How to Effectively Manage Seasonal Workers’ Payroll

How to Effectively Manage Seasonal Workers’ Payroll

Managing seasonal workers’ payroll comes with unique challenges compared to handling payroll for full-time or part-time employees. Compliance with state labor laws is crucial, but opportunities exist to optimize labor costs and business efficiency. Streamlining your seasonal workers’ payroll with Affiliated HR and Payroll can ease the administrative burdens and enhance your business’s overall performance.

Understanding Seasonal Workforce Dynamics

Seasonal employees are different from full-time employees because their work is expected to end at a set time. This makes correctly classifying them very important. Will you hire them as employees for the duration of their contract, or will they be independent contractors? How they are classified affects payroll and tax withholding. Proper classification is essential to avoid issues with employment regulations.

Even though seasonal employment is short-term, employers still need to collect federal Forms W-4 and I-9 for tax purposes. Seasonal employees must have withholdings for federal income taxes, Medicare, Social Security, and unemployment. Depending on their status, there may also be benefits to consider, such as healthcare.

If you hire seasonal employees around holidays, like for the Christmas retail rush, they might expect quick payment so they can spend their earnings during the holidays. An on-demand payment system might be something to consider during these peak times to keep your workers happy.

All these factors contribute to the complexities of payroll for seasonal employees. While payroll for regular employees might be routine, you may need to make adjustments for seasonal workers.

Key Strategies for Effective Payroll Management

Several strategies can help streamline operations and manage seasonal workers’ payroll more efficiently:

  1. Use Specialized Payroll Software: This can help you classify seasonal workers correctly and reduce the time spent on payroll. An automated system makes tracking additional workers easier during a busy season.  
  2. Stay Up-to-Date on Labor Laws: Knowing the latest state-specific labor laws will minimize errors in reporting and withholding, helping you avoid fines. For instance, different states might have varying regulations for overtime pay, and staying informed can prevent costly mistakes. 
  3. Keep Accurate Records: Seasonal workers are often college students looking to make extra money during their breaks. Keeping accurate records and ensuring timely payment can keep them happy and willing to return for future seasonal work. This is especially true for businesses that rely on the same workers year after year, like summer camps or holiday retail stores. 
  4. Consider Outsourcing Payroll: Affiliated HR and Payroll offers certified payroll services that keep you compliant with local, state, and federal laws, even as seasonal workers come and go. This can be a huge relief for businesses that experience fluctuating staffing needs throughout the year. 

Benefits of Efficient Seasonal Payroll Management

Letting a payroll provider handle your seasonal employees’ payroll is a cost-efficient way to do business. The time you usually spend on payroll can be allocated to other important parts of your business. You also gain peace of mind, knowing you’ll always be in legal compliance, as they stay updated on labor law changes for you.

Efficient seasonal payroll management is crucial for keeping seasonal workers happy and motivated. Timely and accurate paychecks are one of the easiest ways to maintain high morale among your seasonal workforce, which is essential for your business’s success.

Moreover, happy seasonal workers are more likely to return the next time you need them. This can save you significant time and money on recruiting and training new staff. Consistency in your seasonal workforce can also improve the overall customer experience, as returning workers are already familiar with your business operations.

Seasonal Employment Payroll Solutions

Adding seasonal employees to your payroll adds complexity to your business. Managing payroll for these workers involves compliance with labor laws, proper worker classification, and ensuring timely and accurate paychecks.

Streamline your seasonal payroll process today! Contact Affiliated HR and Payroll for expert solutions tailored to your business needs.

Get It Right on the Pay Stub

Get It Right on the Pay Stub

Pay stubs can be referred to as pay or wage statements and may be considered the decoder ring of payroll. Pay statements summarize employees’ gross pay, taxes and deductions, and net pay. They can be in printed format or made available electronically.

Pay stubs help employees confirm what was withheld from their gross pay so they can understand how the final net pay amount was arrived at. Pay stubs are useful to employers as well, especially when they need to solve wage and hour disputes or tax discrepancies.

While no federal law requires pay stubs, most states do — you can view pay stubs as part of payroll compliance. For example, some states need employees to consent to receive electronic pay statements. State mandates can pose potential complications for businesses with employees in multiple states, as each state has its own set of rules.

What’s on a pay stub

Pay stubs should have these basic elements:

  • Amount per pay period.
  • Year-to-date pay.
  • Basic identifying information: name and address of the employer, name and address of the employee, and the employee’s Social Security number.
  • Pay period and total hours worked.
  • Gross wages, or the total amount earned for the pay period before taxes. If an employee worked 15 hours at $20 per hour, gross wages are $300. Pay stubs should note hours worked, what the pay rate is and any additional earnings or accrued time off.
  • Tax deductions, including federal tax withholding, state tax withholding, unemployment taxes, Social Security tax and Medicare withholding.
  • Employee benefits deductions often include health insurance, health savings accounts, life insurance payments and retirement contributions.
  • Voluntary deductions, which include the amount an employee chooses to withhold monthly and may include a regular charitable contribution.
  • Involuntary deductions such as wage garnishments, past taxes owed and court-ordered child support payments.
  • Net pay, the amount of money employees take home after all deductions are made.

Pay stubs offer employees transparency in how they’re getting paid, noting gross income, deductions and net income. Workers get year-to-date information and can verify that compensation is accurate. Lenders often ask to see pay statements as proof of income or employment before approving a loan. Pay stubs help prevent pay-related conflicts.

If you miscalculate, the withholding amounts for taxes may include errors that may cost you penalties. Pay statements that are inaccurate or improperly delivered can confuse employees and increase the risk of legal liability. It’s in your best interest to:

  • Know all state and local requirements.
  • Include the necessary information.
  • Make pay stubs easy to access.

Many companies opt to work with a payroll service provider, which will typically include pay stub delivery as part of their service and can assist with state and local pay statement requirements. It’s generally a good practice to save pay statements for at least one year so you can verify the accuracy of your annual Form W-2, Wage and Tax Statement for employees to prepare their individual tax returns.

Pay statements contain personal information that can be subject to identity theft. Retain them in a safe place and securely dispose of them. If employees report losing a stub, advise them to monitor their credit reports and alert their bank and credit reporting agencies so they can flag any suspicious activity. If a copy of a lost pay statement is needed, employees may request another from your payroll department.

New Independent Contractor Rules: Do They Affect Your Employees?

New Independent Contractor Rules: Do They Affect Your Employees?

The Department of Labor’s final rule for employee or independent contractor classification under the Fair Labor Standards Act rescinds the 2021 Independent Contractor Rule, replacing it with guidance on analysis that’s more consistent with the FLSA as interpreted by longstanding judicial precedent, and was scheduled to take effect March 11, 2024.

The final rule reduces the risk of misclassification while providing greater consistency for businesses and gig workers, specifically:

  • The designation of control and opportunity for profit or loss are given greater weight.
  • Considering workers’ investments and initiative only as part of the opportunity for profit or loss.
  • Prohibiting consideration of whether work performed is central or important to your business.

A step toward greater clarification

The 2021 IC Rule narrowed the economic reality test: Is a worker economically dependent on the employer for work? This had a confusing and disruptive effect, departing from decades of case law and describing and applying the multifactor economic reality test as a totality-of-circumstances test.

Analysis of the final rule may be applied to workers in any industry and will be accessible in the Code of Federal Regulations. It doesn’t adopt an ABC test, permitting an independent contractor relationship only if all three factors in a three-factor test are satisfied. Instead, the multifactor economic reality test that courts use to determine whether a worker is an employee or an independent contractor is used, relying on the totality of the circumstances where no one factor is determinative.

The final rule revises only the DOL’s interpretation under the FLSA and has no effect on federal, state or local laws with different standards of classification. The IRS and National Labor Relations Act have different statutory language and judicial precedent governing the distinction between employees and independent contractors. The laws are interpreted and enforced by different federal agencies. The rule has no effect on state wage and hour laws that use the ABC test — California’s and New Jersey’s, for instance. The FLSA doesn’t preempt federal, state and local laws that apply.

In brief, according to new federal guidance, businesses should meet whichever standard provides workers with the greatest protection.

The key aspects

The final rule affirms that a worker is not an independent contractor if economically dependent on an employer for work, applying six factors:

  • Opportunity for profit or loss depending on managerial skill.
  • Investments by the worker and the potential employer.
  • Degree of permanence of the work relationship.
  • Nature and degree of control.
  • Extent of the work performed as integral to the potential employer’s business.
  • Skill and initiative.

Workers cannot voluntarily waive employee status, choosing to be classified as independent contractors. They cannot waive FLSA-protected rights like minimum wage or overtime pay. The Supreme Court has explained that waiving their FLSA rights would harm other employees, undermining the goal of eliminating unfair methods of competition in commerce.

Among the similarities to the 2021 rule: advice on definitions and on identifying economic dependence as the ultimate inquiry of the analysis, providing a nonexhaustive list of factors to assess economic dependence with no single factor being determinative. Both clarify that economic dependence doesn’t focus on the amount of income the worker earns or whether the worker has other sources of income.

Differences between the new rule and the 2021 rule:

  • Returns to a totality-of-the-circumstances economic reality test, where no single factor or group of factors is assigned any predetermined weight.
  • Provides additional analysis of the control factor, including how scheduling, supervising, price-setting and working for others are considered when analyzing the nature and degree of control over a worker.
  • Returns to the DOL’s consideration of whether the work is integral to the employer’s business rather than exclusively part of an integrated unit of production.
  • Omits a provision from the 2021 rule that minimized the relevance of an employer’s reserved but unexercised rights to control a worker.

Note that this is just a summary of a complex series of provisions. One thing certainly hasn’t changed between the new rules and the old: the need for companies to obtain qualified professional advice to make sure they are in compliance.

What Employees Need To Know About Income Tax Withholding

What Employees Need To Know About Income Tax Withholding

Workers who are considered employees do not have to pay their own taxes during the year. Instead, employers withhold income tax from their employees’ paychecks and pay it to the IRS on behalf of the employee.

Now, if not enough tax is withheld from each employee’s paycheck, then the employee might end up receiving an unexpected tax bill come tax season. They might even come face-to-face with penalties when filing their tax returns in the next year.

On the other hand, if employees end up overpaying taxes as a result of having too much tax withheld from their paychecks throughout the year, the employee may receive a tax refund. That’s never a bad thing, but adjusting the tax that is withheld upfront may mean your employee will receive bigger paychecks throughout the year rather than a lump sum come tax season.

Ultimately, the amount of tax that is withheld from employee paychecks is determined by what employees do when they enter the workforce or change jobs. It all starts with the way employees fill out their W-4 form, the Employee’s Withholding Certificate.

This information tells employers how much money they should withhold from an employee’s paychecks for federal income tax. The information that employees submit is out of the employer’s hands, but if your employee notices that something is off with the tax being withheld in their name, you can refer your employee to the information they submitted.

Get the forms right

If need be, employees can submit new W-4 forms when their personal or financial situation changes. That way, their current situation can be reflected in their withholding amounts.

Also, if your employees are not sure whether the right amount of tax is being withheld from their paychecks, the IRS offers a Tax Withholding Estimator tool on the official IRS.gov website. This tool can help people estimate their federal income tax withholding amounts while seeing how it may affect their refund, take-home pay or tax owed.

Keep in mind that all of this information applies only to workers whom you employ. If you pay contractors or freelancers to do work for you, remember that they are responsible for paying their own taxes directly to the IRS. You do not have to automatically withhold any of those taxes from their income because it is their responsibility, not yours.

That said, all taxpayers are encouraged to keep copies of their tax-related documents. Store them in a safe place to ensure that they can be easily found or remain readily available when it comes time for you to file an accurate return.

Law Alert: Texas Prohibits Mandatory COVID-19 Vaccination

Law Alert: Texas Prohibits Mandatory COVID-19 Vaccination

As of February 6, 2024, Texas will prohibit employers of all sizes from adopting or enforcing a policy that requires applicants or employees to receive a COVID-19 vaccination.

Additionally, employers can’t take any adverse action against an employee or applicant for their refusal to be vaccinated against COVID-19. However, a healthcare facility, healthcare provider, or physician can have a reasonable policy that includes requiring unvaccinated employees to use protective medical equipment if they pose a risk to patients based on their routine, direct exposure to them.

Action Item
Eliminate any policy or practice of requiring COVID-19 vaccination for applicants or employees. Pay special attention to job ads, job descriptions, or other documentation that may not get frequent review.

Updating an I-9 When Documentation Has Expired

Updating an I-9 When Documentation Has Expired

Are we required to update our I-9s when the documentation used for them expires?

You would only update a Form I-9 if the expired document pertains to a limited period of employment authorization. You should never reverify U.S. citizens and, in most cases, lawful permanent residents (Green Card holders). However, if a lawful permanent resident presents their employer with temporary evidence of lawful permanent resident status for Section 2 (instead of an unexpired permanent resident card), then reverification may be necessary.

We recommend that you set up a tracking system for the I-9s that will require reverification. Consider setting a calendar reminder for 90 days before the expiration of the document or the expiration date listed by the employee in Section 1 of the I-9, whichever is sooner. Then provide the employee written notice of the need to reverify, the deadline to do so, and the I-9 list of acceptable documents they may use for reference.

Once the employee has presented acceptable documents, you should review and complete the reverification section of the Form I-9 (Supplement B of the Form I-9 version dated 8/1/23).

If the Form I-9 version that the employee originally completed is no longer valid, complete Supplement B of the Form I-9 version dated 8/1/23 to reverify the employee. To do this, an employer should:

  • Enter the employee’s name at the top of each Supplement B page you use (and use the New Name field to record any name change the employee reports at the time of reverification or rehire);
  • Use a new section of Supplement B for each instance of a reverification or rehire;
  • Use the Additional Information fields if the employee’s documentation presented for reverification requires future updates; and
  • Sign and date that section when completed and attach it to the employee’s completed Form I-9.

This Q&A does not constitute legal advice and does not address state or local law.