let’s take a look at how to do labor cost allocation the right way. We’ll have you up to speed by the end of this article.

How to Do Labor Cost Allocation: Two Distinct Methods

There are two distinct methods for how to do labor cost allocation. They are the standard cost and actual cost. We’ll walk through the benefits and limitations of each so that you can choose which method is best for your business.

Standard Cost

Standard costing is an accounting term. Most businesses track the standard costs of direct material, direct labor, and overhead. Here’s how it works for labor cost allocation:

Rather than assigning the actual costs of direct labor to a particular product or service, the company assigns the expected (or standard) cost. In other words, the company determines how much it should cost them to produce the product or service, and uses that information to determine the price of that product or service.

Let’s go back to our cleaning company example for a moment, “ABC Cleaning.” Again, this cleaning company does a standard, weekly maid service for most clients, but a few of their customers add on a window cleaning every now and then. Let’s figure out the standard cost of the window cleaning.

For simplicity’s sake, we’re going to say that every employee of ABC Cleaning is paid $20 per hour, plus $5 per hour in benefits. ($25 per hour total.)

ABC Cleaning sends a three-person cleaning crew to each house for a standard maid service. It takes them two hours to clean the house. They also pay a scheduler for about 10 minutes of time to schedule the cleaning appointment, and a billing person for another 10 minutes to send and process the invoice. They estimate that each job will include 20 minutes of travel time for each of the 3 workers. Adding on a window cleaning means that one cleaner will work an additional 40 minutes.

So far, we have:

  • 3 workers working a total of 6 hours.
  • 3 workers traveling a total of 1 hour.
  • 1 worker working an additional 40 minutes.
  • 1 scheduler working 10 minutes.
  • 1 billing person working 10 minutes.

All together, that’s 8 hours multiplied by $25, or $200.

The window cleaning by itself is only 40 minutes, though. That’s ⅔ of an hour, or $16.65. And since the workers are already traveling to the house, and the scheduler and billing person are already doing their respective jobs for the standard house cleaning, you don’t need to add on those labor expenses to the cost of the window cleaning.

Therefore, the standard cost for window cleaning is $16.65. ABC Cleaning can charge $50 per window cleaning and make a $33.35 profit. That’s 66.7 percent. 

On the other hand, the market will bear only so much for a standard house cleaning. Remember, $16.65 of that $200 was for the window cleaning, so that means that ABC Cleaning has a standard cost of $183.35 for a standard house cleaning. The most they can charge, without driving away customers, is $250. That means that the company makes a profit of $66.65, or 26.7 percent, for a standard house cleaning.

Now which of those services do you think ABC Cleaning should consider more profitable? The window cleaning appears to be the winner.

What’s more, the company can do standard costing calculations for all of their other “add on” services as well. Maybe laundry costs them one hour times $25. They charge $50. Boom, 50 percent profit. Carpet shampooing costs two hours times $25, or $50. They charge $100. Again, they make a 50 percent profit.

Using this standard costing method, ABC Cleaning knows that their add on services are much more cost effective than their standard service. That means that they do everything they can to sell add on services to every customer.

Other Benefits of Standard Costing

As we’ll lean in the next section, standard costs are often compared with actual costs. We’ll explain further in a moment, but a company’s actual costs reflect the amount of money that the company actually paid, dependent on a few variables. (For example, odds are, the windows won’t always take exactly 40 minutes to wash. And travel time won’t always be exactly 20 minutes. Those times will probably vary a little with each job.)

But when a company knows their standard labor cost, that allows them to compare it to their actual labor cost. Of course, the company still has to pay the actual cost, and there are almost always differences between the standard costs and the actual costs. In the accounting world, we call those differences “variances.”

As wishy-washy as it may sound, those variances are part of a valuable management tool. When you have a variance, that lets you know that your performance has differed from your expected (standard) costs. If the actual costs are more than the standard costs, that’s bad. You want to figure out why and try to improve it next time. If actual costs are less than standard costs, then great! Look at what you did and see if you can replicate it in the future.

Actual Costs

Just like it sounds, actual cost means the amount of money that your company actually paid to produce a particular product or service. It’s different from your standard cost because it considers all of the variables that might change over time.

Let’s go back to our cleaning company example. ABC Cleaning had a good month. They sold at least one add on service to every customer they served. How did they do it? They offered a $100 bonus to each employee who successfully sold five or more add ons.

All together, they provided their standard cleaning service to 100 customers. They averaged:

  • 6 cleaning hours,
  • .95 travel hours,
  • .15 scheduling hours, and
  • .15 billing hours per standard cleaning.

When they add up all of the labor costs for those 100 standard cleanings, ABC cleaning paid 7.25 hours X 100 customers X $25 = $18,125. They charged those customers 100 X $250 = $25,000. They made a profit of $6,875 for their standard cleaning service or 27.5 percent of revenue.

For their add-on services, they averaged:

  • .65 hours for window washing for 15 clients (9.75 hours = $243.75)
  • 1 hour for laundry for 70 clients (70 hours = $1,750)
  • 2.2 hours for carpet cleaning for 15 clients (33 hours = $825)

So their total labor costs for add-ons was:

$243.75 + $1,750 + $825 = $2,818.75

But they charged:

  • $50 X 15 customers for window washing ($750)
  • $50 X 70 clients for laundry ($3,500)
  • $100 X 15 clients for carpet cleaning ($1,500)

So they brought in:

$750 + $3,500 + $1,500 = $6,750

That makes a total profit of:

$6,750 (total revenue) – $2,818.75 (actual labor) = $3,921.85, or 58.1 percent (total profit on add-ons)

Clearly, the add-ons are most profitable for ABC Cleaning. But there are other variables that might affect their actual labor cost:

  • How many employees received bonuses for booking 5 or more add-ons?
  • Did the company reward any other employees with bonuses?
  • Did any employees receive a raise this month?
  • Did any customers request an “add-on” service without booking a standard house cleaning?

As you can see, the actual labor cost calculation is a bit more complicated than the standard labor costs.

Your company probably has a more nuanced set of labor costs than our example. You might have other overhead costs for management and administration and employees whom you pay varying salaries.

But we hope that this break down of how to do labor cost allocation helps you determine your own company’s needs. You may want to do only one method of labor cost allocation, or you may find that you need to do both. You may even have to re-evaluate on a monthly or quarterly basis.

Regardless, how to do labor cost allocation the right way will vary based on your business’s circumstances.

The post Your Guide on How To do Labor Cost Allocation appeared first on Zenefits Blog.

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