One example: As of Jan. 1, the minimum wage in Washington State went to  $9.04 an hour, up from $8.67. Business groups there are saying the $9 mark is the point at which business owners — especially small-business owners — will say “enough” and stop hiring, or maybe even start laying off a few people to keep payroll costs level. True or false?

Obviously, every business is different. Some will figure out a way to maintain or increase staff, and certainly some will have to cut costs to stay above water. And some industries get hit harder than normal by an increase in the minimum wage. In general, though, most economists say incrementally increasing the minimum wage should result in a small drop in hiring, and only among those who are making minimum wage.

In an interview with National Public Radio, David Neumark, an economist with the University of California, Irvine, said his studies show that a 10% increase in the minimum wage results in an increase in unemployment of 1% to 2% among low-skill, low-paid workers, who make up about only 5% of the workforce nationally.

What about the argument that raising the minimum wage has a “push up” effect on all wages — in that employers feel pressure to raise everyone’s pay when those at the bottom start earning more? Not so in this economy, according the Neumark. He insists that overall wages tend to go up only when labor is scarce. With generally high unemployment and lots of applicants for openings, businesses are unlikely to increase wages.

As most know by now, President Obama signed a bill that extends the tax break on the employee portion of the Social Security Old-Age, Survivor and Disability Insurance (OASDI) for the first two months of this year. But many don’t know about one small stipulation in the bill.

Specifically:

• There’s no cap on the amount that is subject to the reduced 4.2% withholding rate during January and February, other than the 2012 annual wage base ($110,100). So employers will not have to insert a new limitation in their payroll systems.
• However, if an employee’s wages during January and February exceed $18,350 (two-twelfths of $110,100), then, unless the payroll tax reduction is further extended for the remainder of the year, the reduction in the amount withheld from those excess wages (2%) will be added to the employee’s income tax liability for 2012.
• Self-employed persons receive the same benefit. The rate of self-employment tax remains at 13.3% (instead of 15.3%) for 2012, but only on the first $18,350 of self-employment income, reduced by any amount of wages received by the self-employed individual during January and February.

Note: Self-employment earnings can be subject to the reduced rate even if not earned in January or February, though the reduced rate would still apply to no more than $18,350 of self- employment income, which is the equivalent of two months’ share of the annual maximum.

One of the traps in the Fair Labor Standards Act involves how employers tally overtime pay for employees who get commissions. The rules are complicated, and foul-ups are common. To avoid FLSA violations, take a look at this advice from the law firm of Franczek Radelet, in the form of three examples:

1. Commissions paid during an OT workweek

Chuck is paid a salary of $1,000 per week. The employee handbook states that the normal workweek consists of 40 hours, thus the base salary is intended to cover 40 hours of straight-time work. In one week, Chuck works 50 hours – 40 hours of straight time, and 10 hours of overtime, and Chuck earns $250 in commissions that week, too. Chuck’s pay would be calculated as follows:

• Regular rate = $1,000 + 250/40 hours = $31.25
• Total pay = (Regular salary + commission) + 10 hrs at time-and-a-half
• Total pay = $1,250 + (10 hrs x 31.25/hr x 1.5) = $1,718.75

2. Salary that includes OT

Now assume that Chuck and the employer have an understanding that the $1,000 is intended to cover up to 50 hours of work per week. As a result, Chuck would be entitled to the additional overtime premium for 10 hours at one-half of the regular rate of pay:

• Regular rate = $1,000 +250/50 = $25/hr
• Total pay = (Regular salary + commission) + 10 hrs at half the regular rate
• Total pay = $1,250 + (10 hrs x $25/hr /2) = $1,375

3. Monthly commissions

But things get trickier when that employee is paid both a weekly salary and a monthly commission, and the employer is not able to determine exactly what workweek in the month the employee earned a commission. Here, Chuck earns $1,200 this month in commissions but the employer cannot tie the commissions earned to a specific workweek. In such a situation, the employer must allocate the commissions equally to each workweek in the period covered by the commission payment. Therefore, to calculate Chuck’s regular rate of pay under these circumstances, divide the total commission amount ($1,200) by the number of weeks in the pay period (4) to determine the weekly commission earned ($300). So, here is how you would then calculate Chuck’s overtime using the data from the examples above:

• Regular rate = $1,000 + 300/40 hours = $32.50
• Total pay = (Regular salary + commission) + 10 hrs at time and-a-half
• Total pay = $1,300 + (10 hrs x 32.50/hr x 1.5) = $1,787.50
• Regular rate = $1,000 +300/50 = $26/hr
• Total pay = (Regular salary + commission) + 10 hrs at half the regular rate
• Total pay = $1,300 + (10 hrs x $26/hr /2) = $1,430

This according to Bruce Bartlett, who held a senior position in both the Reagan and George H. W. Bush administrations, balances out the potential positives of such a cut with the long-term consequences.

Proponents of the payroll tax cut argue it’ll increase spending and stimulate the economy by providing more in-pocket pay for every taxpaying employee in the U.S. On top of which, it decreases the taxes an employer has to pay on each individual employee, which – in turn – could lower the overall unemployment rate.

All of which begs the question: “If the idea has so many potential benefits, what’s the problem?”

Well, the potential problems, according to Bartlett, break down as follows:

• The tax cuts only help those who are employed. They don’t do much at all for independent contractors or those who remain unemployed.
• A lot of workers may simply pocket the additional savings, which means the cuts could wind up costing Washington without generating fiscal growth on the back end.
• Historically, employees don’t add to their spending at all if they’re only seeing an incremental increase in take-home pay. In other words, if their gross salary isn’t increasing, neither is their spending.
• A recent survey by the National Federation of Independent Business reveals 23% of businesses claim weak sales are their biggest problem, while only 4% claim it’s the cost of labor.

While a lot of what Bartlett is throwing out there is speculative at best, and almost every point has a counterargument that speaks to the greater good of the payroll tax cut, these are points that need to be considered. In the end, the key is to develop solutions that help the economy more than they hurt it. While a payroll tax cut sounds great on the surface, we need to consider whether it really serves the purpose for which it was proposed.

Source: “The Case Against a Payroll Tax Cut,” by Bruce Bartlett, New York Times, 8/30/11.

Forget the gold watch or even the golden parachute! Seems most employees saying “see ya” to your company plan to take something much more valuable with them.

This stat is enough to send a chill down every CEO’s spine: Nearly three in four (72%) of people confess to taking sensitive and confidential corporate info from previous employers. (And who’s to say the other 28% just aren’t willing to admit it?)

Even worse: They say they’ll do it again.

Nearly the same percentage of folks admit they’d have a “clear plan” for taking data if they left their current employer [translation: your organization].

Those eye-opening revelations come out of a recent survey by London company Imperva.

So what’s the best way to hold your own in this seemingly losing battle? You can turn two of the biggest findings from the survey to your company’s advantage:

Finding #1: 85% of people keep company data on their mobile devices or home computers

Your first stop should be IT. Double check you have a policy of scrubbing employees’ devices of corporate data when they stop working for you. The followup question: How well is that policy being followed?

Be sure, too, that your information technology staff immediately locks out folks from accessing company systems once they’re off the payroll. (It couldn’t hurt to ensure that HR and/or Payroll immediately notifies IT when someone is leaving, either because he or she quit or was fired.)

Finding #2: 50% of folks say they’ve already accessed info that was supposed to be off-limits to them

Your next stop should probably be the finance department. Nobody’s suggesting that internal controls and safeguards aren’t in place to keep folks with less-than-ethical motives from walking off with your data. But many employees feel they’re rather easy to get around.

Now’s the time to take stock of the measures you have and maybe even work with Finance to mix ’em up a bit in order to keep everyone on their toes.

That 11th-hour extension of the Bush-era tax cuts leaves companies with some small tasks to tackle and some big questions to answer. Is your business ready? 

Your finance department will do most of the heavy lifting, but top execs will also need to weigh in on many of the provisions of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (H.R. 4853).

Here’s a breakdown of the new requirements and continued responsibilities, from the tactical to the strategic:

First, the tactical tasks:

1. Administer the Payroll tax holiday. Nobody wants employees’ first paychecks of the year to be wrong,! Make sure your payroll system is adjusted to account for the 2% reduction in the employee-paid portion of Social Security taxes on all wages earned up to $106,800. (No relief for your company on this one – the employer-paid portion of the payroll taxes remains at 6.2%.)

2. UI benefits through 2011. That’s as long as a former employee’s UI benefits hadn’t lapsed. And unemployed workers currently collecting 26 weeks of state UI benefits will now be able to move into the federal unemployment compensation program once they’ve exhausted state benefits under the new law.

3. Educational expenses. This extension keeps this benefit out of Payroll’s hands and in Accounts Payable’s for two more years. The exclusion from gross income of certain educational expenses runs through 2011.

Next, the tax credits to incentivize your company for new behaviors or reward existing ones:

1. Active military reservists payroll credit. Your company can take advantage of this tax break through the end of 2011.

2. On-site childcare credit. If your company generously provides childcare to employees (and did so before 2011 began), you can claim a tax credit on qualified expenses up to $150,000 through Dec. 31, 2012.

3. The New Markets tax credit gets extended through 2011 at a level of $3.5 billion each year.

4. Research and Development tax credit is reinstated for 2010 and extended through 2011.

5. Increase in the rehabilitation tax credit for property placed in service through the end of 2011 in the Gulf Opportunity (GO) Zone.

The Executive Team

Your organization’s top decision makers will need to put their heads together fast to determine just how ready (and willing)  they are to go for growth in the coming year.

1. Bonus depreciation. You’ll enjoy 100% depreciation deduction for investments in certain new equipment placed in service after Sept. 8, 2010 and through Dec. 31, 2011. For taxable years after 2012, you can immediately deduct the costs of certain property rather than depreciating it over time. The Act extends the increase in the maximum amount and phase-out threshold under Internal Revenue Code Section 179.

Companies nationwide expect to increase salaries at an average clip of 2.8% in the year to come, according to a recent study. 

While that’s still well below the 4% average increases companies were offering back in 2007, it’s an optimistic alternative to the salary freezes most companies have instituted over the past 2-3 years.

The figures come from a recent study by Hay Group, a management consulting company.

From a management perspective, now may be the time to research whether other sales organizations are offering salary and/or commission increases.

Taking proactive measures may help you avoid losing some of your best salespeople.

However, if upper-management won’t allow such increases (or your comp isn’t set up that way), all is not lost. Here are three alternatives to consider:

1. Increase the amount of your bonuses, but base them on net profit, rather than gross volume. This way salespeople have an opportunity to earn more — and so does the company. It’s the ideal win-win.
2. Offer extra rewards and incentives for longevity (and achieving long-term benchmarks). This way, salespeople have specific long-term goals and rewards to shoot for — and the company is guaranteed considerable revenue in return for them reaching those benchmarks.
3. Focus on other positives like the extended tax cuts, and the 2% cut in payroll taxes. At the very least, make salespeople feel good about the increased amount of take-home pay they’re earning each week. If reps are really strapped, they may also want to consider short-term strategies like restructuring their 401(k) contributions, or increasing the number of exemptions (or allowances) they claim on their W4s.

Source: “Modest Pay Increases Expected in the Year Ahead,” by Joe Light, Wall Street Journal, 12/27/10.

Sure, everyone’s talking about health reform and its down-the-road costs. There will be real and imposing administrative demands on your staff, too.

Here’s a five-year time line for major admin adjustments:

2010:

Your plan will have to:

• add employee dependents up to age 26
• drop preexisting condition exclusions on children
• lift lifetime limits on the value of coverage

Your payroll people will have to:

• Allow for a bigger income exclusion for qualified adoption assistance. The maximum adoption tax credit and income exclusion for employer-provided adoption assistance increases to $13,170 (indexed for inflation).
• Gather and provide data needed to qualify for employer subsidies and to receive a tax credit for employer-provided coverage for firms with no more than 25 employees and an average wage of less $50,000 per employee. From 2010 to 2013, the credit equals 35% of an employer’s contribution if the company pays at least 50% of the premium.

2011:

• The company will have to report the value of each employee’s employer-provided health coverage, along with other info, on Forms W-2.
• Get ready to change records if employees decide to set less money aside in a healthcare spending plans. Beginning next year, employees won’t be able to buy over-the-counter drugs tax-free through a flexible spending account health reimbursement account, or health savings account.

2012:

That’s the year Payroll will start increasing the paycheck deduction for the Medicare portion of the FICA tax increases — to 2.35% (up from 1.45%) — for individuals earning more than $200,000 annually ($250,00 for couples).

2013:

Payroll will have to adjust deductions to reflect new limits on pre-tax contributions to health accounts. Employees will be able to set aside up to $2,500 for health flexible spending accounts.

2014:

• This is the kick-in date for employers to begin offering a minimum level of health coverage — paying penalties for noncoverage. If you offer coverage that’s considered “unaffordable,” the company pays the lesser of $250 a month for each full-time worker receiving a government subsidy or $166.67 a month for each full-time worker
• If you don’t offer coverage, the penalty is $2,000 per full-time worker – even if just one employee receives a tax credit to buy insurance.

Huddle with your CFO and head purchasers: Your organization may be able to exclude those items from wages and treat them as de minimis fringe benefits.

That’s the word out of a recent IRS private letter ruling.

Of course, nothing’s simple when it comes to the Taxman  — there are some conditions.

Here are the specifics of this case, and the implications for your company.

This business required its employees to wear a variety of items – hats, polo shirts, even socks – with the company logo on them.

The trouble was, the company purchased the clothing under a master contract from its vendor that included escalation clauses.

That made tracking each and every article of clothing too tough to track for accounting purposes, said the company.

Fortunately for this firm, IRS agreed. The Service ruled those purchases could be considered “de minimis” fringe benefits.

Of course, that doesn’t necessarily mean you can keep Payroll out of all your buys like this. But it’s worth a few followup questions. If your company  faces similar accounting difficulties, you may have a case.

Cite: IRS Private Letter Ruling 2010-05014.

Note: PLRs are specifically for the company that requested it, but they give you an idea how IRS is leaning.

To start things off, the Government Accountability Office released figures showing about six out of every 10 low-income workers have almost no retirement savings and only about two out of every 10 workers in general have retirement accounts with their employers.  President Obama and some members of Congress want to change that by requiring businesses to enroll workers in the equivalent of a Roth IRA — but with a small tax credit — funded by payroll deductions.

Workers could opt-out of the plan, and businesses wouldn’t be required to make any matching contributions. What would be required of businesses: administration and recordkeeping for eligible employees in the plan, including contract workers.

The National Small Business Association has voiced its objections to the plan, mainly that it adds to the costs of doing business, especially for companies that right now don’t have a direct-deposit setup and don’t farm out payroll services.

Talk about spreading the wealth. Several fed agencies have rather large to-do lists for 2010 … that will quickly get passed on to your business.

We grouped the changes according to the area in your organization that will be most heavily impacted.

Benefits

A few of the biggest changes go to the perpetually hot topic of employee benefits:

1. New clarification of what makes someone a “fiduciary” when providing investment advice. Lots of confusion on this issue, so the Employee Benefits Security Administration revisited its five-part test of fiduciary status.

Expect it: May 22, 2010 is the effective date for the rule.

2. New regs requiring your company disclose all retirement plan fees and and expenses to participants. These regs are in the “final rule” stage, meaning it’s almost a done deal.

Expect it: September 2010.

3. More Family Medical Leave Act (FMLA) changes. Yes, your firm just had to account for new changes to the FMLA when it comes to military personnel. But the Feds aren’t done yet – they’ve vowed to review both those changes and the FMLA overhaul from Jan. ’09.

No timetable yet.

4. Changes to the Health Insurance Portability and Accountability Act (HIPAA). This major (and costly to comply-with) rule isn’t immune from new scrutiny, either. Expect to make changes in HIPAA provisions covering: access, portability and renewability.

Expect it: September 2010.

Payroll and HR

Your “people people” certainly won’t get left out, either, in the new year:

5. Updated recordkeeping regs for the Fair Labor Standards Act (FLSA). Plan on having to keep more thorough records in how you pay your people – you guessed it – in the name of “greater transparency.”

No timetable yet.

6. An increase in wage-hour audits. Be sure your entire payroll paper trail is in order. DOL just hired 250 new investigators to enforce wage-hour laws.

Expect it: Early 2010.

7. A spotlight on foreign workers. Firms that use workers with H-2B visas can expect more scrutiny – the Employment and Training Administration is proposing rules regarding labor certification for these folks.

Expect it: After a February rule on agricultural workers.

8. A new definition of “temporary” workers. Along the same lines, the DOL wants to ensure people who are hired as temporary actually are.

No timetable yet.

9. Greater accountability on affirmative action. Current regs will be revised to ensure your company complies with affirmative action requirements, particularly as it concerns veterans.

Expect it: November 2010.

10. New rules for union info disclosure. Companies with unionized employees will soon have to go to greater lengths to report on the arrangements they make to persuade folks to join or not join a union.

Expect it: November 2010.

Safety

OSHA also has an aggressive game plan for the new year that will change how your company protects its employees. Two of the biggest:

11. A new standard on slip, trip and fall hazards. Beware: OSHA promises the rule will cover “every non-construction worker in the U.S.”

Expect it: March 2010.

12. The return of an old recordkeeping task. Prepare to resurrect those logs your company had to check when recording musculoskeletal disorders. OSHA’s bringing it back.

Expect it: January 2010.

New Year’s resolution season is the perfect time to initiate a renewed push for Direct Deposit.

Many companies still don’t have participation rates as high as they’d like for this streamlining and cost saving pay option.

But your employees may be a little more receptive right about now.

Here’s how to make the most of the timing and the technology so everybody wins.

Play up 2 different angles

Many folks make their New Year’s resolution to get fitter.

Why not create a company-wide campaign to get people financially fitter as well?

Direct Deposit is a great first step for several reasons. And you’ll want to be sure your payroll department takes a multi-pronged approach to do it:

1. It gets money in their accounts faster. Clearly it’s not ideal, but when people live paycheck-to-paycheck, even 12 hours can make a big difference. Let Finance remind folks how Direct Deposit saves them that critical time.
2. It can force them to save. Some folks simply lack the wherewithall to sock more away? Have Finance remind ‘em with Direct Deposit they can split out their pay between a checking and a savings account to help them keep those resolutions.