Too busy to FOCUS...

As the economic horizon continues to shift and belts tighten, small and medium-sized companies — who typically have between 10 to 500 employees and represent 99.7 percent of all employer firms according to the U.S. Small Business Administration (SBA) — may wind up being so focused on core business issues that they overlook one of their most potentially serious and costly issues — human resource compliance. Unlike their large-company counterparts, they lack the time and resources to build infrastructure and processes that are beyond core business objectives.

But if entrepreneurs and smaller business owners are focused solely on growth and product, how do they know what issues to look for in order to protect the company? Let’s look at the Top 5 HR Compliance Issues that they may face.

Exposure to Workplace Litigation Not Being Addressed

   According to the Equal Employment Opportunity Commission (EEOC), race and sexual   discrimination are the first and second most prevalent forms of workplace discrimination. But few businesses provide training regarding racial and sexual harassment, which opens the door to wrongful termination when employees leave their jobs. 

   Yet despite the possibility of being sued, small business owners are not addressing the problem head on. For example, only 23 percent of small businesses provide employment                 discrimination and/or sexual harassment training (based on a random survey of 300 privately held businesses conducted by Chubb Group of Insurance Companies).

 Employee turnover contributes to employer liability by creating potential wrongful-        termination cases. Studies show that a company’s legal costs in a wrongful termination       lawsuit can run up to $85,000, and that winning plaintiffs receive judgments averaging     $500,000.

  

Current Benefit Regulations and Laws Not Being Followed

       The cost of compliance with benefits regulations is often a bigger burden for small companies, primarily because the associated overhead expense is spread over a smaller workforce. According to a U.S. Small Business Administration survey, small companies spend up to 80 percent more per employee on federal regulatory compliance than large companies. Poor management of personnel-related tasks can make compliance even   more costly.

   For the small business owner who offers retirement and health and welfare benefits,   keeping up with all the new regulations and changing laws can be daunting. The required tests must be conducted, plan provisions must be properly applied, required notices and documents must be provided to employees, and all required government filings must be completed. Plus there’s the alphabet soup of HIPAA, COBRA, FMLA, and the rest to consider.

    Multiple HR Policies and Procedures to Follow with No Qualified Guidance

       For a small to medium-sized business, the human resource “department” is usually one  person who wears many hats. This HR generalist may be responsible for compensation and benefits, HR management, labor relations, legal issues, staffing, HRIS, training and much more. Besides, keeping up with all of these tasks, thorough independent research often falls into the “nights and weekends” environment, which can become both costly and time consuming.

   While a typical HR generalist may know a bit about everything, rock solid HR guidance is crucial given the constant presence and oversight of entities such as the Internal Revenue Service (IRS), the Department of Labor (DOL), or the EEOC.

   The old adage “ignorance of the law is no defense” certainly applies when a company is faced with an audit, an investigation by a government agency, or even litigation. This is particularly true when areas of concern include everything from compensation and benefits to staffing and workers compensation issues.

   An HR generalist who makes the wrong decision about a crucial employee issue — even              something as simple as asking the wrong question in an interview — can result in significant consequences.

     Paperwork Administration Results in Substantial Error

   With every new hire comes a mountain of paperwork. If a company doesn’t have access to online services and must deal with hard copies, errors can multiply. Similarly, what happens when an employee enrolls in benefits? Payroll must ensure that the adequate deductions are made. When an employee undergoes a life status change and alters his or her benefits elections, benefits and payroll must be adjusted accordingly and within the legally required time-frame.

               

   All of these administrative processes tend to “live” in different parts of the organization, and yet they’re utterly dependent upon one another. At each step, when information is transferred from one HR process to another, there is a chance of error. Multiply this possibility by the number of employees and the reams of paperwork, and that possibility starts looking like a probability. When one area fails, the whole process comes to a halt.

   Mistakes cause employees to focus on the errors rather than appreciating the benefits that  HR delivers them. Many employees don’t realize how much money a company spends on employee benefits. The costs are staggering and can easily reach between 5 and 10 percent of an employee’s salary, depending on coverage options. So instead of saying how great it  is to get top-quality benefits and flexible spending accounts, employees are complaining that the wrong deductions were taken out of their paychecks. This type of negative “water cooler” conversation can spread rapidly.

     HR Functions Not Being Coordinated

   As demonstrated above, in order for the correct amount of deductions for benefits to be            taken out of an employee’s paycheck, accurate information must flow to and from payroll. payroll data and benefits recordkeeping need to work in sync. Otherwise, payroll deductions   can be wrong. When that happens, employees notice and valuable time is wasted to implement corrections.

   If different vendors are employed for the payroll and benefits recordkeeping function, the small business owner is the one who must ensure that everything is coordinated and running smoothly. This entails fielding calls back and forth from the vendors, while trying to understand   the technicalities of the different systems. But what about using one of the“do-it-yourself” payroll software now available? Having the “payroll” software still does  not address the need to integrate the payroll, benefit, and HR functions. So now, in addition to making sure the software runs correctly, owners still need to communicate and transmit the information to their current record keeper. On top of that, the payroll software must be continually upgraded.

 Getting Help

   Many of these landmines can be avoided with a little careful advance planning, and most importantly, by seeking outside help. Many small businesses work with an outside HR consultant or a lawyer who specializes in employment issues. SourcePointeHR provides several HR services for smaller companies, including payroll, benefits administration, workers compensation; as well as assistance with many aspects of employer-related risk management and compliance.

   Whichever option a small business owner chooses, he or she faces the obvious need to let qualified experts provide strategic guidance in regards to these issues. The return on investment for taking precautions against running afoul of the law is not only in the prevention of costly errors, but in the satisfaction and productivity of the entire workforce.

About SourcePointeHR

SourcePointeHR is a premier HR administration provider focused on hands-on customer service and human resource expertise. Our service and expertise will allow you to save money, increase productivity, and relax knowing that we are constantly working to ensure that your administrative duties are compliant and completed.

To find out how we can help you solve the many compliance issues faced by small businesses, call us today at 866.340.8333

            

2012 Social Security Wage Base Increase

Social Security Wage Base Increases to $110,100 in 2012

The Social Security Administration (SSA) announced on Wednesday, October 19, 2011, that the 2012 social security wage base will be $110,100, up from $106,800 where it had been set for the past three years  As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax.

The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2012. The maximum social security tax employees and employers will each pay in 2012 is $6,826.20. Note that the 2011 FICA tax rate was 4.2% for employees and 6.2% for employers under the Tax Relief Act of 2010, and that the rate is scheduled to be 6.2% for both employees and employers in 2012. However, bills currently being considered in Congress may change this.

The social security wage base for self-employed individuals in 2012 will also be $110,100. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%). In 2012, the maximum social security tax for a self-employed individual will be $13,652.40. Again, note that the 2012 FICA tax rate for both employees and employers is scheduled to be 6.2%, but that Congress is considering proposals that would change this.

FICA coverage threshold for domestic, election workers
The threshold for coverage under social security and Medicare for domestic employees will be $1,800 in 2012, up from $1,700 in 2011; the coverage threshold for election workers will be $1,500 in 2012, unchanged from 2011. 

The Hidden Benefits of HR Outsourcing

Human resource outsourcing has a reputation for streamlining HR services and increasing the productivity of internal HR staff. But a study by PriceWaterhouseCoopers finds that companies generally underestimate the most profound benefit of outsourcing human resources: cost savings. Businesses evaluating the benefits of human resources outsourcing often focus on the improved productivity of internal HR staff. But the real reason to outsource  administrative tasks, say analysts at PriceWaterhouseCoopers, is cost savings. By the Numbers A study conducted by the research group over a two-year period found that in-house human resources carry hidden costs that most companies dont take into account when they compare internal and outsourced HR options. The studys sponsor, a leading human resource outsourcing provider, observes: "this years study showed that outsourcingandhellip; offers an average 35 percent savings on payroll and more than 50 percent savings on HRIS (human resource information systems)." The study concludes that "in-house human resource systems are more expensive and less strategic" than outsourced HR. Total Cost of Ownership (TCO) of In-House and Outsourced Models PriceWaterhouseCoopers white paper "The Total Cost of Ownership: Warning Signs of Hidden In-House System Costs" details the factors that obscure the true total cost of ownership of internal human resources. Payroll The two costs that businesses typically overlook when assessing TCO are: Costs associated with payroll systems Non-payroll department costs attributed to time collection These costs generally escape the financial assessment of in-house HR. The study cites the example of a business that assesses their in-house cost per paycheck at two to six dollars. Taking into account the two missing factors raises that estimate to sixteen dollars per paycheck. Taking all factors into account, the study found that "hidden costs account for sixty percent of the total cost of ownership component costs for payroll." Human Resource Information Systems (HRIS) Human resource information systems represent another source of cost underestimation. The hidden cost drags of an internal HRIS include: Future upgrades to the system. The useful life of in-house systems appears to be decreasing. HRIS technology is subject to a rapid rate of obsolescence, compelling businesses to invest in frequent system upgrades. PriceWaterhouseCoopers estimates that "the average in-house system has been upgraded within the last eighteen months." Yet few of the senior financial executives the study consulted anticipate any economic value added as a result of continued investments. Maintenance costs. Many businesses fail to account for all the costs associated with maintaining an HRIS system. The study finds that maintenance costs represent 72 percent of an internal HR systems total cost of ownership. Taking into account the following factors, the study estimates the average cost per employee per year for owning and maintaining an HRIS is $88. Application maintenance Daily application support Database administration Network and communication costs Help desk and end-user support Facilities and other overhead

Critical HR Recordkeeping: From Hiring to Termination 

Employee record retention is a daunting task for employers because there are so many different requirements based on a variety of criteria. For example, virtually every federal employment law, ranging from the Americans with Disabilities Act to Title VII of the Civil Rights Act, stipulates certain record-retention rules for all private sector employers. In addition, many state and local jurisdictions impose additional requirements. 

Record retention is complex and time consuming. However, in addition to complying with various federal and state laws, keeping good, well-organized records can be very helpful in documenting and supporting an organization’s employment actions. The best way to ensure that your records are in good order is to establish and publish a record-retention policy. It’s wise to consult with legal counsel, and you may want to engage the services of record-retention specialists who can help you customize your record-retention policies and practices to fit your specific situation. 

Recordkeeping also assists in managing human resources by providing hard data on the effectiveness of policies and procedures. For example, records of accidents in the workplace help identify why accidents are occurring and how to prevent them. Records also help prove compliance with government regulations. For example, documentation of equal employment opportunity practices can help show that an employer is in compliance with Title VII of the Civil Rights Act. 

Records provide documentation to defend—and even drive—employment decisions. They can help when defending against a lawsuit brought by an employee or employees under one of the employment laws. 

Responsible record-keeping practices begin long before a job candidate walks through the door and extend long after an employee leaves an employer.

Litigation is the ultimate test of the adequacy of an employer’s record-keeping practices. There are a whole host of laws that require employers to keep certain records on their employees for various lengths of time, and even after the employment relationship has terminated. 

As a practical rule of thumb, the attorneys recommend that employers keep employees’ records for the duration of the employment relationship, plus an additional 5 years. This satisfies the requirements of every record-retention law except: 

1. Pension and welfare benefit plan records, which must be kept for 6 years after 

the termination of the employment relationship; and 

2. Safety and toxic chemical exposure records, which must be kept for 30 years 

after the termination of the employment relationship. 

SPHR suggest breaking HR recordkeeping into three categories:

1. Hiring;
2. Employment relationship; and
3. Termination.

I will cover the details of these three categories in my next report.

10 Reasons we make YOU better

1. Avoid Penalties 

According to the IRS, 40 percent of small businesses pay an average penalty of $845 per year for late or incorrect filings and payments. SPHR provides a tax guarantee. 

2. Reduce Costs 

The direct costs of processing payroll can be greatly reduced by working with a payroll provider. Our clients average a savings of 23% on payroll costs. We offer a flat service fee based on your pay-cycle. 

3. Local Service 

SPHR is locally owned and headquartered in Mobile, Alabama. Each client is assigned a personal service team that can immediately address an issue. No more waiting on hold for a service representative. No more waiting for delivery from a service center in another state. On Site printing is available for clients outside the immediate delivery area. 

4. Confidence 

SPHR is a state licensed, locally owned Human Resource Administration Provider. Our staff includes both Certified Payroll Professionals and Licensed Human Resource Professionals. 

5. Free Up Free Time 

Payroll processing is a time-consuming process. SPHR can free up staff time to pursue more important value-added and revenue-generating activities. Inc. magazine recently identified payroll as the #1 task for small business to outsource, along with most accounting tasks. 

6. Avoid Technology Costs 

A constant question for small business owners is whether they have the latest version of their payroll software and the most recent tax tables installed on their computer. Using the wrong tax tables can result in stiff penalties. We offer 24/7 online access for reporting and service needs. No more waiting for the office to open to access your information. Also, use of our full service Human Resource Information Software can save thousands.

7. Leverage Outside Payroll & HR Expertise

Most business owners and controllers don't have time to keep up with constantly changing regulations, withholding rates, and government forms. By outsourcing payroll, a small business can take advantage of expertise that was previously available only to big companies.

8. Avoid Payroll Knowledge Leaving 

If your bookkeeper or controller gets a new job, they will walk out the door with their knowledge of the payroll process and how you do it. Using an outside service eliminates that business risk. 

9. Confidentiality / Security 

By allowing SPHR to handle your payroll administration, you can feel comfortable in knowing that your employee’s information stays private and secure. Our software allows for multiple levels of password protected access for your management and employees. 

10. Human Resource Management. 

Human Resource Administration and Management in today’s climate of ever-changing laws and regulations is not for the weak. Every business must spend valuable resources on ensuring compliance. Non-compliance is often overlooked when evaluating a company’s financial liability. Do not subject your company to an unnecessary risk of lawsuits, penalties and fines. Our licensed and experienced HR experts will help ensure that your company is current and compliant with Federal and State Labor Laws & Regulations.