Managing benefits and payroll services is a complicated task because each employee record is unique. Each record is defined by its own set of benchmarks. Regulatory requirements and strict compliance with state and federal labor laws make the task even more involved. Additionally, companies that have multi-state operations or that have employees who cross state lines for their jobs face other multi-state compliance issues.
Minimum Wage Differences
Laws regarding minimum wage vary widely from one state to another. Federal labor laws do not preempt state laws so that in many cases, the employee may have to pay taxes in both states on the same earned income. When it comes to payroll services, employers cannot use a one-size-fits-all strategy for all employees at different work sites. The Fair Labor Standards Act or FLSA provides guidelines to ensure that payroll services comply with location-specific employment laws.
Variations in Work Hours and Overtime Compensation Laws
Typically, overtime is paid at 1.5 times more than standard pay for hours worked beyond 40 hours in a single work week. However, some states require overtime calculations on a daily basis, which means that the overtime rate kicks in after eight hours. FLSA guidelines provide exemptions from overtime compensation if employees are in supervisory and executive levels with earnings at or higher than certain salary thresholds. Deductions, state income tax withholding and application of income tax to residents or nonresidents will also vary by state.
Multi-state Tax Reporting
Employment tax liabilities may be triggered for multi-state employees who telecommute or who report interstate status. Special payroll tax issues may apply to nonresident employees who work in one state and live in another. Some states may have reciprocal agreements with certain states, simplifying withholding tax guidelines as income will be taxed in only one state. For instance, the state of Wisconsin currently has reciprocal agreements with the states of Indiana, Illinois, Michigan and Kentucky.
Determining Liability for State Withholding
State laws vary widely when it comes to defining liability for withholding taxes. In general if some or all of the following conditions are met, the company becomes liable for state withholding:
* The company is doing business in the state.
* The employer pays wages to at least one person in this location for services rendered.
* The company derives some form of income from this state.
* The business maintains a physical address in the state.
Streamlining the Payroll Process
State employment laws vary, and employers are expected to comply with these requirements as applicable to their operations. Outsourcing payroll processing to a third party that specializes in this function simplifies the procedure for employers while ensuring compliance with the requirements of each state.
Preferably, the payroll management company must have local and federal expertise aside from providing a comprehensive suite of services to cover payroll processing, payroll tax payments and overall administration. Compliance with federal, state and local tax jurisdictions should be integrated into the service package. We scale the process according to your needs and streamline administration of these services to ensure compliance in every state where your business operates.