The majority of businesses outsource their payroll work to a payroll company that can handle it more efficiently. The problem is that sometimes business owners forget to communicate with their payroll company when something changes.
“You’d be surprised what they don’t tell you,” says Tony Chiviles, president of PayBridge.
Smart Business spoke with Chiviles and Colleen Bement, vice president of Business Development at PayBridge, about what you cannot forget to communicate to your payroll company, but often do.
What’s the most important thing to notify your payroll company about, because it has the most severe implications?
If you get any tax changes or notifications, such as a change in the local or state unemployment tax rate, notify your payroll company immediately.
If you don’t, your payroll company will continue to use the same one. That could lead to either an underpayment or overpayment of that tax payment, which might create a penalty situation.
If the payroll company isn’t collecting the right amount, it has to go back and collect that money. While some companies just cover the mistake, others pull the missed funds from employee paychecks. Then, you’ve got employees who want to know why their paycheck is smaller.
The issue is further complicated because tax policies vary widely throughout the country, so especially if you have one employee that works in multiple states, the taxes could change in one state and not in the other. Plus, some states collect local taxes, and some don’t.
Most of the state unemployment rates change for Jan. 1, so you should get a notification in December. Other states change in June or July, most notably New Jersey.
When you get a notice in the mail about anything relating to taxes, immediately scan it and fax it to your payroll company. If it’s not something that you have to worry about, then they’ll let you know. But even if you think it’s just a random notice that doesn’t really apply to you, send it just in case. It’s better to err on the side of caution. What you don’t want is to having someone thinking, ‘Oh, I’ll worry about that when the time comes,’ and then it gets forgotten.
What other changes do companies need to notify their payroll company about?
If anything changes in your HR department, you have to let your payroll company know. Like with the taxes, let the payroll company know as much as possible. Examples include changes:
- To your health insurance eligibility rules. Recently, with the Affordable Care Act, many companies have adjusted their eligibility rules, so that they are only offering benefits to people that they have to, to save money. Or, if they weren’t offering insurance before, but now they may have to with their full-time equivalent employees.
- In the health plan costs, how much the employer contributes and how much the employee contributes. Or, changes in the employee’s plan because of a qualifying event, such as the birth of a child.
- To benefit plans, like adding or eliminating a Health Savings Account.
- In the retirement contributions, on the part of the employee or the company match.
- In paid time off policies. Sometimes companies will make it so employees can carry over their PTO. Sometimes they re-do the policy — going from employees accruing a certain number of hours every pay period to giving everybody 10 days on Jan. 1.
- With any other time and attendance rules, like how long lunch breaks have to be and if they are mandatory or not. What are the rounding policies? If somebody punches in at 8:57 a.m., are you going to make it so that they punched in at 8:55 a.m. or round it up to 9 a.m.? Very minute details like those matter.
In employee classifications, such as going from exempt to nonexempt. This is going to be big this year with the new overtime rules.
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