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Payroll Compliance: The Necessities


Payroll Compliance: The Necessities

Payroll compliance is about assembly your payroll obligations as required by regulation. Click on via to find out how your group can keep compliant.

1. Federal wage and hour legal guidelines


The Honest Labor Requirements Act (FLSA) units federal wage and hour requirements, that are administered by the U.S. Division of Labor. These requirements cowl:

  • Federal minimal wage.
  • Additional time pay and exemptions.
  • Work hours, together with meals and relaxation breaks.
  • Little one labor, together with permissible occupations and work hours.
  • Recordkeeping for nonexempt and exempt workers, together with timekeeping and payroll data.


The FLSA additionally limits the deductions that may be constructed from nonexempt and exempt workers’ pay.

2. State wage and hour legal guidelines


These rules are established individually by states.

Some states have only some wage and hour legal guidelines, selecting largely to comply with the FLSA. Different states, resembling California and New York, have in depth wage and hour legal guidelines — lots of that are extra beneficiant to workers than these of the FLSA are.

Additionally, many states have wage and hour legal guidelines that aren’t addressed below the FLSA (e.g., remaining paychecks, pay stubs, frequency of pay and direct deposit).

Some cities and counties have native wage and hour ordinances, resembling native minimal wage.

3. Wage garnishments


Title III of the Shopper Credit score Safety Act (CCPA) regulates federal wage garnishment limits for shopper money owed, youngster assist and alimony. Some states have decrease garnishment thresholds than the CCPA does.

Separate legal guidelines apply to garnishments for federal scholar loans and Inside Income Service (IRS) wage levies.

4. Worker advantages


Payroll is accountable for deducting advantages contributions from workers’ wages and administering advantages funds. Subsequently, employers should know which payroll legal guidelines apply to the advantages they supply. For instance, pretax advantages, post-tax advantages and obligatory paid break day all have totally different guidelines.

5. Federal employment taxes


The IRS oversees federal employment tax legal guidelines, which require employers to withhold federal revenue tax, Social Safety tax and Medicare tax from workers’ wages. Employers should additionally pay their very own share of Social Safety and Medicare taxes plus federal unemployment tax.

6. State and native employment taxes


Most employers should withhold state revenue tax from workers’ wages. (9 states don’t require state revenue tax withholding.)

Relying in your location, you could have to withhold different state taxes out of your workers’ wages. For instance, employers in California should withhold state incapacity insurance coverage tax, and employers in New Jersey should withhold state unemployment tax. Furthermore, some cities and counties require native revenue tax withholding.

On the employer facet, most employers should pay state unemployment tax plus some other taxes levied by the state. Additional, just a few native governments impose native taxes on employers.

Notice that some states have reciprocal tax agreements for workers who stay in a single state however work in one other.

7. Payroll reporting


Employers should file periodic experiences with the suitable federal, state and native businesses. This consists of:

  • Kind W-2 reporting.
  • Federal employment tax reporting.
  • State wage and tax reporting.
  • Native wage and tax reporting, if relevant.


As you’re employed towards payroll compliance, think about different related elements not coated on this article, resembling state legal guidelines for unclaimed paychecks and the usage of payroll playing cards.

Unique content material by © IndustryNewsletters. All Rights Reserved. This data is supplied with the understanding that Payroll Companions is just not rendering authorized, human sources, or different skilled recommendation or service. Skilled recommendation on particular points ought to be sought from a lawyer, HR advisor or different skilled.

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